Prepare the following financial statements based on below info: 1. Balance sheet
ID: 2330015 • Letter: P
Question
Prepare the following financial statements based on below info:
1. Balance sheet as on 31 Dec 2017
2. P&L statement for year ending 31 Dec 2018
3. Balance sheet as on 31 Dec 2018
4. Statement of cash flows for the year ending 31 Dec 2018.
Financial Information:
The Company was initially set up by issuing 240,000 shares at an issue price of $1 each.
A factory was at a cost of $500,000.
The new factory was largely financed by taking out a $450,000 mortgage loan. In addition to the mortgage loan, the company took out a $482,000 interest-only unsecured bank loan.
In addition to the factory, the company purchased the following:
Plant&Equipment to the value of $200,000, Furniture&Fixtures to the value of $140,000, Inventory to the value of $184,000.
All these occurred in late Dec 2017. Any cash remaining was put into a bank account.
On 1 Mar 2018, the company took out a bank overdraft. The outstanbding balance on 31 Dec 2018 was $20,000 (This is to be recorded separately from cash balalnce rather than combined.)
On 1 July 2018, motor vehicles to the value of $160,000 were purchased.
On 31 Dec 2018, the company issued corporate bonds to the value of $700,000 and used the proceeds to purchase an additional factory costing $700,000.
On 31 Dec 2018, the company issued 142,000 new ordinary shares at $2 each and 260,000 new preferance shares at $1 each. Some of the amount raised was used to buy additional plant & equipment for the new factory at a cost of $240,000.
During the course of the year ending 31 December 2018, the following transactions occurred.
Products to the value of $1,992,000 were sold & delivered. These sales were m,ade on the basis on one month credit. Of the $1,992,000 in sales occuring in 2018, products to the value of $199,000 were delivered in Dcember 2018 and will not be paid for until January 2019.
Raw materials to the value of $996,000 were ordered and taken delivery of. These purchases were made on the basis of one month's credit. Of the $996,000 in raw materials purchased in 2018, raw materials to the value of $98,000 were ordered and taken delivery of in December 2018 and will not be paid of until Jan 2019.
Payment of wages ($148,000).
Payment of Rent for 2018 ($130,000)
Payment of motor vehicle running expenses ($53,000)
Payment of insurance for 2018 ($49,000)
Payment of interest ($84,000)
Payment for printing & stationery ($30,000)
Payment for Heating & Lighting for 2018 ($31,000)
Payment for Telephone, Postage & internet charges ($20,000)
In addition, an additional $46,000 was paid in December for January's rent.
In addition to the above interest payment, the principle owing on the mortgage loan was reduced by $42,000.
The value of inventory on 31 Dec 2018 was $213,000.
Additional Info : Depreciation on motor vehicles, plant&equipment and furniture&fixtures is calculated on a straight-line basis at the rate of 10% per year.
The company faces a tax rate of 20% . The company's Dividend payout ratio is 75%.
Explanation / Answer
1 Balance Sheet as on 31st Dec 2017 Assets Current Assets Inventory $184,000 Bank Account $148,000 Fixed Assets Factory $500,000 Plant and Equipment $200,000 Furniture and Fixture $140,000 Total Assets $1,172,000 Long Term Loan Mortgage Loan $450,000 Unsecured Bank Loan $482,000 Common Stock $240,000 (Issued 240000 shares at $1 each) Total Liabilities and Equity $1,172,000 Cash Available Common Stock $240,000 Mortgage Loan $450,000 Unsecured Bank Loan $482,000 $1,172,000 Less : Factory $500,000 Plant and Equipment $200,000 Furniture and Fixture $140,000 Inventory $184,000 Total Spending $1,024,000 Cash Available $148,000 2 Profit and Loss statement for the year ending 31st Dec 2018 Sales $1,992,000 Less: Raw Materials $996,000 Gross Profit $996,000 Less: Wages Expense $148,000 Rent Expense $130,000 Motor Vehicle Running Expense $53,000 Insurance $49,000 Printing and Stationery $30,000 Telephone, Postage and Internet Charges $20,000 Depreciation $74,000 ($200000+140000+240000+160000)*10% $504,000 Earnings before interest and Tax $492,000 Interest $84,000 Earnings before Tax $408,000 Tax @ 20% $81,600 Earnings after Tax $326,400 Dividend @ 75% $244,800 *No details on depreciation of factory is given and hence it is assumed there is no depreciation for the same 3 Balance Sheet as on 31st Dec 2018 Assets Current Assets Inventory $213,000 Bank Account $249,600 Accounts receivable $199,000 Prepaid Rent $46,000 Fixed Assets Factory $1,200,000 Plant and Equipment $440,000 Furniture and Fixture $140,000 Motor Vehicles $160,000 Less : Depreciation @ 10% ($74,000) $666,000 Total Assets $2,573,600 Liabilities and Equity Current Liabilities Accounts Payable $98,000 Bank Overdraft $20,000 Long Term Loan Mortgage Loan $408,000 Unsecured Bank Loan $482,000 Corporate Bond $700,000 Shareholder's Equity Preference Shares $260,000 (Issued 260000 shares at $ 1 each) Common Stock $240,000 (Issued 240000 shares at $1 each) Common Stock $284,000 (Issued 142000 shares at $2 each) Retained Earnings $81,600 Total Liabilities and Equity $2,573,600 4 Statement of Cash flows for the year ending 31 Dec 2018 Cash, beginning of the year $148,000 Cash flows from operating activities Profit before taxation $408,000 Adjustments for: Depreciation $74,000 Working capital changes: Increase in Accounts Receivable ($199,000) Increase in inventories ($29,000) Increase in prepaid Rent ($46,000) Increase in Accounts Payable $98,000 Taxes Paid ($81,600) Cash generated from operations $224,400 Net cash from operating activities 0 Cash flows from investing activities Purchase of Motor Vehicles ($160,000) Purchase of Factory ($700,000) Plant and Equipment ($240,000) Net cash used in investing activities ($1,100,000) Cash flows from financing activities Issue of new common stock $284,000 Issue of Preference shares $260,000 Corporate Bond Issued $700,000 Bank Overdraft $20,000 Repayment of mortgage Principal ($42,000) Dividend paid ($244,800) Net cash used in financing activities $977,200 Net increase in cash and cash equivalents $101,600 Cash and cash equivalents at end of period $249,600