Practice Exercise- - Cumberland Inc.

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Table of Contents

Cumberland Financial Statements

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 Construct Financial Statements for Cumberland Inc.

Produce a Balance Sheet and Income Statement for Cumberland Inc. for Year 2

Transactions

YEAR 1 YEAR 2

Issues common shares 1,500

Borrows 300
Repays loan 150
Pays interest 15 8

Buys property and plant 1,000 100

(10 year estimated useful life)

Buys inventory 200 300

Cash paid for inventory 125 300

Sells inventory 400 450

Cash received from sales 280 380

Inventory left at year end 80 180

Pays expenses 30 25
Pays tax at 30% 41 32
Pays a dividend – 10

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

 Balance Sheet

ASSETS YEAR 1 YEAR 2

Current Assets
Cash 869 624
Accounts Receivable 120 190
Inventory 80 180
Total Current Assets 1,069 994

Non-Current Assets
Property, Plant & Equipment 900 890
Total Non-Current Assets 900 890

Total Assets 1,969 1,884

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
Accounts Payable 75 75
Total Current Liabilties 75 75

Non-Current Liabilities
Long-Term Debt 300 150
Total Non-Current Liabilities 300 150

Shareholders' Equity
Common Shares 1,500 1,500
Retained Earnings 94 159
Total Shareholders' Equity 1,594 1,659

Total Liabilities & Equity 1,969 1,884

Total Assets 1,969 1,884

Total Liabilities & Equity 1,969 1,884
Difference – 0

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

 Income Statement

YEAR 1 YEAR 2

Revenues 400 450

Cost of Sales (120) (200)
Gross Profit 280 250

Other Operating Expenses (30) (25)

EBITDA 250 225

Depreciation (100) (110)

Operating Profit (EBIT) 150 115

Interest Expenses (Finance Cost) (15) (8)

Profit Before Tax (EBT) 135 107

Tax Expense at 30% (41) (32)

Net Income (EAT) 94 75

Dividends – (10)
Retained Earnings 94 65

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