A$-4\mathrm{.}1$ Conday

L$.$td$.,$ a small privately held firm, has been in operation for three years and produces antique repro$-$

duction furniture for the export market. The most recent set of financial statements is shown below.

Conday Ltd$.$

Balance Sheet

as at November $30,2010$

$($in $ thousands$)$

Current assets

Actounts rectirable

$820$

Itwentory

$600$

Total turrent assels

Property, plant, and equipment

Land

Buildings $228$

Less: Actumulated depreciation

Plant and equipment

Less: Accumulated depreciation

Total property, plant, and equipment

Total assets

Current liabilities

Bark overdraft

Actounts payable

Incume tanes payable

Total turrent lisbilities

Long$-$term liabilities

$9\%$ Bonds payable $($Mote $1)$

Total liabilities

$1,345$

Sharehalders' equity

Cammon shares $(700,000$ shares tutstanding$)$

Retained eartings

Total shareholders' equity

$1,055$

Total liabilities and shareholders' equity

$2,410$

Conday Ltd$.$

Income Statement

for the year anded November $30,2010$

$($in $ thousands$)$

Sales $($all an credit$)$

Less: Cost of goods sold

Gruss profit

Less: Selling and distribution expenses $($Wate $2)408$

Abninistration expenses $194$

Interest eipenses

Eartings before taxes

Less: Itcame tan expense

Met incame

Conday Ltd$.$

Statement of Retained Earnings

for the year ended November $30,2010$

$($in $ thtusands$)$

Opening refained earnings, December $1,300$

Add: Net income $225$

Less: Dividends paid $(160)$

Clasing relained eamings, Navember $30$

Nates

The bonds ane secured by the land and builings

Salling and distribution axpanses include $$170,000$ of bad debts axpanse.

The company has invited an investor to buy a new iscue of commen shares in the business at $$6\mathrm{.}40$ each, making a total

ifvesiment of $$200,000.$ Managoment wishes to we the funds to finance a program of further expansion.