Case Study: John & Jon (J&J) Financial Statement Preparation & Analysis You are
ID: 2616665 • Letter: C
Question
Case Study: John & Jon (J&J) Financial Statement Preparation & Analysis
You are recently hired as a senior financial analyst for John & Jon (J&J) and you are in charge of preparing the financial statements and presenting an annual analysis on the board meeting.
Overview of John & Jon’s Balance Sheet
The assets of John & Jon (J&J) in 2017 has both current assets and net plant and equipment. It has total assets of $ 7.5 million and net plan and equipment equals $5 million. J&J only finances with $2.5 million long-term debt, $500,000 notes payable and total common equity of $3.5 million. The firm does have $400,000 accounts payable and $600,000 accruals on its balance sheet. Now assume the firm’s current assets consist entirely of cash and cash equivalence, account receivables and inventories. If it has 1.5 million cash and cash equivalents and $400,000 account receivables.
John & Jon’s Income Statement in 2017 (dollars are in millions)
Sales $15
Operating costs excluding depreciation and amortization $5
EBITDA $10
Depreciation & Amortization $0.6
EBIT $9.4
Interest $0.4
EBT $9
Taxes (40%) $3.6
Net Income $5.4
Cash Dividends $2.0
1. Prepare the balance sheet and present to the board of directors (5%)
Total Assets
Liabilities & Shareholder’s Equity
2.What is the amount of total liabilities and equity that appears on the firm’s balance? (1%)
3. What is the amount of current assets (1%)
4. What is the balance of current liabilities? (1%)
Total Assets
Liabilities & Shareholder’s Equity
Explanation / Answer
Inventory = Total assets - Plant and equipement- cash - accounts receivable
Total Liabilities and Equity - $7.50 million
Current Assets = $2.50 million
Current liabilities - $1.50 million
Balance Sheet of John's and Jon's Assets ($ in millions) Plant and Equipement(Net) 5.00 Cash and cash equivalents 1.50 Accounts Receivable 0.40 Inventory 0.60 Total Current Assets 2.50 Total Assets 7.50 Liabilities Common Stock 3.50 Long Term debt 2.50 Accounts payable 0.40 Accruals 0.60 Notes payable 0.50 Total current liabilities 1.50 Total Liabilities 7.50Inventory = Total assets - Plant and equipement- cash - accounts receivable
Total Liabilities and Equity - $7.50 million
Current Assets = $2.50 million
Current liabilities - $1.50 million