Senior 12 FundamentalsofABM2 Q1 M3 For Printing
Senior 12 FundamentalsofABM2 Q1 M3 For Printing
Fundamentals of Accountancy, Business and Management 2 – Grade 12
Alternative Delivery Mode
Quarter 1 – Module 3: Statement of Comprehensive Income (SCI) of a Merchandising
Business
First Edition, 2020
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Introductory Message
For the facilitator:
This learning resource hopes to engage the learners into guided and independent
learning activities at their own pace and time. Furthermore, this also aims to help
learners acquire the needed 21st century skills while taking into consideration
their needs and circumstances.
In addition to the material in the main text, you will also see this box in the body of
the module:
As a facilitator, you are expected to orient the learners on how to use this module.
You also need to keep track of the learners' progress while allowing them to
manage their own learning. Furthermore, you are expected to encourage and assist
the learners as they do the tasks included in the module.
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For the learner:
This module was designed to provide you with fun and meaningful opportunities
for guided and independent learning at your own pace and time. You will be
enabled to process the contents of the learning resource while being an active
learner.
What I Need to Know This will give you an idea of the skills or
competencies you are expected to learn in
the module.
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Additional Activities In this portion, another activity will be given
to you to enrich your knowledge or skill of
the lesson learned.
1. Use the module with care. Do not put unnecessary mark/s on any part of
the module. Use a separate sheet of paper in answering the exercises.
2. Don’t forget to answer What I Know before moving on to the other activities
included in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your
answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.
If you encounter any difficulty in answering the tasks in this module, do not
hesitate to consult your teacher or facilitator. Always bear in mind that you are
not alone.
We hope that through this material, you will experience meaningful learning
and gain deep understanding of the relevant competencies. You can do it!
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What I Need to Know
This module was designed and written with you in mind. It is here to help you
master the preparation of Statement of Comprehensive Income (SCI) of a
Merchandising Business. The scope of this module permits it to be used in many
different learning situations. The language used recognizes the diverse vocabulary
level of students. The lessons are arranged to follow the standard sequence of the
course. But the order in which you read them can be changed to correspond with
the textbook you are now using.
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What I Know
Choose the letter of the best answer. Write the chosen letter on a separate sheet of
paper.
1. Which of the following account is debited when customer return their products
for reasons such as defects, change of preference, etc.?
a. Sales returns c. Purchase Returns
b. Sales Discount d. Purchase Discount
4. Which of the account is normally used to signify the amount of revenue that the
company was able to generate from selling products?
a. Service Revenue c. Selling Expenses
b. Selling Revenue d. Sales
6. Which of the following represents the actual cost of merchandise that the
company was able to sell during the year?
a. Administrative expenses c. Cost of goods sold
b. Cost of goods available for sale d. Selling expenses
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8. Which of the following is the accounting treatment for ending inventory?
a. Deducted from cost of goods available for sale
b. Added to the cost of goods available for sale
c. Deducted from cost of goods sold
d. Added to the cost of goods sold
Item 11-15: Take the following accounts of VIDIA-19 and Co. for the month of May
2020 to answer the succeeding questions:
Sales P 500,000
Sales returns 30,000
Sales discounts 10,000
Beginning inventory 250,000
Ending inventory 50,000
Purchases 100,000
Purchase returns 20,000
Purchase discounts 10,000
Freight in 15,000
Salaries expense(35% of which is salaries of sales agent) 30,000
Rent expense (for office space is P15,000) 23,000
Depreciation expense, inclusive of P7,000 for office equipment 17,000
Utilities expenses, (the amount for utilities of warehouse is P6,000 11,000
Miscellaneous expense 1,000
11. How much is the Net Sales of VIDIA-19 and Co. for the month of May 2020?
a. P 460,000 c. P 490,000
b. P 470,000 d. P 500,000
12. How much is the Net Purchases of VIDIA-19 and Co. for the month of May
2020?
a. P 85,000 c. P 80,000
b. P 70,000 d. P 90,000
13. How much is the Cost of Goods Sold of VIDIA-19 and Co. for the month of May
2020?
a. P 335,000 c. P 270,000
b. P 250,000 d. P 285,000
14. How much is the total Selling Expenses of VIDIA-19 and Co. for the month of
May 2020?
a. P 34,500 c. P 82,000
b. P 47,500 d. P 33,500
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15. How much is the total General and Administrative Expenses of VIDIA-19 and
Co. for the month of May 2020?
a. P 34,500 c. P 48,500
b. P 47,500 d. P 33,500
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Lesson Statement of Comprehensive
1 Income (SCI) of a
Merchandising Business
Every business entity, especially in this time of COVID-19 pandemic must exert
effort in ensuring that their company remain in the market or at least earn a fair
share of revenue and income. With the help of the Statement of Comprehensive
Income (SCI), a company can determine if it is earning income or not. SCI can also
determine if the earnings for the period has increased or decreased.
