Practice Exercise- - Cobble Hill Part 2 Strictly Confidential

Table of Contents

Cobble Hill Financial Statements

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Construct Financial Statements for Cobble Hill Inc.

Produce a Balance Sheet and Income Statement for Cobble Hill Inc. for Year 1 and Year 2

Transactions

YEAR 1 YEAR 2

Issues common shares 1,000

Borrows 400
Repays loan 100
Pays interest 24 18

Buys property and plant 900

(10 year estimated useful life)

Buys inventory 350 400

Cash paid for inventory 320 380

Sells inventory 510 550

Cash received from sales 430 480

Inventory left at year end 60 80

Pays expenses 40 50
Pays tax at 30% 20 4
Pays a dividend 30 5

Practice Exercise- - Cobble Hill Part 2 Page 3 of 5

Balance Sheet

ASSETS YEAR 1 YEAR 2

Current Assets
Cash 496 419
Accounts Receivable 80 150
Inventory 60 80
Total Current Assets 636 649

Non-Current Assets
Property, Plant & Equipment 810 720
Total Non-Current Assets 810 720

Total Assets 1,446 1,369

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
Accounts Payable 30 50
Total Current Liabilties 30 50

Non-Current Liabilities
Long-Term Debt 400 300
Total Non-Current Liabilities 400 300

Shareholders' Equity
Common Shares 1,000 1,000
Retained Earnings 16 19
Total Shareholders' Equity 1,016 1,019

Total Liabilities & Equity 1,446 1,369

Total Assets 1,446 1,369

Total Liabilities & Equity 1,446 1,369
Difference – –

Practice Exercise- - Cobble Hill Part 2 Page 4 of 5

Income Statement

YEAR 1 YEAR 2

Revenues 510 550

Cost of Sales (290) (380)
Gross Profit 220 170

Other Operating Expenses (40) (50)

EBITDA 180 120

Depreciation (90) (90)

Operating Profit (EBIT) 90 30

Interest Expenses (Finance Cost) (24) (18)

Profit Before Tax (EBT) 66 12

Tax Expense at 30% (20) (4)

Net Income (EAT) 46 8

Dividends (30) (5)

Retained Earnings 16 3

Practice Exercise- - Cobble Hill Part 2 Page 5 of 5