1. Which is true regarding the liquidity (or short term solvency) of Entity A in 20x1? [10pts] *10 pointslIt has improvedIt has deterioratedIt has remained the same2. The additional investments in fixed assets in 20x1 is most likely financed through.. [10pts] *10 pointsoperationsborrowingsdonations3. Which is true regarding capital structure in 20x1? [10pts] *10 pointsProfit in 20x1 wsa retainedLoss has been incurredThe owner has made drawings in excess of profit4. Which is true regarding profitability in 20x1? [5pts] *5 pointsProfitability has improvedProfitability has deterioratedProfitability has remained the same5. Which could be the reason for the increased depreciation expense? [5pts] *5 pointsEntity A employed additional personnelEntity A obtained additional borrowingsEntity A made additional investments in fixed assets6. Which could be the reason for the decreased bad debts expense? [5pts] *5 pointsCredit sales and trade receivables have increasedCredit sales and trade receivables have decreasedThe additional borrowings during the year7. Which could be the reason for the increased interest expense? [5pts] *5 pointsThe decline in profitability during the yearThe decline in salesThe additional borrowings during the year

Comparative Statements of Financial Comparative Statements of Profit or Position of Entity A as of Dec. 31, 20x1 and 20x0. Loss (Comprehensive Income) of Entity A [Please replace title of Entity A Statements of Financial Position As of December 31, 20x1 and 20x0 company from ABC Co. to Entity A] ASSETS 20x1 20x0 Cash and cash equivalents P159,600 P105,000 Trade and other receivables 320,400 890,000 Inventory 306,000 300,000 Prepaid assets 48,000 50,000 Total current assets 834,000 1,345,000 DE ! ABC Co. Property, plant & equipment 1,886,000 820,000 Statements of profit or loss Total noncurrent assets 1,886,000 820,000 For the years ended December 31, 20x1 and December 31, 20x0 TOTAL ASSETS P2,720,000 P2,165,000 20x1 20x0 LIABILITIES Trade and other payables P556,200 P540,000 Sales P2,296,000 P2,800,000 Total current liabilities 556,200 540,000 Cost of sales (1,010,240) (1,260,000) Notes payable 1,120,000 140,000 GROSS PROFIT 1,285,760 1,540,000 Total noncurrent liabilities 1,120,000 140,000 Salaries expense (943,400) (890,000) TOTAL LIABILITIES 1,676,200 680,000 Depreciation expense (66,010) (28,700) Bad debts expense (16,020) (44,500) EQUITY Owner's capital 1,043,800 1,485,000 Interest expense (112,000) (14,000 TOTAL LIABILITIES & EQUITY P2,720,000 P2,165,000 PROFIT FOR THE YEAR P148,330 P562,800