fs model.doc

8/22/2019 FS model.doc

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MODEL CORPORATIONStatements of Income and Retained Earnings

As of December 31, 2009 and 2008

Notes 2009 2008

Revenue 7,693,400 7,534,400

Cost of sales (2,449,200) (2,835,300)

Gross profit 5,244,200 4,699,100

Other income 28,300 20,400

Distribution cost (2,320,800) (2,240,300)

Administrative expenses (1,188,700) (1,055,900)

Finance cost (604,700) (543,200)

Profit before tax 1,158,300 880,100

Income tax expense (346,785) (263,889)Profit for the year 811,515 616,211

Retained Earnings at the start of the year 616,211 -

Dividends - -

Retained Earnings at the end of the year 1,427,726 616,211

See Notes to Financial Statements.

MODEL CORPORATION


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STATEMENT OF FINANCIAL POSITION


Notes 2009 2008

ASSETS

Current Assets

Cash and cash equivalents 401,521 111,000

Trade and Other Receivables 594,300 381,600

Inventories 1,057,400 879,300

Other current assets 42,000 39,000

Total current assets 2,095,221 1,410,900

Noncurrent Assets

Property, plant, and equipment 7,700,000 6,550,000

Intangible assets 90,000 120,000

Deferred tax assets 19,950 7,590

Refundable Deposit 20,000 20,000

Total non-current assets 7,829,950 6,697,590

TOTAL ASSETS 9,925,171 8,108,490

LIABILITIES AND EQUITY

Current Liabilities

Trade and other payables 713,606 370,800

Current tax liability 283,839 121,479

Total current liabilities 997,445 492,279

Noncurrent Liabilities

Loans payable 5,000,000 4,500,000

Total non-current liabilities 5,000,000 4,500,000

Equity

Share Capital 2,000,000 2,000,000

Share Premium 500,000 500,000

Retained Earnings 1,427,726 616,211

Total stockholders equity 3,927,726 3,116,211

TOTAL LIABILITIES AND EQUITY 9,925,171 8,108,490

See Notes to Financial Statements.

MODEL CORPORATIONSTATEMENTS OF CASH FLOWS


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Notes 2009 2008

Income (loss) before income tax 1,158,300 880,100

Adjustments for non-cash income and expenses:

Depreciation 550,000 450,000

Amortization 30,000 30,000

Interest expense 604,700 543,200

Interest income (4,000) (800)

Operating income before working capital changes 2,339,000 1,902,500

Decrease (increase) in:

Trade and other receivables (212,700) (381,600)

Inventories (178,100) (879,300)

Other current assets (3,000) (39,000)

Increase (decrease) in:

Trade and other payables 322,806 190,800

Cash generated from operations 2,268,006 793,400

Interest paid (584,700) (363,200)

Interest received 4,000 800

Income taxes paid (196,785) (150,000)

Net cash provided by (used in) operating activities 1,490,521 281,000

Cash flows from investing activities

Acquisition of property and equipment (1,700,000) (7,000,000)

Acquisition of intangible assets - (150,000)

Payment for refundable deposit - (20,000)

Net cash provided by (used in) investing activities (1,700,000) (7,170,000)

Cash flows from financing activities

Proceeds of loans 500,000 4,500,000

Proceeds from share issuance 2,500,000

Net cash provided by (used in) financing activities 500,000 7,000,000

Net Increase (decrease) in cash and cash equivalents 290,521 111,000

Cash at the beginning of the year 111,000 -

Cash at the end of the year 401,521 111,000

MODEL CORPORATIONNotes to the financial statements

For the years ended December 31, 2009 and December 31, 2008


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1. COMPANY INFORMATION

MODEL Corporation (the Company) is a domestic corporation that was registered with Philippine

Securities and Exchange Commission (PSEC) on ______________ under registration

number__________________. Its primary purpose is to manufacture and sell electronic parts both

local and abroad.

The Companys registered office which is also its principal place of business is at Unit 804-A AIC

Burgundy Empire Tower, corner Sapphire and Garnet Roads, ADB Avenue, Ortigas Center, Pasig

City.

