GABELLI COMPANY:Balance Sheet - Assignment Example

E1-3 (a) (b) Accounts Payable and Accrued Liabilities L A liability balance by itself does not affect the cash flow. Only an increase or decrease in the balance would be part of operating cash flow Accounts Receivable A An asset balance by it itself does not affect the cash flow. Only an increase or decrease in the balance would be part of Operating cash flow Property, plant and equipment A Fixed Asset balance does not form part of cash flow statement. However, payment/receipt on purchase/sale of a fixed asset is considered as part of Investing activity Food and beverage operations revenue R O Golf course operation revenue R O Inventory A Inventory balance does not affect the cash flow. Only an increase or decrease is included in Operating cash flow Long-term debt L Long term debt does not form part of cash flow statement. But cash received/paid on raising/repayment of long term debt forms part of Financing activity Office and general expenses E O Professional fees expenses E O Wages and benefits expenses E O E1-13 GABELLI COMPANY Balance Sheet December 31, 2007 ASSETS $ LIABILITIES $ Current Assets: Current Liabilities: Cash 18,500 Accounts payable 16,000 Accounts Receivable 12,000 Total Current Liabilities 16,000 Supplies 9,500 Stockholder's Equity: Dividends 10,000 Common Stock 40,000 Total Current Assets 50,000 Retained Earnings 34,000 Property, Plant & Equipment: 74,000 Equipment 40,000 Property, Plant & Equipment 40,000 TOTAL ASSETS 90,000 TOTAL LIABILITIES 90,000 P1-3A Fix-It-Up Service Co. Income Statement for the month of June 2007 $ Revenue 8,000 Operating Expenses: Supplies expense 1,000 Gas and oil expense 600 Utilities expense 300 Wage expense 1,400 Advertising expense 400 Total Operating Expense 3,700 Net Operating Income 4,300 Dividends paid 2,000 Net Income to be added to Retained Earnings 2,300 Statement of Retained Earnings $ Opening Balance of retained earnings on 1st June 2007 - Add: Net Income for the month of June 2007 2,300 Closing Balance of retained earnings on 30th June 2007 2,300 Balance Sheet as on 30th June 2007 $ ASSETS: Cash 4,600 Accounts Receivable 4,000 Supplies 2,400 Total Current Assets 11,000 Equipment 32,000 TOTAL ASSETS 43,000 LIABILITIES: Notes Payable 14,000 Accounts Payable 500 Total Current Liabilities 14,500 Common Stock 26,200 Retained Earnings 2,300 Shareholder's Equity 28,500 TOTAL LIABILITY & SHAREHOLDER'S EQUITY 43,000 (b) The company's first month operations was a success since it has earned a positive net income during this period. (c) The company must have decided to pay dividend because it had sufficient cash balance and also a net operational income. E2-5 Texas Instruments, Inc Balance Sheet 31 December, 2004 $ in Millions ASSETS Cash 2,668 Accounts Receivable 1,696 Inventories 1,256 Prepaid Expenses 326 Other current assets 554 Total Current Assets 6,500 Property, plant & equipment - Net 3918 Long-term Investments 264 Short-term Investments 3,690 Total Net Fixed Assets 7,872 Other non-current assets 1,927 TOTAL ASSETS 16,299 LIABILITIES Accounts Payable 1,444 Loan payable in 2005 11 Other Current Liabilities 470 Total Current Liabilities 1,925 Long Term Debt 368 Other Liabilities 943 Total Liabilities 3,236 Common Stock 2,488 Retained Earnings 10,575 Shareholder's Equity 13,063 TOTAL LIABILITY & SHAREHOLDER'S EQUITY 16,299 E2-11 (a) Is the rationale for why plant assets are not reported at liquidation value 2 (b) Indicates that business and personal record-keeping should be separately maintained 6 (c) Assumes that dollar is the measuring stick to report financial performance 3 (d) Separates financial information into time periods for reporting purpose 4 (e) Indicates that companies should not record in the accounts market value changes subsequent to purchase 5 (f) Dictates that companies should disclose all circumstances and events that make a difference to financial statement users 1 P2-4A (a) Computation of Net Income and Earnings per share (EPS) Arthur Corporation Lancelot Corporation Net Sales 1,950,000 620,000 Less: Cost of goods sold 1,175,000 340,000 Gross Profit 775,000 280,000 Less: Operating Expenses 303,000 98,000 Operating Income 472,000 182,000 Less: Interest Expenses 9,000 3,800 Net Income Before Tax 463,000 178,200 Less: Income Tax Expense 85,000 36,000 (a) Net Income After Tax ($) 378,000 142,200 (b) Average Number of Shares Outstanding 100,000 50,000 Earnings Per Share (a / b) 3.78 2.844 The net income as well as EPS of Arthur Corporation is higher than that of Lancelot Corporation. Hence, an investor can enjoy higher returns by investing in Arthur Corporation rather than Lancelot Corporation. (b) Computation of Working Capital and Current Ratio: Arthur Corporation Lancelot Corporation (a) Current Assets ($) 427,200 190,336 (b) Current Liabilities ($) 66,325 35,348 Working Capital (a-b) 360,675 154,988 Current Ratio (a / b) 6.44 5.38 Both companies have high levels of liquidity with a positive working capital and high current ratio. However, Arthur Corporation, with higher working capital and current ratio, has higher level of liquidity than Lancelot Corporation. (c) Computation of debt to total assets ratio and free cash flow: Arthur Corporation Lancelot Corporation Debt to Total Assets Ratio: (a) Long-term liabilities ($) 108,500 29,620 (b) Total Assets: Current Assets 427,200 190,336 Plant* 532,000 139,728 Total Assets($) 959,200 330,064 Debt to Total Assets Ratio (a / b) 0.113 0.090 Free Cash Flow: Cash from Operating activities 148,000 36,000 Capital Expenditures 90,000 20,000 Free Cash Flow ($) 58,000 16,000 *It has been assumed that Plant includes the capital expenditure mention as additional information Arthur Corporation appears to be more solvent when free cash flows of the two companies are considered. But Lancelot Corporation appears to be more solvent when the decision is based on Debt to total assets ratio. Read More