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Kingfisher Corporation, a nonpublic entity, was incorporated on December 1, 2011, and began

operations one week late closing the books for the fiscal year ended November 30, 2012, the
controller prepared the following financial statements:

Kingfisher Corporation

Statement of Financial Position

November 30, 2012


Current assets:


P 150,000
Marketable securities , at cost
Accounts receivable
Allowance for doubtful accounts
( 59,000)
Prepaid insurance

Total current assets

Property, plant and equipment

Less accumulated depreciation

( 40,000)
Property, plant and equipment, net

Research and development costs

Total assets
Liabilities and Shareholders' equity

Current liabilities:

Accounts payable and accrued expenses

P 592,000
Income taxes payable

Total current liabilities
Shareholders' equity:

Share capital, P10 par value

Retained earnings

Total shareholders' equity

Total liabilities and shareholders' equity

Net sales
Operating expenses:

Cost of sales
Selling and administrative
Research and development


Income before income taxes
Provision for income taxes

224 000
Net income
P 336,000

Kingfisher is in the process of negotiating a loan for expansion purposes, and the bank has
requested audited financial statements. During the course of the audit, the following additional
information was obtained:

The investment portfolio consists of short-term investments in marketable equity securities with a
total market valuation of P55,000 as of November 30, 2012.
Based on an aging of the accounts receivable as of November 30, 2012, it was estimated that
P36,000 of the receivables will be uncollectible.
Inventories at November 30, 2012 did not include work in process inventory costing P12,000, sent
to an outside processor on November 29, 2012.
A P3,000 insurance premium paid on November 30, 2012 on a policy expiring one year later was
charged to insurance expense.
KINGFISHER adopted a pension plan on June 1, 2012 for eligible employees to be administered by a
trustee. Based upon actuarial computations, the first twelve months' normal pension was
estimated at P45,000.

On June 1, 2012, a production machine purchased for P24,000 was charged to repairs and
maintenance. KINGFISHER depreciates machines of this type on the straight-line method over a
five-year life with no salvage value, for financial and tax purposes.
Research and development costs of P150,000 were incurred the development of a patent, which
KINGFISHER expects to be granted during the fiscal year ending November 30, 2013. KINGFISHER
initiated a five-year amortization of the P150,000 total cost during the fiscal year ended November
30, 2012.
During December 2012, a competitor company filed suit against KINGFISHER for patent
infringement claiming P200,000 damages. KINGFISHER's legal counsel believes that an unfavorable
outcome is probable. A reasonable estimate of the court's award to the plaintiff is P50,000.
The 40% effective tax rate was determined to be appropriate for calculating the provision for
income taxes for the fiscal year ended November 30, 2012. Ignore computation of the deferred
portion of income taxes.

Determine the adjusted balances of the following:
Net Income
Current Assets
Total Assets
Total Liabilities
Total Equity

The following information pertains to Northfield Flower Shop, a calendar-year sole proprietorship, which
maintained its books on the cash basis during the year.
Northfield Flower Shop
December 31, 2008

Northfield has developed plans to extend into wholesale flower market and is in the process of
negotiating a bank loan to finance the expansion. The bank is requesting 2008 financial statements
prepared on the accrual basis of accounting from Northfield. During the course of a review engagement,
Marion, Northfield accountant, obtained the following additional information.
1. Amounts due from customers totaled P128, 000 at December 31, 2008.
2. An analysis of the above receivables revealed that an allowance for uncollectible accounts of P15,
200 should be provided.
3. Unpaid invoices for flower purchases totaled P122, 000 and P68, 000, at December 31, 2008, and
December 31, 2007, respectively.
4. The inventory totaled P291, 200 based on a physical count of the goods at December 31, 2008. The
inventory was priced at cost, which approximates market value.
5. On May 1, 2008, Northfield paid P34, 800 to renew its comprehensive insurance coverage for 1
year. The premium on the previous policy, which expired on April 30, 2008, was P31, 200.
6. On January 2, 2008, Northfield entered into 25-year operating lease for the vacant lot adjacent to
Barons retail store for use as a parking lot. As agreed in the lease, Northfield paved and fenced in
the lot at a cost P180, 000. The improvements were completed on April 1, 2008, and have an
estimated useful life of 15 years. No provision for depreciation or amortization has been recorded.
Depreciation on furniture and fixtures was P48, 000 for 2008.
7. Accrued expenses at December 31, 2007 and 2008, were as follows:

8. Northfield is being sued for P16, 000. The coverage under the comprehensive insurance policy is
limited to P1, 000, 000. Northfield attorney believes that an unfavorable outcome is probable and
that a reasonable estimate of the settlement is P1, 200, 000.
9. The salaries account includes P16, 000 per month paid to the proprietor. Northfield also receives P1,
000 per week for living expenses.
Determine the balances of the following:
A/R, Inventory, A/P, Sales, Purchases, Salaries, Payroll Taxes, Insurance, Utilities