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Equity

Cash
Patent
Incorporation costs
Equipment
Outofpocket costs
Purchases
Shortterm loan
Interest
Payroll

120000
80000
120000
2500
85000
25000
212100
30000
500
145000

Other Manu.costs
Selling and Admn Costs
Sales
Depreciation
Acc. Depreciation
Patent Amortization
Acc. Amortization on patent
Dividends
Incometax expenses
Incometax Payable

62000
63000
598500
8500
8500
20000
20000
5000
22500
22500

80000
-2500

-85000

-25000

-30000

INCOME STATEMENT
SALES
LESS: COST OF GOODS SO

598500
412500

GROSS PROFIT
OPERATING EXPENSES:
SELLING AND ADMIN
PATENT AMORTIZATION
OUTOFPACKET EXPENSES
INCORPORATION COSTS
TOTAL OPERTING EXPENSES

OPERATING PROFIT
LESS: INTERET
PROFIT BEFORE TAX
LESS: TAX
NET INCOME EAIT
DIVIDEND PAID

RETAINED EARNINGS

186000
63000
20000
25000
2500
110500

75500
500
75000
22500
52500
5000

47500

-212100

30000

-500

-145000

BALANCE SHEET
SOURCES OF FUNDS
EQUITY CAPITAL
RETAINED EARNINGS

200000
47500

SHAREHOLDER FUNDS
LOAN FUNDS

TOTAL LIABILITIES AND EQUITY


APPLICATION OF FUNDS
FIXED ASSETS
PAYTENTS(120000-20000)
EQUIPMENT (85000-8500)
CURRENT ASSETS
INVENTORY
CASH
CURRENT LIBILITIES
TAXES PAYABLE
SHORT TERM LOAN
NET CURRENT ASSETS (CA-CL)

TOTAL ASSETS

100000
76500

15100
78400

22500
0

CASH FLOW STATEMENT


PROFIT BEFORE TAX
ADD: NON CASH EXP AND NON OP.EXP
AMORTIZATION
DEPRECIATION
INTEREST
LESS:NONCASH AND NON OP.INC
OPERATING PROFIT BEF.WC CHANGES
ADD:INCREASE IN CL AND DECREASE IN CA
LESS:DECREASE IN CL AND INCREASE IN CA
INVENTORY

NET CASH GENE. FROM OP. ACT.


CASH FLOWS FROM INVESTING ACT.
EQUIPMENT PURCHASE

NET CASH USED IN INVEST. ACT


CASH FLOWS FROM FINANCING ACT.
PROCEEDS FROM CAPITAL
INTEREST PAID
DIVIDEND PAID

NET CASH GENE. FROM FINANCING ACT.

NET INCREASE IN CASH

20000
8500
500

200000
-62000

-63000

598500

-5000

-30000

78400
120000
2500
85000
25000
212100
0
500
145000
62000
63000
598500
8500
8500
20000
20000
5000
22500
22500

849500 849500

247500
0

247500

176500

93500

22500
71000

247500

75000

29000
0
104000
0
-15100

88900

-85000

-85000

80000
-500
-5000

74500

78400

COST OF GOODS SOLD


Opening Inventory
ADD: Purchases
ADD: Direct Expenses
Payroll
Manufacturing cost
Depreciation
LESS:Closing Inventory

Cost of goods sold

0
212100
212100
145000
62000
8500
427600
15100

412500

q1

How might Hynes and the investors use the profit plan in managing business?
Profit plans are used for a variety of purposes. These incluce:
to force short range planning
as a basis for evaluating performance and determining compensation
to encourage corodination and communication between different organisation units and lev
as a challenge to improve performance
as a means for training managers
as an early warning system
as a guide to spending

q2

How might the projected transactions impact the company's balance sheet?
please check transaction analysis sheet

q3

Prepare the profit plan in the form of income statement for the first year of operations
please check the prepared income statement

q4

Prepare the balance sheet as of the end of the first year of operations
please check the prepared balance sheet

q5

Hynes made a number of accounting decisions. Do you agree with these decisions?
there are three accounting decisions that require Hynes to exercise judgment. They are
PATENT VALUATION
PATENT AMORTIZATION PERIOD
EQUIPMENT DEPRECIATION PERIOD

hopefully, the patent amortization and depreciation periods represent Hyne's best estimate

g business?

organisation units and levels

ce sheet?

t year of operations

these decisions?
e judgment. They are

ent Hyne's best estimate of the related assets' useful life.