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50203446 Keith J Cunningham Financial Literacy
Introduction to Finance (FIN2303)
Algonquin College
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Copyright© 2008 Keys to the Vault
BALANCE SHEET
YEAR 1
ASSETS
Cash $1,
Receivables 19,
Inventory 5,
Fixed Assets 4,
Depreciation (1,500)
Net Fixed Assets 3,
Total Assets $28,
LIABILITIES
Payables 2,
Debts 4,
Income Tax Due 500
Total Liabilities $6,
EQUITY
Stock 5,
Retained Earnings 17,
Total Equity 22,
Total Liabilities &
Equity $28,
Copyright© 2008 Keys to the Vault
INCOME STATEMENT
YEAR 1
Sales $50,
COGS (10,000)
Gross Profit 40,
Operating Expenses (18,500)
Operating Income 21,
Depreciation (1,500)
Interest Expense (800)
Total (2,300)
Profit before Tax 19,
Taxes (2,000)
Net Income $17,
Copyright© 2008 Keys to the Vault
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 We purchased enough inventory to actually make 75,000 quarts. Inventory raw materials
cost 20¢ per quart. Paid cash.
4 We sold 50,000 quarts at $1 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,
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.
####### ASSETS
####### =
####### +
####### Transaction/Event
####### Cash
####### Accts Rec'ble
####### Inventory
####### Prop., Plant & Equip (net)
####### Accts Payable
####### Taxes Payable
####### Notes Payable
####### Common
####### Stock
####### Retained Earnings
####### _____
####### =
####### _____
KEYS TO THE VAULT
THE FINANCIAL ROSETTA STONE
####### LIABILITIES
####### OWNER'S EQUITY
THE MIGHTY FINE LEMONADE COMPANY
####### 1 Equity Sale2 Bank Loan
####### _____
####### =
####### 3 PPE purchase
####### _____
####### =
####### 4 Inventory Purch.
####### _____
####### =
####### 4 Sales
####### _____
####### Revenues
####### =
####### 4 Inventory Sold
####### =
####### Cost of Goods Sold
####### _____ _____
####### =
####### Interest expenseTax expense
####### _____
####### =
####### TOTAL
####### =
####### +
####### =
####### O =
####### _________________
####### I =
####### _________________
####### Copyright© 2008 Keys to the Vault
####### F =
####### _________________
####### info@keystothevault
####### 4 Inventory Sold
####### =
####### Cost of Goods Sold
####### 5 Operating Costs
####### Operating Expenses
####### 2 Adjust Interest
####### _____
####### =
3 Adjust Depreciation
####### =
####### Depreciation
####### 6 Income Taxes
####### _____
####### = =
####### 2 Note Repayment
####### Balance 12/
50203446 Keith J Cunningham Financial Literacy
Course: Introduction to Finance (FIN2303)
University: Algonquin College
