Question

Some recent financial statements for Smolira Golf Corp. follow. Assets 2017 2018 Current assets Cash Accounts receivable Inventory SMOLIRA GOLF CORP. 2017 and 2018 Balance Sheets Liabilities and Owners' Equity 2018 2017 Current liabilities $ 39,400 Accounts payable $ 39,752 29,296 Notes payable 20,708 43,312 Other 21,394 $ 36,085 18,651 4,120 20 $ 43,432 17,475 25,994 Total $ 58,856 $ 112,008 Total $ 81,854 $ 86,901 Long-term debt $ 123,500 $ 187,898 $ 56,700 Owners' equity Common stock and paid-in surplus Accumulated retained earnings $ 56,700 262,962 302,692 Fixed assets Net plant and equipment $ 466,160 $522,183 Total $ 319,662 $359,392

Answer 1

Compute the change in the balance sheet from the year 2017 to 2018, using MS-excel as shown below:

D 2 Changes in Balance Sheet 3 Particulars Year 2017 Year 2018 Change {Increase/ (Decrease)} | 4. Current Assets 5 Cash 36085 39400 =D5-C5 6 Accounts receivables 18651 29296 =D6-C6 7 Inventory 4120 43312 =D7-C7 8 Fixed assets 9 Plant and equipment 466160 522183 =D9-C9 10 Total =SUM(C5:09) =SUM(D5:D9) =SUM(E5:59) 11 Current Liabilities 12 Accounts payables 39752 43432 =D12-C12 Notes payables 20708 17475 =D13-C13 14 Other 21394 25994 =D14-C14 15 Long-term Liabilities =D15-C15 16 Debt 123500 187898 =D16-C16 17 Qwner's Equity =D17-C17 18 Common stock 56700 56700 56700 =D18-C18 19 Accumulated Retained Earnings 262962 302692 =D19-C19 20 21 Total =SUM(C12:C19) =SUM(D12:D19) I=SUM(E12:E19)

The result of the above excel table is as follows:

с D 2 Changes in Balance Sheet 3 Particulars Year 2017 Year 2018 Change {Increasel (Decrease) 4. Current Assets 5 Cash $ 36,085 $ 39,400 $ 3,315 6 Accounts receivables $ 18,651 $ 29,296 $ 10,645 7 Inventory $ 4,120 $ 43,312 $ 39,192 8 Fixed assets 9 Plant and equipment $ 466,160 $ 522,183 $ 56,023 10 Total $ 525,016 $ 634,191 $ 109,175 11 Current Liabilities 12 Accounts payables $ 39,752 $ 43,432 $ 3,680 Notes payables | $ 20,708 $ 17,475 ($ 3,233) 14 Other $ 21,394 $ 25,994 $ 4,600 15 Long-term Liabilities $0 16 Debt $ 123,500 $ 187,898 $ 64,398 17 Owner's Equity $0 18 Common stock $ 56,700 $ 56,700 $0 19 Accumulated Retained Earnings $ 262,962 $ 302,692 $ 39,730 20 21 Total $ 525,016 $ 634,191 $ 109,175

Hence, the above table shows the changes in the balance sheet.

Compute the purchase of fixed assets, using the equation as shown below:

Purchases = Closing fixed assets + Depreciation – Opening fixed assets

                 = $522,183 + $46,588 - $466,160

                 = $102,611

Hence, the purchase of fixed assets is $102,611.

Prepare the statement of cash flows, using MS-excel as shown below:

H I J Statement of Cash Flows 3 Particulars Amount Amount Opening Cash 36085 Cash from operating activities: 6 Net income 63730 7 Depreciation 46588 Increase in receivables =-E6 Increase in inventory =-E7 Increase in accounts payables =E12 11 Decrease in notes payables =E13 Increase in other current liabilities =E14 13 Cash from operating activities =SUM(16:112) 14 Cash from investing activities: 15 Purchase of fixed assets -102611 16 Cash from investing activities =115 Cash from financing activities: 18 Increase in long term debts =E16 Dividend paid -24000 20 Cash from financing activities =SUM(118:119) 21 22 Changes in cash and cash equivalents | =J13+J16+J20 23 Closing cash =J22+J4 17

The result of the above excel table is as follows:

Η Statement of Cash Flows 3 Particulars Amount Amount Opening Cash $ 36,085 5 Cash from operating activities: 6 Net income $ 63,730 7 Depreciation $ 46,588 Increase in receivables ($ 10,645) Increase in inventory ($ 39,192) Increase in accounts payables $ 3,680 11 Decrease in notes payables ($ 3,233) Increase in other current liabilities $ 4,600 13 Cash from operating activities $ 65,528 14 Cash from investing activities: 15 Purchase of fixed assets ($ 102,611) 16 Cash from investing activities ($ 102,611) 17 Cash from financing activities: | 18 Increase in long term debts $ 64,398 Dividend paid ($ 24,000) 20 Cash from financing activities $ 40,398 21 22 Changes in cash and cash equivalents $ 3,315 23 Closing cash $ 39,400

Hence, the above table shows the statement of cash flows.

Note:

The interest paid is considered as part of the operating activities.