ASSUMPTIONS:

• On December 31, 1995, the following transactions took place:
  
  
  • Issued no par stock for P500
  • Borrowed P500 from bank at 10% interest
  • Purchased property plant and equipment for P1,000. PP&E is depreciated on the straight line method over 20 years.
    
    
• On January 1, 1997, the following transactions took place:
  
  
  • Repaid debt of P100
  • Purchased PP&E for P100
    
    
• Sales and expense are made evenly through the year.
  
  
• Cost of sales is 70% of sales
  
  
• Inflation is 50% both years and is even throughout the year - 22.47% average inflation. Unless otherwise indicated, transactions are assumed to occur evenly throughout the year. To illustrate, nominal sales is adjusted by 1.2247 to determine sales in constant year end pesos.
  
  
• Interest is not paid.
  
  View the Financial Statements