What’s In
In the previous lesson, you have learned the meaning and elements of Statement of
Comprehensive Income (SCI) of a service business as well as its preparation using
the single-step approach. As a review, briefly define the following important terms
to strengthen your knowledge about the SCI before you proceed to this lesson.
3. Single-step approach
___________________________________________________________________________
_________________________________________________________________________
4. Service business
___________________________________________________________________________
______________________________________________________________________
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What’s New
Below activity will help you understand the elements of the Merchandising
business.
Activity 1: Can you spot it?
Directions: Study the Statement of Comprehensive Income (SCI) of ECQ Company.
Identify the elements of SCI using the format below. Write your answers on the
answer sheet.
ECQ COMPANY
STATEMENT OF COMPREHENSIVE INCOME
FOR THE MONTH ENDED MAY 31, 2020
Sales P 600,000
Sales returns P (40,000)
Sales discounts (20,000) (60,000)
Net Sales 540,000
Cost of Goods Sold
Beginning inventory P 250,000
Net Cost of Purchases
Purchases P 120,000
Purchase returns (25,000)
Purchase discount (15,000)
Net Purchases 80,000
Freight in 20,000 100,000
Cost of Goods available for sale 350,000
Ending inventory (60,000) (290,000)
Gross Profit 250,000
Selling Expenses
Salaries expense (20,000)
Rent expense (16,000)
Depreciation expense (14,000)
Utilities expense (12,000) (62,000)
General & Administrative Expenses
Salaries expense (35,000)
Rent expense (25,000)
Depreciation expense (20,000)
Utilities expense (10,000)
Miscellaneous expense (2,000) (92,000)
Net Income P 96,000
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What is It
In Activity 1, you were able to identify and define the elements of SCI of a
merchandising business. In this part of the module, you will find out further the
elements of SCI of a merchandising business and how to prepare such using the
multi-step approach.
ECQ COMPANY
A STATEMENT OF COMPREHENSIVE INCOME
FOR THE MONTH ENDED MAY 31, 2020
Sales P 600,000
Sales returns B-1 P (40,000)
Sales discounts (20,000) (60,000)
NET SALES 540,000
Cost of Goods Sold
Beginning inventory P 250,000
Net Cost of Purchases
Purchases P 120,000
Purchase returns B-2 (25,000)
Purchase discount (15,000)
Net Purchases 80,000
Freight in C 20,000 100,000
Cost of Goods available for sale 350,000
Ending inventory (60,000) (290,000)
Gross Profit 250,000
Selling Expenses
Salaries expense (20,000)
Rent expense B-3 (16,000)
Depreciation expense (14,000)
Utilities expense (12,000) (62,000)
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Explanation of Exhibit 1:
A – Heading
i. Name of the company
ii. Name of the statement
iii. Date of preparation (emphasis on the word “for the” to denote that the
statement is only for that specific period.
B –Elements of SCI
1. Net Sales (Sales less Sales returns and Sales discount)
i. Sales – this is the amount of revenue that the company was able to
generate from selling products
iii. Sales discount - this is where discounts given to customers who pay
early are recorded. (Haddock, Price, & Farina, 2012) Also known as
cash discount. This is different from trade discounts which are given
when customers buy in bulk. Sales discount is awarded to customers
who pay earlier or before the deadline.
Notes:
Sales returns and sales discount are called contra revenue account because
it is on the opposite side of the sales account. The sales account is on the
credit side while the reductions to sales accounts are on the debit side.
This is “contrary” to the normal balance of the sales or revenue accounts.
(Haddock, Price, & Farina, 2012)
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d. Purchase returns – account used to record merchandise
returned by the company to their suppliers. (Haddock, Price, &
Farina,2012) This is how buyers see a sales return recorded by their
supplier
e. Freight In – this account is used to record transportation costs
of merchandise purchased by the company. (Haddock, Price, &
Farina, 2012). It is called freight in because this is recorded when
goods are transported into the company.
iii. Cost of Good available for Sale – add Beginning inventory and Net
cost of Purchases
Notes:
3. Selling Expenses – these expenses are those that are directly related to the
main purpose of a merchandising business such as the sale and delivery of
merchandise. However, this does not include cost of goods sold and contra
revenue accounts. (Haddock, Price, & Farina, 2012)
Notes:
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Simpler SCI:
The above SCI of ECQ Company can be presented in a much simpler form, taking
only the four important elements.
