A B C D E F G H

1 03 Case model 9/7/2019 18:23 10/1/2015

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3 Chapter 3. Financial Statements, Cash Flow, and Taxes
This spreadsheet model is designed to be used in conjunction with the chapter's integrated case and the
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related PowerPoint slide presentation.
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6 EXHIBITS: INPUT DATA (for D'Leon)
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8 Table IC3.1 Balance Sheets
9 2016 2015
10 Assets
11 Cash $ 7,282 $ 57,600
12 Accounts receivable 632,160 351,200
13 Inventories 1,287,360 715,200
14 Total current assets $ 1,926,802 $1,124,000
15 Gross fixed assets 1,202,950 491,000
16 Less: accumulated depreciation 263,160 146,200
17 Net fixed assets $ 939,790 $ 344,800
18 Total assets $ 2,866,592 $1,468,800
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20 Liabilities and equity
21 Accounts payable $ 524,160 $ 145,600
22 Accruals 489,600 136,000
23 Notes payable 636,808 200,000
24 Total current liabilities $ 1,650,568 $ 481,600
25 Long-term debt 723,432 323,432
26 Total liabilities $ 2,374,000 $ 805,032
27 Common stock (100,000 shares) 460,000 460,000
28 Retained earnings 32,592 203,768
29 Total common equity $ 492,592 $ 663,768
30 Total liabilities and equity $ 2,866,592 $1,468,800
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32 Table IC3.2 Income Statements 2016 2015
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34 Sales $ 6,034,000 $3,432,000
35 Cost of goods sold 5,528,000 2,864,000
36 Other expenses 519,988 358,672
37 Total operating exp. excl. depreciation and amortization $ 6,047,988 $3,222,672
38 Depreciation and amortization 116,960 18,900
39 Earnings before interest and taxes (EBIT) $ (130,948) $ 190,428
40 Interest expense 136,012 43,828
41 Earnings before taxes (EBT) $ (266,960) $ 146,600
42 Taxes (40%) (106,784) 58,640
43 Net income $ (160,176) $ 87,960
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45 EPS $ (1.602) $ 0.880
46 DPS $0.11 $0.22
47 Book value per share $ 4.926 $ 6.638
48 Stock price $ 2.25 $ 8.50
49 Shares outstanding 100,000 100,000
50 Tax rate 40.00% 40.00%
51 Lease payments $ 40,000 $ 40,000
52 Sinking fund payments 0 0
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54 Table IC3.3 Statement of Stockholders' Equity, 2016
55 Common Stock Total
56 Retained Stockholders'
57 Shares Amount Earnings Equity
58 Balances, Dec. 31, 2015 100,000 $ 460,000 $ 203,768 $ 663,768
59 Add: Net Income, 2016 (160,176)
60 Less: Dividends to common stockholders (11,000)
61 Addition (Subtraction) to Retained Earnings (171,176)
62 Balances, Dec. 31, 2016 100,000 $ 460,000 $ 32,592 $ 492,592
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64 Table IC3.4 Statement of Cash Flows, 2016
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66 Operating Activities
67 Net Income $ (160,176)
68 Depreciation and amortization 116,960
69 Increase in accounts payable 378,560
70 Increase in accruals 353,600
71 Increase in accounts receivable (280,960)
72 Increase in inventories (572,160)
73 Net cash provided by operating activities $ (164,176)
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75 Long-Term Investing Activities
76 Additions to property, plant, and equipment $ (711,950)
77 Net cash used in investing activities $ (711,950)
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79 Financing Activities
80 Increase in notes payable $ 436,808
81 Increase in long-term debt 400,000
82 Payment of cash dividends (11,000)
83 Net cash provided by financing activities $ 825,808
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85 Summary
86 Net decrease in cash $ (50,318)
87 Cash at beginning of the year 57,600
88 Cash at end of the year $ 7,282
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91 PART A
What effect did the expansion have on sales, after-tax operating income, net operating working capital
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(NOWC), and net income?
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94 AT operating income16 = EBIT × (1 – T)
95 AT operating income16 = $ (130,948) × 0.60
96 AT operating income16 = ($78,569)
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98 AT operating income15 = EBIT × (1 – T)
99 AT operating income15 = $ 190,428 × 0.60
100 AT operating income15 = $114,257
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102 NOWC16 = Current assets – (Current liabilities – Notes payable)
103 NOWC16 = $ 1,926,802 – $1,013,760
104 NOWC16 = $913,042
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106 NOWC15 = $ 1,124,000 – $ 281,600
107 NOWC15 = $842,400
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109 Change in NOWC = NOWC16 – NOWC15
110 Change in NOWC = $913,042 – $842,400
111 Change in NOWC = $70,642
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113 Change in NI = NI16 – NI15
114 Change in NI = $ (160,176) – $87,960
115 Change in NI = ($248,136)
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117 PART B
118 What effect did the company’s expansion have on its free cash flow?
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120 FCF16 = EBIT × (1 – T) + Depreciation – [Capital Expenditures +
121 FCF16 = $ (130,948) × 0.60 + 116,960 – $ 782,592
122 FCF16 = ($78,569) + $ 116,960 – $ 782,592
123 FCF16 = -$744,201
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Capital Expenditures + ΔNOWC]
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