MGT 4540 Chapter exercise on Balance and Income Statement Put your name here: Instructions: The work must be on your own. The exercise consists of 13 questions Q1-10 (worth 8 points each) and Q 11(worth 10 points cach), 12, 13 (worth 5 points cach) You must show calculation, not just an answer 100 Maximum points possible With Bob's help, Richard has purchase, installed and setup his new accounting software program. In fact, he has just printed his first income statement and balance sheet, reproduced belox. Warrior Industries Income Statement for year ending 12/31/20XX Sales revenue 1456,45 Less cost of goods sold 205.200 Kronsmartin 251.225 Les operating po Marketing 0.000 Sales and administrative BLOG Depreciation 10.000 Il Total aperiting expenses 70.000 Operating income 181.22 Less interest expense 7.000 Income before taxes 174328 Income tax exped 40,000 Nete Warrier Industrie Balance Sheet for 3/20XX CA Kash whe 0.00.00 F. 00 13.00 79.00 Totalcarrastel |Furfan Property, plant and we Berwand donati Veld Yal 2000 310000 5.300.00 IS200 TE Lallis and Cheers Curs | | Vote para tom Deposits from Tonal crow Law Total biex Cher Reading Toad ang Toalhin and AKO 54 Is 100 200.00 1.29.300.00 To see if he really understands what's going on, Bob asked Richard the following questions. Richard answered most of them correctly, can you? 1. How much revenue did the business produce The business produced $456,428 2. What costs did the business have for financing? The cost that the businesses had for financing were 3. What can you turn into cash in one year? 4. What did it cost to make your product? 5. What is the value of everything the company owns? 6. How much profit did the company make? 7. How much is the business worth to Richard? 8. How much does the business need for its continuing operation? Hint: Net Fixed Assets is the purchase price of all fixed assets (Land, buildings, equipment machinery, vehicles, leasehold improvements) less accumulated Depreciation 9. What debts will take longer than a year to pay? 10. Can this business be considered liquid? Hint: Current ratio current assets/ current liabilities By the rule of thumb, it should be 2 or greater. The current ratio is an indicator of a business' ability to repay debt when it is due Applying for a Loan. Anet Cumentos Cash 14.00 Accounts receivable Total current 21:00 Puede Property, plant & equipment 112.000 Accumulated depreciation 35.000 Not fired as Total assets 2.500 Listed Owner's Equity Current liabilities Accounts payable Notepable Deposits from customers Totalcar listes Total liabilities Owner's equity Cock Retained mig Total owner's pity Total liabilities and guity 5.000 14.000 34.000 50.000 14.000 Use balance sheet to the process of applying for a loan. The answers to the questions are as follows: 11. What is the amount of current assets and long-term assets that you have? 12. Calculate the current ratio. Using the rule of thumb given in the text, is this a good or bad ratio? Hint: Current ratio = current assets current liabilities By the rule of thumb, it should be 2 or greater. The current ratio is an indice Applying for a Loan. Assets Current assets Cash 14,000 Accounts receivable 7,000 Total current assets 21.000 Fixed Assets Property, plant & equipment 112.000 Accumulated depreciation (35,000) Net fixed assets 77.000 Total assets 98,000 Liabilities and Owner's Equity Current liabilities Accounts payable Note payable Deposits from customers Total current liabilities Total liabilities Owner's equity Common stock Retained earnings Total owner's equity Total liabilities and equity 2.500 26,500 5,000 34.000 34,000 50.000 14.000 64,000 98,000 Use balance sheet to the process of applying for a loan. The answers to the questions are as follows: 11. What is the amount of current assets and long-term assets that you have? 12. Calculate the current ratio. Using the rule of thumb given in the text, is this a good or bad ratio? Hint: Current ratio = current assets current liabilities By the rule of thumb, it should be 2 or greater. The current ratio is an indicator of a business' ability to repay debt when it is due 13. Why would the current ratio matter to your banker? MGT 4540 Chapter exercise on Balance and Income Statement Put your name here: Instructions: The work must be on your own. The exercise consists of 13 questions: Q1-10 (worth 8 points each) and Q 11(worth 10 points each), 12, 13 (worth 5 points each) You must show calculation, not just an answer 100 Maximum points possible 1. With Bob's help, Richard has purchase, installed and setup his new accounting software program. In fact, he has just printed his first income statement and balance sheet, reproduced below. Warrior Industries Income Statement for year ending 12/31/20XX 456,428 205,200 251,2281 Sales revenue Less cost of goods sold Gross margin Less operating expenses I Marketing Sales and administrative Depreciation Il Total operating expenses Operating income Less interest expense Income before taxes Income tax expense Net income 40,000 20,000 10,000 70,000 181.228 7,000 174,2281 40,000 134,228 Warrior Industries Balance Sheet for 12/31/20XX Assets Current Assets Cash $ 52,400.00 Accounts receivable S 11,000.00 Inventory $ 15,900.00 Total current assets $ 79,300.00 Fixed assets Property, plant and equipment S 80,000.00 Accumulated depreciation S (20,000.00 Net fixed assets $ 60,000.00 Total assets $139,300.00 Liabilities and Owner's Equity Current liabilities Accounts payable Note payable to bank Deposits from customers Total current liabilities Long term mortgage Total liabilities Owner's Equity Retained earnings Total Owners' Equity Total liability and equities $ 5,300.00 $ 2,700.00 $ 6,000.00 $ 14,000.00 S 40,000.00 $ 54,000.00 $ 85,300.00 $ 85,300.00 $139,300.00 To see if he really understands what's going on, Bob asked Richard the following questions. Richard answered most of them correctly, can you? 1. How much revenue did the business produce? The business produced $456,428. 2. What costs did the business have for financing? The cost that the businesses had for financing were 3. What can you turn into cash in one year? 4. What did it cost to make your product? 5. What is the value of everything the company owns? 6. How much profit did the company make? 7. How much is the business worth to Richard? 8. How much does the business need for its continuing operation? Hint: Net Fixed Assets is the purchase price of all fixed assets (Land, buildings, equipment, machinery, vehicles, leasehold improvements) less accumulated Depreciation 9. What debts will take longer than a year to pay? 10. Can this business be considered liquid? Hint: Current ratio = current assets / current liabilities By the rule of thumb, it should be 2 or greater. The current ratio is an indicator of a business' ability to repay debt when it is due