4-5.

(LUXOR COMPANY)

Requirement a (nature of expense method)

Luxor Company
Statement of Comprehensive Income
For Year Ended December 31, 2017

Note Total
PROFIT OR LOSS
Net sales revenue (11) P3,359,000
Rent revenue 105,000
Total revenues P3,464,000
Operating Expenses
Net purchases (12) 1,762,000
Increase in inventory (13) (105,000)
Delivery expense 77,000
Advertising expense 170,000
Salaries and commissions (14) 502,000
Depreciation expense (15) 241,000
Supplies expense (16) 75,000
Bad debts expense 27,000
Insurance and taxes 85,000
Other operating expenses (17) 170,000
Total Operating Expenses 3,004,000
Profit from Operations P460,000
Interest expense ( 37,000)
Profit before income tax from continuing operations P423,000
Income tax expense 126,900
Profit from continuing operations P296,100
Discontinued operations, net of tax (18) (245,000)
Profit P 51,100

OTHER COMPREHENSIVE INCOME

Unrealized Gains on Investments at fair value through other
comprehensive income, net of P24,000 income tax P 56,000
Actuarial Gains Taken to Equity, net of P12,000 income tax 28,000
Total Other Comprehensive Income P 84,000
TOTAL COMPREHENSIVE INCOME P135,100

Notes to Financial Statements (after presenting notes for basis of presentation and summary of significant
accounting policies)

Note11 – Net sales revenue

Sales P3,529,000
Less sales discounts P 49,000
Sales returns and allowances 121,000 170,000
Net sales revenue P3,359,000
 Note 12 – Net purchases
Purchases P1,730,000
Add freight-in 135,000
Total P1,865,000
Less purchase discounts P41,000
Purchase returns and allowances 62,000 103,000
Net purchases P1,762,000

Note 13 – Increase in inventory

Inventory, December 31 P446,000
Inventory, January 1 341,000
Increase in inventory P105,000

Note 14 – Salaries and commissions

Sales commissions and salaries P182,000
Office salaries 320,000
Total salaries and commissions P502,000

Note 15 – Depreciation expense

Depreciation – Buildings and office equipment P145,000
Depreciation – Store equipment 96,000
Total depreciation expense P241,000

Note 16 – Supplies expense

Store supplies expense P56,000
Office supplies expense 19,000
Total supplies expense P75,000

Note 17 – Other operating expenses

Loss on sale of equipment P 50,000
Loss from typhoon 120,000
Total other operating expenses P170,000

Note 18 – Discontinued Operations

Revenues P 900,000
Expenses (1,050,000)
Profit (loss) before income tax P (150,000)
Income tax benefit 45,000
Profit (loss) from operations of discontinued operations P (105,000)
Loss on sale of assets, net of tax benefit of P60,000 (140,000)
Discontinued Operations P (245,000)

(function of expense method)

Luxor Company
Statement of Comprehensive Income
For Year Ended December 31, 2017
Note Total
Net sales revenue (11) P3,359,000
Cost of goods sold (12) 1,657,000
Gross profit P1,702,000
 Other Operating Income
Rent Revenue 105,000
Total Income P 1,807,000
Operating Expenses
Selling Expenses (12) P581,000
General and Administrative Expenses (13) 596,000
Other Operating Expenses (14) 170,000
Total Operating Expenses P1,347,000
Profit from Operations P460,000
Interest expense ( 37,000)
Profit before income tax from continuing operations P423,000
Income tax expense 126,900
Profit from continuing operations P296,100
Discontinued operations, net of tax (18) (245,000)
Profit P 51,100

OTHER COMPREHENSIVE INCOME

Unrealized Gains on Investments at fair value through other
comprehensive income, net of P24,000 income tax P 56,000
Actuarial Gains Taken to Equity, net of P12,000 income tax 28,000
Total Other Comprehensive Income P 84,000
TOTAL COMPREHENSIVE INCOME P135,100

Notes to Financial Statements (after presenting notes for basis of presentation and summary of significant
accounting policies)

Note 11– Net sales revenue

Sales P3,529,000
Less sales discounts P 49,000
Sales returns and allowances 121,000 170,000
Net sales revenue P3,359,000

Note 12 – Cost of goods sold

Inventory, January 1 P341,000
Purchases P1,730,000
Add freight-in 135,000
Total P1,865,000
Less purchase discounts (41,000)
Purchase returns and allowances (62,000) 1,762,000
Cost of goods available for sale P2,103,000
Less Inventory, December 31 446,000
Cost of goods sold P1,657,000

Note 13 – Selling expenses

Sales commissions and salaries P182,000
Store supplies expense 135,000
Delivery expense 77,000
Advertising expense 170,000
Depreciation expense – store equipment 96,000
 Total selling expenses P581,000

Note 14 – General and Administrative expenses

Bad debts expense P27,000
Office supplies expense 19,000
Insurance and taxes 85,000
Office salaries 320,000
Depreciation – buildings and office equipment 145,000
Total administrative expenses P596,000

Note 15 – Other operating expenses (continuing operations)

Loss on sale of equipment P 50,000
Loss from typhoon 120,000
Total other operating expenses P170,000

Note 16 – Discontinued Operations

Revenues P 900,000
Expenses (1,050,000)
Profit (loss) before income tax P (150,000)
Income tax benefit 45,000
Profit (loss) from operations of discontinued operations P (105,000)
Loss on sale of assets, net of tax benefit of P60,000 (140,000)
Discontinued Operations P (245,000)

Requirement b
Luxor Company
Statement of Changes in Equity
For the Year Ended December 31, 2017

Ordinary Retained
Share Reserves Earnings Total
Balances, January 1 P700,000 P660,000 P1,785,000 P3,145,000
Correction of prior year’s income due to
understated depreciation, net of P54,000
income tax (126,000) (126,000)
Restated balances, January P700,000 P660,000 P1,659,000 P3,019,000
Issuance of ordinary shares 100,000 40,000 140,000
Comprehensive Income 84,000 51,100 135,100
Dividends declared (60,000) (60,000)
Balances, December 31 P800,000 P784,000 P1,650,100 P3,234,100

Reserves at January 1 included the share premium (P610,000) and unrealized gain on investments carried at fair
value through OCI (P50,000). The amounts may be reported in separate columns.