Subject: Balance Analysis

Teacher: María José García López

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 Prepare a multi-step income statement for the Appully Company (a clothing retailer)
for the year ending December 31, 2003 given the information below:

Advertising expenditures 68,000

Beginning inventory 256,000
Transport 15,400
Independent professional services 36.700
Prompt payment discounts 32,100
Advertising, publicity and Public Rel. 45,900
Operating grants, donations and bequests 230,000
Gains on trading portfolio 46,100
Dividends 3,400
Gains on intangible assets 8,200
Insurance Premium 23,000
Rent 178,000
Losses on irrecoverable trade receivables 79,000
Depreciation 78,000
Ending inventory 248,000
Gross Sales 3,210,000
Interest expense 64,000
Financial Revenues 52,000
Management salaries 240,000
Materials purchases 2,425,000
R&D expenditures 35,000
Repairs and maintenance costs 22,000
Returns and allowances 48,000
Result (gains) from discontinued operations 1,245,000
Taxes 21,000

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Exercise 2

The following list of accounts for Company ALJDR Ltd. is available at the end of 2015.

ACCOUNT AMOUNT
Tranfer on grants related to non current assets 6250
Change in inventory of finished goods (decrease) 4,710
Change in inventory of raw materials (increase) 63,630
Discount for volume of sale of finished goods 540,000
Exceptional expenses 459,000
Expense for the provision for trade operations 3,600
Income tax 1,575
Insurance expense 951,150
Intangible assets depreciation expense 943,500
Interest of debt from financial institutions 22,740
Interest of debt from subsidiaries 28,950
Losses from disposal of tangible fixed assets 21,600
Losses from impairment of inventory of raw materials 32,670
Losses from impairment of tangible fixed assets 19,455
Losses from impairment of trade accounts receivable 233,310
Negative exchange differences 1,440
Profits from held for trading portfolio 18,000
Purchase of raw materials 2,707,500
Purchase returns (of raw materials) 76,275
Rent expense 1,616,955
Revenue form holdings in equity instruments, other companies 1,365
Revenue form holdings in equity instruments, subsidiaries 12,000
Reversion of impairment of inventory of raw materials 47,670
Reversion of impairment of trade accounts receivable 238,260
Sale of finished goods 11,179,500
Sale returns (of finished goods) 31,800
Services rendered 505,800
Social security in charge of the company 504,300
Supplies 1,236,495
Tangible assets depreciation expense 672,000
Taxes other than income tax 24,600
Wages and salaries 1,761,000
Work performed by other companies 2,805

REQUIRED:

1) Calculate the net turnover.

2) Calculate the consumption of raw materials.

3) Prepare the Income Statement for year 2009 according to the model
established in the P.G.C.

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Exercise 3.

The company Técnicos S.A. presents the following data at the end of 2013:

• Purchased Repsol shares for 1,000 euros held for trading (short term)

• Received invoices from suppliers for the amount of 3,000 euros.

• The rent of the building amounted to 90,000 euros

• The bank in interest on the current account amounted 410 euros.

• The share capital amounts to xxxxxxx euros.

• The computer equipment (hardware) amounts to 36,000 euros.

• The tax amounts to 25%

• The place where the offices are located was acquired for 343,600 euros, of
which 43,600 correspond to the value of the land.

• The furniture of the whole company was acquired for 10,000 euros.

• An advertising campaign that consisted of a series of advertisements is pending

of payment by € 2,200 and must be paid on next July 30.

• The accumulated amortization amounts to 105,000 euros.

• The purchases of merchandise were 239,000 euros.

• The social security contributions pending of payment amount to 1,800 euros.

• The financial assets held for trading were depreciated by 100. The net financial
book value of this investment was 1.000

• Sales revenue amounted to 910,000 euros

• The interest expenses on long-term loans amounted to 1,560 euros

• The software used in the management of the company (software) has cost €
6,000

• The software of the previous paragraph was paid 50% in cash and the remaining
50% is unpaid yet, and it will be paid next July 1.

• The water and electricity bills totaled 36,150 euros

• The salaries of the staff were 296,000 euros

• The balances in current bank accounts amount to a total of 4,000 euros.

• The inventory amounts to 12,900 euros.

• Cash in the company for small payments amounts to 2,500 euros.

• Legal reserve amounts to 40,000 euros.

