Daenerys Co. began operations on Jan. 1, 2019. Daenerys starts her business by investing $20,000 of...
Daenerys Co. began operations on Jan. 1, 2019. Daenerys starts her business by investing $20,000 of her own money by purchasing 2,000 shares of $1 par value stock, and borrowing $50,000 from the bank. The loan has an interest rate of 6-percent, and she will have to make quarterly payments of $5,000 plus accumulated interest, on the first of each April, July, October, and January, until the entire principle is repaid. On April 1, Daenerys purchased equipment for $15,000 cash. She will depreciate the new equipment over five years using straight line depreciation, and expects a salvage value of $2,000. She also purchased for cash for $4,000 in supplies during the year, with only $250 of supplies remaining at year end. Daenerys does not offer credit to her customers. For the first year of operations, she had cash revenues of $80,000. Daenerys also incurred $26,500 for other operating expenses, for which she still owes $3,250.
Required: Ignoring taxes, provide an (a) Income Statement and (b) Balance Sheet for Daenerys Co.first year of business ending 12/31/2019. Also, determine (i) Cash from Operations, (ii) Cash from Investing, and (iii) Cash from Financing for the year. Be sure to show your work.
Homework Answers
| a) Income statement for year ended 12/31/19: | Calculation | ||
| Amount $ | |||
| Revenue | 80000 | ||
| Less: Expenses: | |||
| supplies | 3750 | ||
| Operating exp. | 26500 | ||
| Interest | 2550 | ||
| Depreciation | 2600 | (15000-2000)/5 | |
| total exp. | 35400 | ||
| Net Income | 44600 | ||
| b) Balance sheet: | |||
| Assets: | Amount $ | ||
| Cash | 90725 | 70000-15000-4000+80000-26500+3250-17025 | |
| supplies | 250 | 4000-3750 | |
| Current Assets | 90975 | ||
| Equipment | 15000 | 15000 | |
| Acc Dep | -2600 | -2600 | |
| Total Assets | 103375 | ||
| Liabilities & Capital: | Amount $ | ||
| Accounts Payable | 3250 | 3250 | |
| Loan payable | 5525 | 5525 | |
| Current Liabi | 8775 | ||
| Borrowings | 30000 | 50000-20000 | |
| Share Capital @1 | 20000 | 20000 | |
| Retained Earnings | 44600 | 44600 | |
| Total Liabilities & Capital | 103375 | ||
| c) CASH FLOW STATEMENT: | Amount $ | ||
| Cash from Operations: | |||
| Net Income | 44600 | ||
| Add:Depreciation | 2600 | ||
| less:supplies increase | -250 | ||
| add:CL increase | 8775 | ||
| Cash from Operations: | 55725 | ||
| Cash from Investing: | |||
| Less: equip purchase | -15000 | ||
| Cash from financing: | |||
| Add:Share issue | 20000 | ||
| Add:Increase in Loan | 30000 | ||
| Cash from financing: | 50000 | ||
| Total cash from all activities | 90725 | ||
| NOTE: | |||
| Due Principle of Loan | Interest | Inst Paid | Inst Payable |
| 50000 | 750 | 5750 | |
| 45000 | 675 | 5675 | |
| 40000 | 600 | 5600 | |
| 35000 | 525 | 5525 | |
| Total | 2550 | 17025 |
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