THE MIGHTY FINE LEMONADE COMPANY

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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

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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

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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

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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.

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THE FINANCIAL ROSETTA STONE
THE MIGHTY FINE LEMONADE COMPANY
ASSETS = LIABILITIES + OWNER'S EQUITY

Prop., Plant & Taxes Notes Common Retained

Transaction/Event Cash Accts Rec'ble Inventory Equip (net) Accts Payable Payable Payable Stock Earnings

1 Equity Sale _____ =

2 Bank Loan _____ =

3 PPE purchase _____ =

4.1 Inventory Purch. _____ =

4.2 Sales _____ = Revenues

4.3 Inventory Sold _____ = Cost of Goods Sold

5 Operating Costs _____ = Operating Expenses

Interest expense
2 Adjust Interest _____ =

3 Adjust Depreciation = Depreciation

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Tax expense
6 Income Taxes _____ =

2 Note Repayment _____ =

Balance 12/31 =

TOTAL = +

O = _________________
I = _________________ Copyright© 2008 Keys to the Vault
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