Financial Analysis Exercises and Questions - Essay Example

Running head: FINANCIAL ANALYSIS EXERCISES AND QUESTIONS Financial Analysis Questions and Exercises of University/Institution] Practice 2-14 Expanded Accounting Equation Assets Liabilities Capital Stock Retained Earnings Case A $20,000 $ 8,000 $ 8,500 $ 3,500 Case B $16,000 $ 9,000 $ 5,000 2,000 Case C $57,000 11,000 14,000 32,000 Case D 46,000 30,000 20,000 ($4000) Exercise 2-6 Balance Sheet Preparation Simon Company Balance Sheet as on December 31, 2006 Assets Liabilities and Owners' Equity Cash $ 179,750 Liabilities Accounts receivable 123,000 Accounts payable $62,500 Supplies 3,750 Mortgage payable 479,500 Land 130,000 Building 418,500 Owners' equity* 313,000 Total assets $855,000 Total liabilities and owners' equity $855,000 *Owners' equity (01/01/06) $210,000 Less: Distributions to owners during 2006 $(21,750) Add: Net Income $124,750 Owners' equity (12/31/06) $313,000 Exercise 2-8 Income Statement Preparation Beckstrom Corporation Income Statement For the Year Ended December 31, 2006 Revenues $ 384,000 Less: Expenses Advertising expense 15,000 Supplies expense 46,000 Rent expense 10,000 Utilities expense 3,000 Salaries expense 61,000 Miscellaneous expenses 4,400 Income before tax 244,600 Less: Tax (30%) 73,380 Net income $171,220 Exercise 2-9 Cash Flow Computations 1.

Net cash flow provided (used) by operating activities Cash receipts from: Customers $270,000 Less: Cash payments for Wages Utilities Advertising Rent Taxes 82,000 3,000 4,000 36,000 67,000 Net cash flow provided (used) by operating activities $78,000 2. Net cash flow provided (used) by investing activities Cash receipts from: Investments by owners 54,000 Sale of building 90,000 Less: Cash payments for Purchase of land 106,000 Net cash flow provided (used) by operating activities $38,000 3.

Net cash flow provided (used) by financing activities Cash receipts from: Proceeds from bank loan 60,000 Less: Cash payments for Dividends 20,000 Repayment of principal on loan 40,000 Net cash flow provided (used) by operating activities $ 0 4. Net increase (decrease) in cash during the year. Operating activities + Investing activities + Financing activities = 78,000 + 38,000 + 0 = $116,000 5. The cash balance at the end of the year Cash balance at beginning of year $386,000 Net increase (decrease) in cash during the year 116,000 Cash balance at the end of the year $502000 Exercise 2-11 Retained Earnings Computations The amount of Retained Earnings at December 31, 2006, may be calculated as follows: Assets = Liabilities + Capital Stock + Retained Earnings 350,000 = 80,000 + 210,000 + Retained Earnings Retained earnings ( 12/31/05) = $60,000 The amount of Retained Earnings at December 31, 2006, may be calculated as follows: Retained earnings (12/31/05) $60,000 Add: Net income for year 40,000 Less: Dividends for year 25,000 Retained earnings (12/31/06) $75,000 Exercise 2-14 Cash Flow Classifications 1.

Cash receipts from selling merchandise Operating activity 2. Cash payments for wages and salaries Operating activity 3. Cash proceeds from sale of stock Operating activity 4. Cash purchase of equipment Investing activity 5. Cash dividends paid Financing activity 6. Cash received from bank loan Financing activity 7. Cash payments for inventory Operating activity 8. Cash receipts from services rendered Operating activity 9. Cash payments for taxes Operating activity 10.

Cash proceeds from sale of property no longer needed as expansion site Investing activity Works Cited .Libby, Robert, Libby Patricia A.,Short, Daniel G. (2001). Financial accounting NewYork,: McGrawHill. Wild, John J. (2005). Financial accounting:Information for decisions. NewYork,: McGrawHill