RITCHELLE G. REYES MR.

MARVIN DENTE
2.1 BSA-CY1 FINANCIAL MANAGEMENT

CHAPTER 5 - ACTIVTY 1

PROBLEM 1
GIVEN:

ASSET:
Net Plant and Equipment 2,000,000
Total Assets 2,500,000
LIABILITY:
Notes payable 150,000
Long-term debts 750,000
EQUITY:
Total common equity 1,500,000

Accounts payable and accruals are not given. No preferred stock.

Required;

a) What is the amount of total liabilities and equity appears on the firm’s statement of financial
position? P 2,500,000

FORMULA: ASSET=LIABILITY+EQUITY
Since asset = P 2,500,000
Then total liabilities and equity = P 2,500,000

b) What is the balance of current assets on the firm’s statement of financial position?
P 500,000
Work back up from total assets

Current Assets 500,000

NCA-Net Plant and equipment 2,000,000
Total assets 2,500,000

c) What is the balance of current liabilities on the firm’s statement of financial position?
P 250,000

Work back up from total liabilities and equity

Current Liabilities 250,000

NCL-Long-Term Debts 750,000
Total Liabilites 1,000,000
Common Equity 1,500,000

d) What is the amount of accounts payable, and accruals on its statement of financial postion? P
100,000
Accounts payable and accruals 100,000
Notes payable 150,000
Current liabilities 250,000

e) What is the firm’s networking capital? P 250,000

Net working Capital= currents assets-current liabilities

= P 500,000 - P250,000
= P 250,000

f) What is the firm’s net operating capital? P 400,000

Net operating capital = net working capital +interest bearing

=250,000 + 150,000
= 400,000

PROBLEM 2
How much in dividends were paid to shareholders during the year? Assume that all dividends declared
were actually paid? P 20,000

Dividends=RE beg + net income - RE end

780,000 + 50,000 - 810,000 = 20,o00

PROBLEM 4
Required;

Did Red Book Inc. Make a profit in 20x5? Verify your answer with an income statement.

Red Book Inc.

Statement of Income
For the Year ended December 31, 20x5

Sales 845,000
Cost of Goods Sold (585,000)
Gross Profit 260,000
Selling expense (20,000)
Depreciation expense (35,000)
Operating profit 205,000
Interest expense (35,000)
Earnings before taxes 170,000
Earnings after tax - 20% (136,000)
Net Income P 34,000.00

Therefore, Red Book Inc. made a profit in 20x5.

PROBLEM 7

Shadow Corporation
 Income Statement
For the year ended 20x5

Sales 220,000
Cost of Goods Sold (60%) ( 132,000)
Gross Prodit 88,000
Selling and administrative expense ( 22,000)
Depreciation expense ( 20,000)
Operating Profit 46,000
Interest expense (8,000)
Earnings before taxes 38,000
Taxes (20%) 7,600
Earnings after taxes 30,400
Preferred stock dividends (2,000)
Earnings available to common stockholder P 28,400.00

Shadow Corporation
Statement of Retained Earnings

Retained earnings balance, Jan.1, 20x5 80,000

Add: Earnings available to commom stocholders 28,400
Less: Cash dividends declared 20x5 8,400
Retained earnings balance, Dec. 31,20x5 P 100,000.00

Shadow Corporation
Statement of Financial Position
As of December 31,20x5

ASSETS
Current assets
Cash 10,000
Accounts Receivable 16,500
Inventory 27,500
Prepaid expenses 12,000
Total current asset 66,000
Non current assets
Gross Plant 285,000
Less: Accumulated Depreciation 70,000
Total non current asset 215,000
TOTAL ASSETS P 281,000.00

LIABILITIES AND OWNER’S EQUITY

Liabilities
Accounts payable 15,000
Notes payable 26,000
Bonds payable 40,000
Total liabilities 81,000
Owner’s equity
Common stock 75,000
Paid in capital in ecess of par 25,000
Retained earnings 100,000
Total equity 200,000
TOTAL LIABILITIES AND OWNER’S EQUITY P 281,000.00
PROBLEM 8

Maris Corporation
Statement of Cash Flow
For the year ended of december 31,20x1
Operatiing activities
Net income 250,000
Cash flow from operations
Increase in accpunts receivable (10,000)
Increase in inventory (30,000)
Decrease in prepaid expenses 30,000
Increase accounts payable 250,000
Decrease in accrued expenses (20,000)
Depreciation 230,000
Net cashflow from operating activities 700,000

Investing activities
Decrease in investments 10,000
Increase in plant and equipment (600,000)
Net cashflow from investing activities (590,000)

Financing activities
Increase in bonds payable 60,000
Preferred stock dividends paid (10,000)
Common stock dividends paid (140,000)
Net cashflow from financing activities (90,000)
Net increase in cash flows P 20,000.00