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Income Statements and Balance Sheets

Using the income statement and balance sheet below, can you please help me with the following questions?

Thank you!

a. Calculate the amount of dividends Firm A and Firm B paid using the information given.
b. Prepare a statement of cash flows for each firm using the indirect method.
c. Analyze the difference in the two firms.

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The following income statement and balance sheet information are available for two firms, firm A and Firm B.

Income Statement for Year Ended December 31, 2012
Firm A Firm B
Sales $ 1,000,000 $ 1,000,000
Cost of goods sold $ 700,000 $ 700,000
Gross profit $ 300,000 $ 300,000
Other expenses
Selling and administrative $ 120,000 $ 115,000
Depreciatin $ 10,000 $ 30,000
Interest expense $ 20,000 $ 5,000
Earnings before taxes $ 150,000 $ 150,000
Income tax expense $ 75,000 $ 75,000
Net Income $ 75,000 $ 75,000

Changes in Balance Sheet Accounts December 31, 2011, to December 31, 2012

Firm A Firm B
Cash and cash equivalents $ 0 $+10,000
Accounts receivable +40,000 +5,000
Inventory +40,000 -10,000
Property, plant, and equipment +20,000 +70,000
Less accumulated depreciation (+10,000) (+30,000)
Total Assets $+90,000 $+45,000
Accounts payable $-20,000 $ -5,000
Notes payable (current) +17,000 +2,000
Long-term debt +20,000 -10,000
Deferred taxes (noncurrent) +3,000 +18,000
Capital, stock ---------- -- ---------
Retained earnings +70,000 +40,000
Total Liabilities and Equity $+90,000 $+45,000

Solution Preview

Please see attachment.

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QUESTION

The following income statement and balance sheet information are available for two firms, firm A and Firm B.

Income Statement for Year Ended December 31, 2012
Firm A Firm B
Sales $ 1,000,000 $1,000,000
Cost of goods sold $ 700,000 $700,000
Gross profit $ 300,000 $300,000
Other expenses
Selling and administrative $ 120,000 $115,000
Depreciation $ 10,000 $30,000
Interest expense $ 20,000 $5,000
Earnings before taxes $ 150,000 $150,000
Income tax expense $ 75,000 $75,000
Net Income $ 75,000 $75,000

Changes in Balance Sheet Accounts December 31, 2011, to December 31, 2012
Firm A Firm B
Cash and cash equivalents $0 $10,000
Accounts receivable $40,000 $5,000
Inventory $40,000 ($10,000)
Property, Plant and equipment $20,000 $70,000
Less accumulated ...

Solution Summary

The income statements and balance sheets are discussed. The differences of the two firms are analyzed.

$2.19