keith j cunningham - financial literacy
TRANSCRIPT
Copyright© 2008 Keys to the Vault
THE MIGHTY FINE LEMONADE COMPANY
BALANCE SHEET
YEAR 1
ASSETS
Cash $1,700 Receivables 19,000 Inventory 5,000 Fixed Assets 4,500
Depreciation (1,500)
Net Fixed Assets 3,000
Total Assets $28,700
LIABILITIES
Payables 2,000 Debts 4,000 Income Tax Due 500
Total Liabilities $6,500
EQUITY
Stock 5,000 Retained Earnings 17,200
Total Equity 22,200
Total Liabilities & Equity $28,700
Copyright© 2008 Keys to the Vault
THE MIGHTY FINE LEMONADE COMPANY
INCOME STATEMENT
YEAR 1
Sales $50,000
COGS (10,000)
Gross Profit 40,000
Operating Expenses (18,500)
Operating Income 21,500
Depreciation (1,500)
Interest Expense (800)
Total (2,300)
Profit before Tax 19,200
Taxes (2,000)
Net Income $17,200
Copyright© 2008 Keys to the Vault
THE MIGHTY FINE LEMONADE COMPANY
CASH STATEMENT
YEAR 1
Beginning Cash $0
Collections (Sales-A/R) 31,000
Inventory Paid (15,000)
Operating Expenses Paid (16,500)
Interest Paid (800)
Income Tax Paid (1,500)
Total OCF ($2,800)
Fixed Asset Investment ($4,500)
Total ICF ($4,500)
Financing From Equity $5,000
Financing From Bank 8,000
Loan Repayment (4,000)
Total FCF
$9,000
Ending Cash $1,700
Copyright© 2008 Keys to the Vault
THE MIGHTY FINE LEMONADE COMPANY
TRANSACTIONS:
1 We invest $5,000 Cash to create The Mighty Fine Lemonade Company.
The company issues 5,000 shares of Common Stock.
2 We borrow $8,000 from the Bank. The note is due over 2 years. The interest rate is 10%.
Payments are made at the end of each year. Year 1 principal payment is $4,000 and
Year 1 interest payment is $800.
3 We purchased a computer, printer and software for the business. Total price was $4,500.
Paid Cash. The estimated useful life is 3 years (no salvage value). Straight line depreciation.
4.1 We purchased enough inventory to actually make 75,000 quarts. Inventory raw materials
cost 20¢ per quart. Paid cash.
4.2 We sold 50,000 quarts at $1.00 each. Of the $50,000 in sales, $31,000 was in cash
and $19,000 were receivables.
5 Expenses for rent, office supplies, sales, payroll and advertising totalled $18,500
for the year. We paid for $16,500.
6 Estimated income tax came to $2,000. We paid $1,500.
Prepare an Ending Balance Sheet, Income Statement and Cash Flow Statement.
AS
SE
TS
=+
Tra
nsaction/E
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Cash
Accts
Rec'b
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Pro
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Equip
(net)
Accts
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Taxe
s
Paya
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Note
s
Paya
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Com
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Sto
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Reta
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Earn
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_____
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1 E
quity
Sale
2 B
ank L
oan
_____
=
3 P
PE
purc
hase
_____
=
4.1
In
vento
ry P
urc
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_____
=
4.2
S
ale
s_____
Revenues
=
4.3
In
vento
ry S
old
=C
ost
of
Goods S
old
_____
_____
=
Inte
rest exp
ense
Tax
exp
ense
_____
=
TO
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=
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4.3
In
vento
ry S
old
=C
ost
of
Goods S
old
5 O
pe
ratin
g C
osts
Opera
ting E
xpenses
2 A
dju
st In
tere
st
_____
=
3 A
dju
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epre
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=D
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6 In
com
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axe
s_____
= =2
Note
Repaym
ent
Bala
nce 1
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