2. BASIS OF PREPARATION

Statementof Compliance

The financial statements have been prepared in compliance with Philippine Financial Reporting

Standards (PFRS) for Small and Medium-sized Entities issued by Philippine Financial Reporting

Standards Council.

Basis of Measurement

The financial statements have been prepared on historical cost basis.

Functional and Presentation Currency

The financial statements are presented in Philippines peso, which is the Companys functional

currency.

Use of Judgements and Estimates

The preparation of the financial statements in Philippine Financial Reporting Standards for SMEs

requires the management of the Company to make estimates and assumptions that affect the amounts

reported in the financial statements and accompanying notes. Future events may occur which willcause the assumption used in arriving at the estimates to change. The effects of changes in estimates

will be reflected in the financial statements as they become reasonably determinable.

3. SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

Revenue is recognized to the extent that it is probable that economic benefits will flow to the

Company and revenue can be reliably measured. Revenue is measured at the fair value of the

consideration received, excluding discounts, rebates, and other sales taxes or duty. The following

specific recognition criteria must also be met before revenue is recognized:


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Sale of Goods

Revenue is recognized when risks and rewards of ownership of goods have passed to the buyer that is

upon delivered of goods to customer.

Interest

Revenue is recognized as the interest accrues on a time basis, by reference to the principaloutstanding and at the effective interest rate applicable.

Cash and Cash Equivalents

Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid investments

that are readily convertible to known amounts of cash with original maturities of three months or less

and are subject to insignificant risk of changes in value.

Trade and other receivables

Most sales are made on the basis of normal credit terms, and the receivables do not bear interest.

Where credit is extended beyond normal credit terms, receivables are measured at amortized costusing the effective interest method. At the end of each reporting period, the carrying amounts of trade

and other receivables are reviewed to determine whether there is any objective evidence that the

amounts are not recoverable. If so, an impairment loss is recognized immediately in profit or loss

Inventories

Inventories are stated at the lower of cost and selling price less cost to complete and sell. Cost iscalculated using first-in, first-out (FIFO) method.

Property, plant and equipment

Items of property, plant and equipment are measured at cost less accumulated depreciation and any

accumulated impairment losses.

Depreciation is charged so as to allocate the cost of assets less their residual values over their

estimated useful lives, using straight-line method. The following estimated lives are used for

depreciation of property, plant and equipment:

Useful Life

Buildings 20 years

Tools and equipment 5 yearsFurniture and fixtures 5 years

Vehicles 5 years

If there is an indication that there has been a significant change in useful life or residual value of an

asset, the depreciation of that asset is revised prospectively to reflect the new expectations

Intangible Assets


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Intangible assets are purchased computer software that is stated at cost less accumulated amortization

and any accumulated impairment losses. It is amortized over its estimated life of five years using the

straight-line method. If there is an indication that there has been a significant change in amortization

rate, useful life or residual value of an intangible asset, the amortization is revised prospectively to

reflect the new expectations.

Impairment of Assets

Property, plant and equipment, and intangible assets are reviewed to determine whether there is any

indication that those assets have suffered an impairment loss. If there is an indication of possible

impairment, the recoverable amount of any affected asset is estimated and compared with its carrying

amount is reduced to its estimated recoverable amount is lower, the carrying amount is reduced to its

estimated recoverable amount, and an impairment loss is recognized immediately in profit or loss.

Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the

risks and rewards of ownership of the leased asset to the Company All other leases are classified as

operating leases.

Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the

term of the relevant lease unless the payment is structured to increase in line with general inflation.

Trade and other payables

Trade and other payables are obligations on the basis of normal credit terms and do not bear interest.

Borrowing cost

All borrowing costs are recognized in profit or loss in the period in which they are incurred using theeffective interest method.

Income Taxes

Income tax expense represents the sum of the current tax and deferred tax.

The current tax is based on taxable profit for the year.

Deferred tax is recognized for all temporary differences that are expected to affect taxable profit in

the future, and any unused tax losses or unused tax credits. The net carrying amount of deferred taxassets is reviewed at each reporting date and is adjusted to reflect the current assessment of future

taxable profits. Any adjustments are recognized is profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the taxable profit (tax loss) of

the periods in which it expects the deferred tax assets to be realized or then deferred tax liability to be

settled, on the basis of tax rates that have been enacted or substantively enacted by the end of the

reporting period.

4. CASH AND CASH EQUIVALENTS


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2009 2008

Cash on hand and in banks 351,521 50,000

Short-term placements 50,000 61,000

401,521

111,000

Cash in banks earns interest at respective bank deposit rates. Short-term placements are made for

varying periods of up to three months depending on the immediate cash requirements of the

Company, and earn interest at respective short-term placement rates.

5. TRADE AND OTHER RECEIVABLES

2009 2008

Trade receivables from third parties 630,200 369,500

Trade receivables from related parties - -

Other receivables 30,600 37,400

Less allowance for impairment of receivables 66,500 25,300

594,300 381,600

6. INVENTORIES

2009 2008

Finished goods 539,600 410,700

Goods in process 298,400 246,700

Materials and supplies 219,400 221,900

1,057,400 879,300

The net realizable value of all inventories was higher than its cost therefore no inventory

write-down was recognized in either 2009 or 2008.

7. OTHER CURRENT ASSETS

2009 2008

Prepaid Rental 30,000 30,000

Prepaid Insurance 12,000 9,000

42,000 39,000

8. PROPERTY, PLANT, AND EQUIPMENT


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The movements within each class of property and equipment are as follows:

For the Year Ended December 31, 2009

Land BuildingsTools and

Equipment

Furniture

and

Fixtures

Vehicles Total

Gross carrying amount:

December 31, 2008 1,750,000 4,000,000 600,000 250,000 400,000 7,000,000

Additions 1,200,000 - - - 500,000 1,700,000

December 31, 2009 2,950,000 4,000,000 250,000 900,000 8,700,000

Accumulated depreciation:

December 31, 2008 200,000 120,000 50,000 80,000 450,000

Depreciation 200,000 120,000 50,000 180,000 550,000

December 31, 2009 400,000 440,000 260,000 1,000,000

Carrying amount:

December 31, 2008 1,750,000 3,800,000 480,000 200,000 320,000 6,550,000

December 31, 2009 2,950,000 3,600,000 360,000 150,000 640,000 7,700,000

9. INTANGIBLE ASSETS

Software

Gross carrying amount:

December 31, 2008 P150,000

Additions -

December 31, 2009 P150,000

Accumulated amortization:December 31, 2008 P30,000

Amortization 30,000

December 31, 2009 P60,000

Carrying amount:

December 31, 2008 P120,000

December 31, 2009 P90,000

10. REFUNDABLE DEPOSIT


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This represents rental deposit which is refundable at the end of the lease term.

11. TRADE AND OTHER PAYABLES

2009 2008Trade payables 142,580 29,200

Other non-trade payables 55,300 19,000

Accrued expenses 315,726 142,600

Interest payable 200,000 180,000

713,606 270,800

12. LOANS PAYABLE

The Company obtained a 5-year loan from Squatters Group Company, Inc. Amounting toPhP4,500,000 and PhP500,000 on January 1, 2008 and 2009, respectively. Outstanding loan

availed shall be subject to 12% interest per annum and shall be payable on May 1, September

1, and January 1 of each year. Total interest incurred on this loan amounted to P600,000 andP540,000 in 2009 and 2008 respectively.

13. COMMITMENTS UNDER OPERATING LEASE

The Company rents its sales office under operating leases. The lease is for a period of five years, with

monthly fixed rental of PhP10,000 and an escalation rate of 10% per annum. The Company started to

occupy the premises on January 2008.

