|
These problems cover:
- balance sheet
- income statement
- cash flow
[cross reference to business valuation chapter]
|
| "Bush told
his senior aides Tuesday that he 'didn't
want to see any stories' quoting unnamed
administration officials in the media
anymore, and that if he did, there would
be consequences, said a senior administration
official who asked that his name not be
used."
--Joseph L. Galloway and James Kuhnhenn,
“Bush orders officials to stop the
leaks” (Philadelphia Inquirer, October
16; also cited in Washington Post, October
21, 2003) |
|
Use the financial statemnets for Albega Corporation:
ALBEGA
CORPORATION
Balance Sheet
December 31, 20xx |
Assets |
Liabilities |
| Current Assets |
|
Current Liabilities |
|
Cash |
$ 50,000 |
Accounts Payable
|
$ 60,000 |
Accounts receivable
(net of allowance for bad debts of $5,000)
|
$175,000 |
Notes payable (including current
portion of long-term debt) |
$ 40,000 |
Inventory (FIFO)
|
$125,000 |
Income taxes payable
|
$ 25,000 |
| Total current assets |
$350,000 |
Total current liabilities |
$125,000 |
| Fixed Assets |
|
Long Term Liabilities
5-year notes payable
|
$160,000 |
Land
|
$ 50,000 |
Total Liabilities |
$285,000 |
Building |
$ 75,000 |
|
|
Equipment |
$ 50,000 |
SHAREHOLDERS' EQUITY |
|
| |
$175,000 |
Common stock
($1.00 par value; 1,000 shares authorized, issued
and outstanding)
|
$ 1,000 |
Less:
|
|
Paid-in capital in excess of par value
|
$ 49,000 |
Accumulated depreciation
|
$ 50,000 |
Retained earnings |
$150,000 |
| Net fixed assets |
$125,000 |
Total Shareholders' Equity |
$200,000 |
| |
|
Total Liabilities
and shareholders' equity |
$485,000 |
ACME CORPORATION
Income Statement
Years ended December 31, 1998 - 2000 |
|
2000 |
1999 |
1998 |
| Net sales |
$500,000 |
|
|
Cost of goods sold and operating expenses
|
|
|
|
Cost of goods sold
|
$304,000 |
|
|
Depreciation
|
15,000 |
|
|
Selling and administrative expenses |
100,000 |
|
|
| |
$419,000 |
|
|
| Operating Income |
$ 81,000 |
|
|
| Interest on long-term notes |
13,000 |
|
|
| Income before income taxes |
$ 68,000 |
|
|
| Income taxes |
$18,000 |
|
|
| Net income |
$ 50,000 |
|
|
Net income per share
(1,000 shares outstanding) |
$ 50 |
|
|
1. What is the effect on the Acme Balance Sheet
of each of the following transactions? Consider each
transaction separately.
a. Acme borrows $20,000, payable in 3 years at 8%
interest, to purchase a parcel of land.
b. Acme purchases a parcel of land for $20,000 cash.
c. Acme collects $5,000 of accounts receivable.
d. Acme buys $10,000 of inventory on credit, with
the total amount payable in 6 months.
e. Acme pays off $5,000 of a note due in 180 days.
2. What is the value of each of the following and what
does each tell you about Acme?
a. Net working capital.
b. Current ratio.
c. Net quick assets.
d. Quick assets ratio.
e. Book value of conunon shares.
f. Asset coverage of debt.
g. Debt/equity ratio.
h. Earnings per share
i. Return on equity
j. Cash flow
3. Value Albega Corporation using the following methods:
What are the advantages and disadvantages of each approach?
a. Book value
b. Liquidation value [some assumptions]
c. Cash flow or earnings [some assumptions]
d. Comparable [some assumptions]
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|
Chapter 3 - Accounting Basics