Alysia Gearty

02/17/2022 BUAD 477 16:40:42

577245258.xlsx

Assume you have started a new company on the first day of the year. You raise $100,000 from
family and friends, and borrow $40,000 from the bank on a ten-year, 8% note, with 10% of
the original principle due each year (on the morning of Dec. 31.) Your company sells only for
cash, and holds no inventory. All labor and materials are paid for at delivery. Properly label all
accounts.

1. Show the balance sheet for Jan. 1, 2002.

2. On Jan 2, 2002 you buy a machine for $75,000. It has a five-year life, and is depreciated
straight-line. Show the balance sheet for Jan. 2, 2002.

Banlace sheet Question 1 Question 2

1/1/2002 1/2/2002
Cash $140,000 $65,000
GFA $0 $75,000
Acc. Depreciati $0 $0
Net Fixed Assets $0 $75,000
Total Asset $140,000 $140,000

debt $40,000 $40,000

CS $100,000 $100,000
RE $0 $0
Total liability a $140,000 $140,000
Assume you have started a new company on the first day of the year. You raise
$100,000 from family and friends, and borrow $40,000 from the bank on a ten-year,
8% note, with 10% of the original principle due each year (on the morning of Dec.
31.) Your company sells only for cash, and holds no inventory. All labor and materials
are paid for at delivery. Properly label all accounts.

2002 2003
Income $ 200,000 $ 250,000
COGS $ 68,000 $ 85,000
Labor $ 76,000 $ 95,000
Depr $ 15,000 $ 15,000
EBIT $ 41,000 $ 55,000
Int. $ 3,200 $ 2,880
Taxable $ 37,800 $ 52,120
Taxes $ 12,852 $ 17,721
ATI $ 24,948 $ 34,399
Dividends $12,474 $17,200
Contribution To RE $12,474 $17,200
Cashflow $39,948 $49,399

Balance Sheet 2002 2003

Cash $ 88,474 $ 116,674
GFA $ 75,000 $ 75,000
Acc. Depr. $ 15,000 $ 30,000
NFA $ 60,000 $ 45,000
TA $ 148,474 $ 161,674

Debt $36,000 $ 32,000

CS $ 100,000 $ 100,000
RE $ 12,474 $ 29,674
Total liability and eq. $ 148,474 $ 161,674
 3. Your sales for the 2002 are $200,000 and for 2003 they are $250,000.
Cost of goods sold is 34% of sales, and labor is 38% of sales. Taxes are at
34%. Investors are paid 50% of earnings as dividends. Show the income
statement and balance sheet for 2002 and 2003. Assume debt repayments
are made on the morning of Dec. 31 of each year. Show details on GFA
and Accumulated Depreciation. What is the cash flow available for each
year?
Assume you have started a new company on the first day of the year. You
raise $100,000 from family and friends, and borrow $40,000 from the
bank on a ten-year, 8% note, with 10% of the original principle due
each year (on the morning of Dec. 31.) Your company sells only for
cash, and holds no inventory. All labor and materials are paid for at
delivery. Properly label all accounts.

2002 2003
Account Debit Credit Account Debit
CS $100,000 Net Cash 2002 $88,474
Debt $40,000 Sales $250,000
Machine $75,000 COGS
Sales $200,000 Labor
COGS $68,000 Int.
Labor $76,000 Taxes
Int. $3,200 Debt
Taxes $12,852 Dividends
Debt $4,000 $338,474
Dividends $12,474 Net Cash $116,674
$340,000 $251,526
Net Cash $88,474
Credit

$85,000
$95,000
$2,880
$17,721
$4,000
$17,200
$221,800