2009 2008

Minimum lease payments under operating leases recognized as an expense

during the year 132,000 120,000

132,000 120,000

At year end, the Company has outstanding commitment under non-cancellable operating leases thatfall due as follows:

2009 2008

Within one year 145,200 132,000

Later than one year but within five years 335,412 480,612

480,612 612,612

14. SHARE CAPITAL


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The total authorised number of ordinary shares is twenty thousand (20,000) common shares with a

par value of one hundred pesos (PhP100.00) per share. As of December 31, 2009 and 2008 the

authorized number of shares were fully subscribed and fully paid.

2009 2008Shares Amount Shares Amount

Authorized - P100 par value per

share 20,000 2,000,000 20,000 2,000,000

Less: Unissued Capital Stock - - - -

Issued Capital Stock 20,000 2,000,000 20,000 2,000,000

Subscribed capital stock

- - - -

Less: Subscription receivable

- - - -

Total 20,000 2,000,000 20,000 2,000,000

15. REVENUE

2009 2008

Export Sales 350,000 240,000

Local Sales 7,359,700 7,316,600

Less: Returns, Allowances and Discounts (16,300) (22,200)

7,693,400 7,534,400

16. COST OF GOOD SOLD

Cost of inventory recognized as expense follows:

2009 2008

Purchases of materials 612,400 915,000

(Increase)/ decrease in raw materials 2,500 (221,900)

Direct Labor 815,000 973,500

Indirect Labor 787,400 942,900

Utilities- Factory 78,500 549,900Fuel and Oil- Machineries 42,400 36,500

Repairs and maintenance 18,400 19,800

Factory supplies 11,400 14,500

Other factory overhead 1,800 2,500

Depreciation- Factory Building 140,000 140,000

Depreciation - Tools and Equipment 120,000 120,000

(Increase) in work in process (51,700) 246,700


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(Increase) in finished goods (128,900) 410,700

2,449,200

2,835,30

0

17. DISTRIBUTION COST

2009 2008

Salaries and Wages- Marketing Personnel 1,847,000

1,929,70

0

Depreciation Vehicle 180,000 80,000

Rent - Sales Office 132,000 120,000

Utilities- Sales office 38,600 19,700

Freight-out 37,900 21,700

Fuel and oil- Vehicle 31,500 21,800

Supplies 21,300 17,100

Representation 17,600 18,700

Repairs and maintenance-Vehicle 14,900 11,600

2,320,800

2,240,30

0

18. ADMINISTRATIVE EXPENSES

2009 2008

Salaries and Wages- Key management personnel 814,200 715,800

Professional fees 60,000 60,000

Depreciation- Office Building 60,000 60,000Depreciation- Furniture and Fixtures 50,000 50,000

Communication 41,300 29,600

Amortization-Software 30,000 30,000

Taxes and licenses 28,400 23,900

Provision for inventory obsolescence 24,100 13,700

Repairs& Maintenance- Office Building 21,600 22,900

Transportation and travel 18,700 16,900

Provision for impairment of receivables 17,100 11,600

Insurance 12,000 12,000

Office supplies 11,300 9,500

1,188,700

1,055,90

0

19. FINANCE COST

2009 2008


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Interest Expense

600,00

0

540,00

0

Other finance charges 4,700 3,200

604,70

0 543,200

20. OTHER INCOME

2009 2008

Scrap sales

24,30

0

19,60

0

Interest income 4,000 800

28,30

0

20,40

0

21. INCOME TAXES

Provision for income tax for the years ended December 31 consists of:

2009 2008

Current 346,785 263,889

Deferred 12,360 7,590

359,145 271,479

The components of the Companys deferred tax assets at December 31 follow:

Allowance for Bad debts

Deferred tax assets

January 1, 2008 -

Credit- originating difference 7,590

December 31, 2008 (7,590)

Credit- originating difference 12,360

December 31, 2009 (19,950)

22. KEY MANAGEMENT COMPENSATION

Total salaries and other benefits of key management personnel amounted to P814,200 andP715,800 in 2009 and 2008 respectively.

23. APPROVAL OF FINANCIAL STATEMENTS


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The accompanying financial statements were approved and authorized for issuance by the Board of

Directors on April 14, 2010.

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