ECQ COMPANY
STATEMENT OF COMPREHENSIVE INCOME
FOR THE MONTH ENDED MAY 31, 2020
The SCI in the face of the Financial Statement is usually presented in such simpler
form. The schedule of computations for each element is to be presented separately
in the Notes to Financial Statement.
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What’s More
Sales 150,000
Purchases 20,000
Purchase returns 2,000
Purchase discounts 2,000
Freight-in 1,000
Beginning inventory 10,000
Ending inventory 5,000
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Activity 4: Can you PREPARE me now?
Directions: The following are the accounts of Covidy Store for the month of May
2020. Prepare its Statement of Comprehensive Income for the period using multi-
step approach in a simpler format. Use the activity sheet as your guide for
computation and presentation of the SCI. write your answer on the answer sheet.
Sales P 50,000
Sales returns 3,000
Sales discounts 1,000
Beginning inventory 25,000
Ending inventory 5,000
Purchases 10,000
Purchase returns 2,000
Purchase discounts 1,000
Freight in 1,500
Salaries expense (60% of which is salaries of admin personnel) 3,000
Rent expense, inclusive of P800 for office space 2,300
Depreciation expense, (P1,000 is for office equipment) 1,700
Utilities expenses, (the utilities charged to admin office is P600) 1,100
Miscellaneous expense 100
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Activity 5: My Reflection!
Directions: Based on your learnings gained while doing Activity 4, write your
reflection on the importance of the preparing SCI for a merchandising business
using multi-step approach. Write your answer on the answer sheet.
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
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What I Have Learned
At this point, let us see how much you have gained from the discussions and
activities you have undergone.
(1)ECQ COMPANY
STATEMENT OF COMPREHENSIVE INCOME
(2)
Sales P 600,000
Sales returns (3)
(4) ________________ (20,000) (60,000)
NET SALES (5)
Cost of Goods Sold
(6) ________________ P 250,000
Net Cost of Purchases
Purchases P 120,000
Purchase returns (25,000)
Purchase discount (15,000)
(7) ________________ 80,000
Freight in 20,000 (8)
(9)____________________ 350,000
Ending inventory (10) (290,000)
Gross Profit (11)
(12)________________
Salaries expense (20,000)
Rent expense (16,000)
Depreciation expense (14,000)
Utilities expense (12,000) (13)
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What I Can Do
This activity will help you transfer into real-life situations the knowledge and skills
you have gained or learned from this module.
Business Address:
Owner:
Products offered:
b. Inquire on the amount of their daily sales and the effect of COVID-19 on
such sales.
___________________________________________________________________________
___________________________________________________________________________
_____________________________________________________________________
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• If the records obtained were only for past periods, prepare the SCI for May
2020 using estimates based on the amounts in the past statement and daily
sales you’ve got.
• If there is no record obtained at all, prepare the SCI using hypothetical
amounts only.
• Write the SCI using the Activity Sheet below. If you opt to present it using the
simpler format, make sure to include also the computation of each element.
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Rubrics in Rating Activity 7: The Bookkeeper in you
Score
Case Facts
3 2 1
Business details Filled-out at least Fill-out only 2-3 Listed only one (or
4 needed needed none) needed
information information information
SCI Preparation: Headings is There are few Incorrect headings
Headings correct errors in the or no heading at
headings all
The format and There are few Incorrect format
SCI Preparation:
computation is errors in the and computation
Net sales format and
correct
computation
The format and There are few Incorrect format
SCI Preparation:
computation is errors in the and computation
Cost of Goods format and
correct
Sold computation
The format and There are few Incorrect format
SCI Preparation:
computation is errors in the and computation
Selling Expenses format and
correct
computation
The format and There are few Incorrect format
SCI Preparation:
computation is errors in the and computation
General and format and
correct
administrative computation
expense
The SCI is There few There many
SCI Preparation:
presented in a accounts that are accounts that are
Overall not presented in a not presented in a
correct and
presentation correct and correct and
organized manner
organized manner organized manner
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Assessment
Directions: Choose the letter of the best answer. Write the chosen letter on a
separate sheet of paper.