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 • For the purchase of building, he requested a bank loan, of which € 150,000 in
the long term and € 10,000 in the short term is pending of payment.

• Received a staff income for 14,000 euros

• 85,500 euros of amortization of tangible fixed assets were provided

• Taxes amounting to 2,000 euros are unpaid yet.

• It has pending to collect for clients, bills for the amount of € 25,000 and
promissory notes for € 20,000.

• He has a van purchased for 24,000 euros through a bank loan, of which he has
to pay € 12,000 in the long term and € 6,000 in the next year.

Exercise 4

Accounting, in its most fundamental sense, is merely a system of record keeping.

Income statements and balance sheets are the formalized documents used to
summarize and report accounting data. Firms engage in real and monetary activities
and these must be recorded and reported to tax authorities, creditors, equity holders,
and the firm’s managers. The following story is offered as an example of how financial
statements can be used to summarize the operations of small firms as well as large. It
also demonstrates that financial statements can be constructed for any time period - a
day, a week, a quarter, a year, or any other period.

One summer Saturday morning as Richie, an energetic and enterprising six

year old, and his dad, a finance professor, were eating breakfast, Richie noticed an ad
in the newspaper for a Nintendo Game Cube video game player. The sale price of
$199.99 included, if purchased that week, a free second controller as well as a coupon
for $50 off the regular retail price of the video game, RedCard Soccer 2003. Earlier
that week Richie and his dad had discussed the possibility of Richie getting a Game
Cube for Christmas. Given this discussion, the free controller, the coupon, and the fact
that, to Richie, Christmas was at least another 5,000 days away, Richie asked his dad
if they could get the video game player that afternoon.

“Dad,” said Richie, “you can just buy my Christmas present early this year.”
“And dad,” he continued, “if you get me a Game Cube today, you can play with my
game anytime you like.” Although Richie’s dad was tempted, because he wanted a
Game Cube at least as much as Richie did, instead he decided to use this opportunity
to teach Richie a lesson about money. “Richie,” he said, “if you can earn one-fourth of
the money on your own, which is $50, I will put in the rest of the money and buy you
a Game Cube.”

Richie, though very excited about the offer, had absolutely no idea how a six
year old could earn $50. After much discussion, however, he and his dad decided that
Richie should start a business and that the best business for a six year old to operate
was a lemonade stand. The day was perfect for selling lemonade - it was hot and given
the rain earlier in the week, most of the people in the neighborhood would be cutting
grass and working in their yards. Thus began Richie’s venture into the world of
business and corporate finance. Surely, thought Richie’s dad, this will be a lesson my
son will never forget!

Richie’s dad loaned him $30 (interest free) to start his business. With the

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money, Richie bought 10 two-quart packets of lemonade mix for $1.00 per packet, 100
plastic cups for $5.00 (5 cents per cup), a poster board and magic marker to make a
sign for $3.00, a table and chair at a local garage sale for $8.00, and a small box in
which to keep his money for $2.00. Richie’s dad agreed to loan Richie a two-quart
pitcher and mixing spoon for $1.00 per day and to sell him water and ice from the
kitchen for $0.50 per pitcher (in business, there is no such thing as a free lunch). Richie
negotiated terms of net 5 on these items, meaning that the rent and cost of water and
ice had to be paid within 5 days of when they were incurred.

Richie priced his lemonade at $0.50 per glass. By the end of the day, he had
sold 60 glasses of lemonade. Since each pitcher produced 10 glasses of lemonade, he
used 6 packets of mix during the day. All sales were for cash, except for 2 glasses that
he sold to his dad while he was cutting the grass and 4 glasses that he sold to his mom
for that evening’s dinner. Neither Richie’s mom nor dad had cash with them when they
bought the lemonade so Richie agreed to sell them the lemonade on credit with credit
terms of net 2 days.

After dinner that evening, dad explained to Richie the importance of officially
recording the day’s activities. The current state and operating history of any business,
dad explained, are best summarized with an income statement and a balance sheet. To
track actual cash flow, he continued, it is best to use a statement of cash flows, which
nets all cash outflows against cash inflows for a given time period. Accordingly, Richie
and his dad sat down at the computer to create a set of financial statements for the
lemonade business. try to create an income statement and a Balance Sheet for Richie’s
Lemonade Stand (using accrual accounting)