Question

Perkasa Berhad (PB) was formed on 1 January 2016. Additional data for the year follow:

On 1 January 2016, PB issued no par common stock for RM500,000.

    Early in January, PB made the following cash payments:

1. For store fixtures, RM54,000

2. For merchandise inventory, RM270,000

3. For rent expense on a store building, RM11,000

Later in the year, PB purchased merchandise inventory on account for RM244,000. Before year-end, PB paid RM144,000 of this account payable.

During 2016, PB sold 2,300 units of merchandise inventory for RM225 each. Before year-end, the company collected 90% of this amount. Cost of goods sold for the year was RM320,000 and ending merchandise inventory totaled RM194,000.

The store employs three people. The combined annual payroll is RM88,000, of which PB still owes RM6,000 at year-end.

At the end of the year, PB paid income tax of RM20,000. There are no income taxes payable.

    Late in 2016, PB paid cash dividends of RM35,000.

For store fixtures, PB uses the straight-line depreciation method, over five years, with zero residual value.

1. Prepare PB’s income statement for the year ended 31 December 2016. Use the single-step format, with all revenues and all expenses listed together.

2. Prepare PB’s classified balance sheet at 31 December 2016.

3. Prepare PB’s statement of cash flows using the indirect method for the year ended 31 December 2016.

Answer 1

1.)	Perkasa Behad
	Income Statement
	Year Ended December 31,2016
		Amount in RM
	Revenue:
	Sales Revenue ( 2,300 x 225 )	517,500
	Expenses:
	Cost of Goods sold	320,000
	Salary Expense	88,000
	Depreciation expense (54,000 / 5 )	10,800
	Rent Expense	11,000
	Income Tax Expense	20,000
	Net Income (loss)	67,700
2.)	PB Balance Sheet at December 31,2016
	Assets	Amount in RM
	Non-current assets
	Store Fixtures , Net of Depreciation ( 54,000 - 10,800 )	43,200
	Current assets
	Cash (500,000 - 54,000 - 270,000 - 11,000 - 144,000 + (517,500 x 90%) - 82,000 - 20,000 - 35,000 )	349,750
	Accounts Receivables (517,500 x 10% )	51,750
	Inventory	194,000
	Total Assets	638,700
	Equity & Liabilities
	Equity
	Common stock -No par	500,000
	Retained Earnings ( 67,700 - 35,000 )	32,700
	Current Liabilities
	Accounts Payable (244,000 - 144,000 )	100,000
	Salaries Payable	6,000
	Total Equity & Liabilities	6,38,700
		-
3.)	Statement of Cash Flow ( Indirect Method)
	Particulars	Amount in RM
	Cash flows from operating activities
	Net income	67,700
	Adjustments to arrive cash flow from operating activities:
	Depreciation expense	10,800
	Increase in accounts receivables	-51,750
	Increase in inventory	-194,000
	Increase in salaries payable	6,000
	Increase in accounts payable	100,000
	Net Cash flow from (used in ) operating activities	-61,250
	Cash flows from investing activities
	Purchase of Store Fixtures	-54,000
	Net Cash flow from (used in ) Investing activities	-54,000
	Cash flows from financing activities
	Proceeds from issue of common stock	500,000
	Dividend paid	-35,000
	Net Cash flows from financing activities	465,000
	Net increase(decrease) in cash and cash equivalents (A)	349,750
	Cash and cash equivalents at beginning of period (B)	0
	Cash and cash equivalents at end of period =A+B	349,750