1. Which of the account is normally used to signify the amount of revenue that the
company was able to generate from selling products?
a. Service Revenue c. Selling Expenses
b. Selling Revenue d. Sales
2. Which of the following represents the actual cost of merchandise that the
company was able to sell during the year?
a. Administrative expenses c. Cost of goods sold
b. Cost of goods available for sale d. Selling expenses
6. Which of the following account is debited when customer return their products
for reasons such as defects, change of preference, etc.?
c. Sales returns c. Purchase Returns
d. Sales Discount d. Purchase Discount
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8. Which of the following is the accounting treatment for transportation costs of
merchandise purchased by the company?
a. Freight in and deducted from the net purchases
b. Freight in and added to the amount of net purchases
c. Freight out and treated as selling expenses
d. Freight out and treated as general and administrative expenses
10. Which of the following is the accounting treatment for ending inventory?
a. Deducted from cost of goods available for sale
b. Added to the cost of goods available for sale
c. Deducted from cost of goods sold
d. Added to the cost of goods sold
Item 11-15: Take the following accounts of Covid Marie Enterprise for the year
ended December 31, 2019 to answer the succeeding questions:
Sales 5,000,000
Sales returns 300,000
Sales discounts 100,000
Beginning inventory 2,500,000
Ending inventory 500,000
Purchases 1,000,000
Purchase returns 200,000
Purchase discounts 100,000
Freight in 150,000
Salaries expense (50% of which is salaries of sales agent) 300,000
Rent expense (for office space is P150,000) 230,000
Depreciation expense, inclusive of P70,000 for office equipment 170,000
Utilities expenses, (the utilities charged for office space is P60,000 110,000
Miscellaneous expense 10,000
11. How much is the Net Sales of Covid Marie Enterprise for the year ended
December 31, 2019?
a. P 4,700,000 c. P 4,600,000
b. P 4,970,000 d. P 5,000,000
12. How much is the Net Cost Purchases of Covid Marie Enterprise for the year
ended December 31, 2019?
a. P 700,000 c. P 900,000
b. P 850,000 d. P 800,000
13. How much is the Cost of Goods Sold of Covid Marie Enterprise for the year
ended December 31, 2019?
a. P 3,350,000 c. P 2,850,000
b. P 2,500,000 d. P 2,700,000
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14. How much is the total Selling Expenses of Covid Marie Enterprise for the year
ended December 31, 2019?
a. P 460,500 c. P 430,000
b. P 420,000 d. P 380,000
15. How much is the total General and Administrative Expenses of Covid Marie
Enterprise for the year ended December 31, 2019?
a. P 440,000 c. P 430,000
b. P 420,000 d. P 380,000
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Additional Activities
Let us reinforce the skills/knowledge that you have gained from this lesson by
doing the next activity.
Case 1:
Handy Mask Company’s salaries to sales agents amounted to P10,000. Salaries of
accountants amounted to P20,000. No other expenses were incurred. How much is
the company’s general and administrative expense?
Case 2:
Handy Mask’s beginning inventory amounted to P250,000. Net purchases
amounted to P70,000. Freight In totaledP15,000. Compute for the company’s cost
of goods available for sale.
Case 3:
Handy Mask’s Sales amounted to P500,000. Sales returns and sales discounts
amounted to P30,000 and P10,000 respectively. Purchases of the company totaled
P100,000 while purchase returns and purchase discounts amounted to P20,000
and P10,000 respectively. How much is the company’s Net Sales? Net Purchases?
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Case 4:
Case 5:
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What’s I Know
1. A 6. C 11. A
2. B 7. D 12. B
3. C 8. A 13. D
4. D 9. C 14. A
5. B 10. D 15. B
What’s In
1. Statement of Comprehensive Income – Also known as the income statement.
Contains the results of the company’s operations for a specific period of time which is
called net income if it is a net positive result while a net loss if it is a net negative
result. This can be prepared for a month, a quarter or a year. (Haddock, Price, &
Farina, 2012)
2. Temporary or Nominal Accounts – are the accounts found under the SCI. They are
called such because at the end of the accounting period, balances under these
accounts are transferred to the capital account, thus having only temporary amounts
and resulting to zero beginning balances at the beginning of the following
year.(Haddock, Price, & Farina, 2012)Examples of temporary accounts include
revenues, sales, utilities expense, supplies expense, salaries expense, depreciation
expense, interest expense among others.
