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    Income Statements and Balance Sheets

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    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

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    Solution Preview

    Please see attachment.

    Feel free to ask for clarifications at any time.

    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

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