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 Summary
The income statements and balance sheets are discussed. The differences of the two firms are analyzed.
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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 ...
Education
- B. Sc., University of Nigeria
- M. Sc., London South Bank University
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