3. Single-step approach – called single-step because all revenues are listed down in one
section while all expenses are listed in another. Net income is computed using a
“single-step” which is Total Revenues minus Total Expenses. (Haddock, Price, &
Farina, 2012)
4. Service business – A service company provides services in order to generate revenue
and the main cost associated with their service is the cost of labor
Activity 1
Requirement 1:
• GCQ Incorporated only – SERVICE REVENUE
• ECQ Company only – SALES, SALES RETURNS, SALES DISCOUNT, COST OF GOODS
SOLD, INVENTORY, PURCHASES, PURCHASE RETURNS, PURCHASE DISCOUNT,
FREIGHT IN, COST OF GOODS AVAILABLE FOR SALE, GROSS PROFIT, SELLING
EXPENSES, GENERAL AND ADMINISTARIVE EXPENSE
Requirement 2:
• GCQ Incorporated – Service Business – the company is using Service Revenue
• ECQ Company – Merchandising Business – presence of accounts that denote selling
activity such as Sales, Cost of Goods Sold, Selling Expenses, Inventory, etc.
Activity 2 Activity 3
Beginning inventory P 10,000
a. General and admin Purchases P 20,000
b. General and admin Purchase returns 2,000
c. Selling Expenses Purchase discount 2,000
d. General and admin Net Purchases 16,000
e. General and admin Freight in 1,000
f. General and admin Net Cost of Purchases 17,000
g. Selling expenses Cost of Goods Available for Sale 27,000
h. Selling expenses Ending inventory 5,000
i. General and admin Cost of goods sold P 22,000
Answer Key
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Activity 4
• Net Sales
Sales P 50,000
Sales Returns 3,000
Sales Discount 1,000
Net Sales P 46,000
• Cost of Goods Sold
Beginning inventory P 25,000
Purchases P 10,000
Purchase returns 2,000
Purchase discount 1,000
Net Purchases 7,000
Freight in 1,500
Net Cost of Purchases 8,500
Cost of Goods Available for Sale 33,500
Ending inventory 5,000
Cost of goods sold P 28,500
• Selling Expenses
Salaries expense (3,000 x 40%) P 1,200
Rent expense (2,300 – 800) 1,500
Depreciation expense (1,700 – 1,000) 700
Utilities expense (1,100 – 600) 500
Selling expenses P 3,900
• General and Administrative Expenses
Salaries expense (3,000 x 60%) P 1,800
Rent expense (office space) 800
Depreciation expense (office equipment) 1,000
Utilities expense (admin office) 600
Miscellaneous expense 100
General and Administrative expenses P 4,300
• SCI (Simpler Form)
COVIDY STORE
Statement of Comprehensive Income
For the month ended May 31, 2020
Net Sales P 46,000
Cost of Goods Sold (28,500)
Gross Profit 17,500
Selling Expenses (3,900)
General and Administrative Expenses (4,300)
Net Income P 9,300
Activity 5: Students’ answers may vary as.
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Activity 6
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Activity 7 - Students’ answers might vary. Scoring will be based on the Rubrics
Assessment
1. D
2. C 16-20:
3. C COVID MARIE ENTERPRISE
4. C Statement of Comprehensive Income
5. D
For the year ended December 31, 2019
6. C
7. B
8. B Net Sales P 4,600,000
9. D Cost of Goods Sold (2,850,000)
10. A Gross Profit 1,750,000
11. C Selling Expenses (380,000)
12. B General and Administrative Expenses (440,000)
13. C Net Income P 930,000
14. D
15. A
Activity 8
Case 1:
General and administrative expenses
Salaries (accountant) P 20,000
Case 2:
Beginning Inventory P 250,000
Net Purchases 70,000
Freight In 15,000
Cost of goods available for sale P 335,000
Case 3:
Sales P 500,000
Sales returns (30,000)
Sales discount (10,000)
Net Sales P 560,000
Purchases P 100,000
Purchase returns (20,000)
Purchase discount (10,000)
Net Purchases P 70,000
Case 4:
Beginning inventory P 250,000
Net Cost of Purchases 85,000
Total Goods available for Sale 335,000
Ending inventory (50,000) ? (335,000 – 285,000)
Cost of goods sold P 285,000
Case 5:
Beginning inventory P250,000
Net Sales(COGS + Gross Profit) P460,000
Net cost of purchases 85,000
Cost of Goods Sold (COGS) 285,000 Ending inventory (50,000)
Gross profit P175,000 Cost of goods sold P285,000
References
Teaching Guide for Senior High School: Fundamentals of Accountancy, Business
and Management 2 Published by the Commission on Higher Education,
2016
Chairperson: Patricia B. Licuanan, Ph.D.pp 19-35
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