Use any Financial Management reference in answering the following exercises.

Topics: ACCOUNTING & FINANCE

- Balance Sheet
- Income Statement
- Statement of Cash Flows
PROBLEMS:
1. Construct the balance sheet using the following information. Find the shareholders
equity.
Cash
Inventory
Land
Accounts Receivable
Accounts Payable
Short-term loan
Long-term mortgage debt

10,000.00
165,000.00
210,000.00
22,000.00
27,000.00
40,000.00
100,000.00

BA 238 Corporation
Statement of Financial Position
As of December 31, 2012
Assets
Current Assets
Cash
Accounts Receivable
Inventory
Total Current Assets

10,000.00
22,000.00
165,000.00
197,000.00

Non-Current Asset
Land
Total Assets

210,000.00
407,000.00

Liabilities and Shareholders' Equity

Current Liabilities
Accounts Payable
27,000.00
Short-term loan
40,000.00
Total Current Liabilities

67,000.00

Non-Current Liability
Long-term mortgage debt
Total Liabilities
Shareholders' Equity
Total Liabilities and Shareholders' Equity

100,000.00
167,000.00
240,000.00
407,000.00

Assignment 1 BA 238 P a g e | 1

2. It is said that balance sheet provides a snapshot of the firm at one point in time and the
income statement providing the video. What is the best explanation for this? Is the
statement of cash flows a snapshot or a video?
3. Explain why accounting income will generally differ from a firms cash inflows.
4. What impact will the following actions have on the firms cash balance?
a. A firm sells some goods from inventory.
b. A firm sells some machinery to a bank and leases it back for a period of 20 years.
c. A firm buys back 1 million shares from existing shareholders.
d. A firm takes out P1 million loan and uses the cash to expand its factory.
e. A firm uses excess cash to pay down accounts payable to suppliers.
5. Can cash flow from operations be positive if net income is negative? Can cash flow be
negative of net income is positive?
6. Using data for 2011 and 2012 (incomplete) balance sheet, be able to answer the
questions that follow:
ASSETS
2005
2006
Current assets
310
420
Net fixed assets
1,200
1,420
LIABILITIES & OWNERS' EQUITY
Current liabilities
210
240
Long-term debt
830
920

a. What is the owners equity at the end of 2005 and 2006?

ASSETS
Current assets
Net fixed
assets
Total Assets
Current
liabilities
Long-term
debt
Owners
Equity

Assignment 1 BA 238 P a g e | 2

2005
310
1,20
0
1,51
0

2006
420
1,42
0
1,84
0

(210)

(240)

(830)

(920)

470

680

b. If the company paid dividends of $100 in 2006, and made no stock issues,
what must have been the net income during the year?
Owners Equity, 2006
Owners Equity, 2005

680
(47
0)
210
100
31
0

Total
Dividends
Net Income, 2006

c. If the company purchased $300 in fixed assets during the year, what must
have been the depreciation charge on the income statement?
Net fixed assets, 2005

1,20
0
300
1,50
0
1,42
0
80

Purchased, 2006
Total
Net fixed assets, 2006
Depreciation, 2006

d. What was the change in the working capital between 2005 and 2006?

Current Assets
Current Liabilities
Working Capital

200
5
310
210
100

Working Capital, 2006

Working Capital, 2005
Change in Working
Capital

200
6
420
240
180
180
100
80

e. If the company issued $200 of new long-term debt, how much debt must
have been paid off during the year?
Long-term debt, 2005
New long term issuance, 2006
Total
Long-term debt, 2006
Long-term debt payment, 2006

Assignment 1 BA 238 P a g e | 3

830
200
1,03
0
920
110