Use the following information to create an income statement and balance sheet fo
ID: 2809848 • Letter: U
Question
Use the following information to create an income statement and balance sheet for 2016 and 2017; assume the tax rate is 34%. Then, using those statements, calculate for 2017: • Cash flow from assets • Cash flow to creditors • Cash flow to stockholders 2016 2017 Sales 25,460 28,458 Depreciation expense 3,654 3,820 Cost of goods sold 8,754 10,356 Other expenses 2,082 1,812 Interest expense 1,708 2,038 Cash 13,348 14,226 Accounts receivable 17,674 20,742 Short-term notes payable 2,576 2,524 Long-term debt 44,704 54,198 Net fixed assets 111,954 119,400 Accounts payable 9,644 10,216 Inventory 31,422 33,634 Dividends 3,044 3,560
Explanation / Answer
Income Statement
2016
2017
Sales
$25460
$28458
- Cost of goods sold
$8754
$10356
Gross profit
$16706
$18102
- Depreciation expenses
$3654
$3820
- Other expenses
$2082
$1812
EBIT
$10970
$12470
- Interest expense
$1708
$2038
EBT
$9262
$10432
- Tax @ 34%
$3149
$3547
Net income
$6113
$6885
Balance Sheet
2016
2017
Current assets;
Cash
$13348
$14226
Accounts receivable
$17674
$20742
Inventory
$31422
$33634
Total current assets
$62444
$68602
Net fixed assets
$111954
$119400
Total assets
$174398
$188002
Liabilities;
Current liabilities:
Accounts payable
$9644
$10216
Short-term notes payable
$2576
$2524
Long-term debts
$44704
$54198
Total liabilities
$56924
$66938
Stockholders’ funds
$117474
$121064
Total liabilities and stockholders’ funds
$174398
$188002
1. Cash flow from assets;
Cash flow from assets = Operating cash flows - Addition to NWC – Capital spending
Operating cash flows $12470 + $3820 – $3547 = $12743
Additions to NWC ($55862 – $50224) = $5638
Capital spending ($119400 - $111954) + $3820 = $11266
Now, let’s put these values in the formula;
Cash flow from assets ($12743 - $5638 – $11266) = - $4161
2. Cash flow to creditors;
Cash flow to creditors = Interest – New long-term debt
Cash flow to creditors ($2038 – $9494) = - $7456
3. Cash flow to Stockholders;
Cash flow to stockholders = Cash flow from assets – Cash flow to creditors
Cash flow to stockholders -$4161 – (-7456) = $3295
Income Statement
2016
2017
Sales
$25460
$28458
- Cost of goods sold
$8754
$10356
Gross profit
$16706
$18102
- Depreciation expenses
$3654
$3820
- Other expenses
$2082
$1812
EBIT
$10970
$12470
- Interest expense
$1708
$2038
EBT
$9262
$10432
- Tax @ 34%
$3149
$3547
Net income
$6113
$6885