Problem 3: Financial Statement Analysis:

Below is the Balance Sheet for Simplicity Corporation from the previous month.

Current Assets:			Current Liabilities:
Cash:	$56,000.00		Accounts Payable	$75,000.00
Accounts Receivable:	$70,000.00		Taxes Payable:	$12,000.00
Inventory:	$70,000.00		Total Current Liabilities:	$87,000.00
Total Current Assets:	$196,000.00
Fixed Assets:			Mortgage:	$157,629.14
Property:	$210,000.00		Total Liabilities:	$244,629.14
Acc. Depreciation:	$105,000.00
Equipment:	$50,000.00		Equity:
Acc. Depreciation:	$25,000.00		Retained Earnings:	$81,370.86
Net Fixed Assets:	$130,000.00		Total Equity:	$81,370.86
Total Assets:	$326,000.00		Total L and E:	$326,000.00

Transactions throughout the current month:

Earn $100,000.00 in sales revenue: $50,000.00 into Accounts Receivable and $50,000.00 in cash.

The sales require $55,000.00 worth of inventory. $30,000.00 of additional inventory is purchased on credit and applied to the Accounts Payable.

$25,000.00 is collected from Accounts Receivable.

$35,000.00 of the Accounts Payable is due this month and must be paid in cash.

The mortgage payment is $2,026.55 which includes the monthly interest of 6% APR (i.e. 0.5% per month).

The plant is depreciated by $800.00 and the equipment is depreciated by $400.00.

Salary, General, and Administrative expenses are $20,000.00 and is paid in cash.

The tax rate is 39% and is simply accumulated in the Taxes Payable Account and paid off at the end of the year, which is six months in the future.

Develop the income statement and balance sheet for the current month given the above transactions by providing the appropriate account titles and corresponding values in the tables below.

Income Statement

Sales:
Operating Expense:
Depreciation Expense:
EBIT:
Interest Expense:
EBT:
Taxes:
EAT:
Dividend:
Paid to Retained Earnings:

Balance Sheet

Current Assets:			Current Liabilities:
Cash:			Accounts Payable
Accounts Receivable:			Taxes Payable:
Inventory:			Total Current Liabilities:
Total Current Assets:
Fixed Assets:			Mortgage:
Property:			Total Liabilities:
Acc. Depreciation:
Equipment:			Equity:
Acc. Depreciation:			Retained Earnings:
Net Fixed Assets:			Total Equity:
Total Assets:			Total L and E:

Compute the Cash Flow from Assets and reconcile the Balance Sheet (Show your work).

Cash Flow from Assets: __________________

The Statement of Cash Flows is related to the calculations for Free Cash Flow and the associated reconciliation of the balance sheet. What appears to be very different is that the working capital accounts are analyzed individually instead of simply calculating the change in net working capital. It is made of three components: Cash Flow from Operating Activities (Cash Inflows from Customers plus Cash Paid to Suppliers plus Other Operating Cash Flows plus Cash Tax Payments), Cash Flow from Investing Activities ($0.00 in this case), and Cash Flow from Financing Activities. The Net Change in Cash equals Cash Flow from Operating Activities plus Cash Flow form Investing Activities plus Cash Flow from Financing Activities.

Fill in the shaded boxes

Sales:
Less Change in Accounts Receivable:
Cash Inflows from Customers:
COGS (negative number):
Less Change in Inventory:
Plus Change in Accounts Payable:
Cash Paid to Suppliers:
SGA (negative number):
Plus Interest Expense (negative number):
Other Operating Cash Outflows:
Provision for Income Taxes (negative number):
Plus Change in Taxes Payable:
Cash Tax Payments:
Cash Flow from Operating Activities:
Cash Flow from Investing Activities:		$0.00
Change in Short-term Notes:	$0.00
Plus Change in Long-term Notes (Debt):
Plus Change in Common Stock:	$0.00
Cash Flow from Financing Activities:
Net Change in Cash: