Howard Company (B) Diane Howard was grateful for the balance sheets/Statement of Financial Position (per Case 2, Howard Company A) that her friend prepared. In going over the numbers, she remarked, its sort of surprising that cash increased by P31,677, but net income was only P19,635. Why was that? Her friend replied, A partial answer to that question is to look at an income statement for June. I think I can find the data I need to prepare one for you. In addition to the data given in Case 2 (Howard Company A), her friend found a record of cash receipts and disbursements, which is summarized in Exhibit 1. She also learned that all accounts payable were to vendors for purchase of merchandise inventory and that cost of sales was P39,345 in June.

Questions 1. Prepare an income statement for June in proper format. Explain the derivation of each item on this statement, including cost of sales. 2. Explain why the change in the cash balance was greater than the net income. 3. Explain why the following amounts are incorrect cost of sales amounts for June: (a) P14,715 and (b) P36,030. Under what circumstances would these amounts be correct cost of sales amounts?

Haward Company Statement of Financial Position Current Assets Current Liability Cash 34,983 66,660 Bank Note payable 8.385 29,250 Accounts payable 851 21315 Shareholders Equity Jun-01 Jun.30 Retain earning 22151 220446 Inventory 2,835 26 520 Add Net Income Prepaid ex 3150 2 826 Tax payable 5.700 7.224 Note Receivable 11700 Less dividends paid 221,511 229,446 Supplies on Hand 5.559 6.630 Other Non current Liabilities 2451 2451 Totalcurrent Asset 107.025 129.141 Buildin S5000 Total Liabilty 27,027 62,442 LessAccumulated Dep 390000 390000 156000 157850 Shareholder's Equity Comman stockexcess value Less Accumulated Dep 5304 5928 Net income 0 89,700 89,700 Less dividends paid Total Share holder s Equity 611,511 619,446 526,656 547,482 221,511 229,446 other non current asset ASS7 5265 Retain earning Ending balance Less: Beginning Balance 7935 Total Share holder's Equity L 611,511 619A46 Net income 6 38538 68 1,888 638,538 681,888 DATA FROM CASE 3 HOWARD COMPANY A