BW’s Determination of Sources and Uses

Assets 2006 2007 +/- +/- S/U

Cash 100 90 -10 - S
Acct. Rec. 410 394 -16 - S
Inventories 616 696 80 + U
Prepaid Exp 5 5 0
Accum Tax Prepay 9 10 1+ U
Current Assets 1140 1195 N/A #N/A
Fixed Assets (@Cost) 930 1030 N/A #N/A
Less: Acc. Depr. 299 329 N/A #N/A
Net Fix. Assets 631 701 70 + U
Investment, LT 50 50 0
Other Assets, LT 223 223 0
Total Assets 2044 2169 N/A #N/A

“Basic” Sources and Uses Statement (Flow of Funds Statement) %

SOURCES

Decrease, Cash 10 6%
Decrease, Accounts Receivable 16 10%
Increase, Long-Term Debt 77 49%
Increase, Retained Earnings 53 34%

Total Sources of Funds 156 100%

USES

Increase, Inventories 80 51%

Increase, Accum Tax Prepay 1 1%
Increase, Net Fixed Assets 70 45%
Decrease, Notes Payable 5 3%

Total Uses of Funds 156 100%

Liabilities and Equity 2006 2007 +/- +/- S/U
Notes Payable 295 290 -5 - U
Acct. Payable 94 94 0
Accrued Taxes 16 16 0
Other Accrued Liab. 100 100 0
Current Liab. 505 500 N/A #N/A
Long-Term Debt 453 530 77 + S

Shareholders’ Equity 2006 2007

Com. Stock ($1 par) 200 200 0
Add Pd in Capital 729 729 0
Retained Earnings 157 210 53 + S
Total Equity 1086 1139 N/A #N/A
Total Liab/Equity 2044 2169 N/A #N/A

Assets Liabilities
Sources - +
Uses + -
 Basket Wonders Balance Sheet (thousands) Dec. 31, 2007

Assets 2006 2007 Liabilities 2006 2007

Cash 100 90 Notes Payable 295 290
Acct. Rec. 410 394 Acct. Payable 94 94
Inventories 616 696 Accrued Taxes 16 16
Prepaid Exp 5 5 Other Accrued Liab. 100 100
Accum Tax Prepay 9 10 Current Liab. 505 500
Current Assets 1140 1195 Long-Term Debt 453 530
Fixed Assets (@Cost) 930 1030
Less: Acc. Depr. 299 329 Shareholders’ Equity
Net Fix. Assets 1229 1359 Com. Stock ($1 par) 200 200
Investment, LT 50 50 Add Pd in Capital 729 729
Other Assets, LT 223 223 Retained Earnings 157 210
Total Equity 1086 1139
Total Assets 2642 2827 Total Liab/Equity 2044 2169

Adjusting the “Basic” Sources and Uses Statement

Sources: Net Profit 91

Less Use: Cash Dividends 38
(Net) Source: Increase, Retained Earnings 53

Sources: Depreciation 30
Less Use: Addition to Fixed Assets 100
(Net) Use: Increase, Net Fixed Assets 70
 Basket Wonders Statement of Earnings (in thousands) for Year Ending December 31, 2007

Net Sales 2211

Cost of Goods Sold 1599
Gross Profit 612
SG&A Expenses 402
EBIT 210
Interest Expense 59
EBT 151
Income Taxes 60
EAT (Net Profit) 91
Cash Dividends 38
Increase in RE 53

Sources and Uses Statement

Sources

Funds provided by operations Percentage

Net Profit 91 41%
Depreciation 30 13%

Decrease, Cash 10 4%
Decrease, Accounts Receivable 16 7%
Increase, Long-Term Debt 77 34%

224

Assets 2006 2007 +/- +/- S/U

Cash 100 90 -10 - S
Acct. Rec. 410 394 -16 - S
Inventories 616 696 80 + U
Prepaid Exp 5 5
Accum Tax Prepay 9 10 1+ U
Current Assets 1140 1195 N/A #N/A
Fixed Assets (@Cost) 930 1030 N/A #N/A
Less: Acc. Depr. 299 329 N/A #N/A
Net Fix. Assets 631 701 70 + U
Investment, LT 50 50
Other Assets, LT 223 223
Total Assets 2044 2169

Assets Liabilities
Sources - +
Uses + -
nds) for Year Ending December 31, 2007

Uses

Funds Used in Operations Percentage

Dividends 38 17%
Additions to fixed assets 100 45%

Increase, Inventories 80 36%

Increase, Accum. Tax Prepay. 1 0%
Decrease, Notes Payable 5 2%

224

Liabilities and Equity 2006 2007 +/- +/- S/U

Notes Payable 295 290 -5 - U
Acct. Payable 94 94
Accrued Taxes 16 16
Other Accrued Liab. 100 100
Current Liab. 505 500 N/A #N/A
Long-Term Debt 453 530 77 + S

Shareholders’ Equity 2006 2007

Com. Stock ($1 par) 200 200
Add Pd in Capital 729 729
Retained Earnings 157 210 53 + S
Total Equity 1086 1139
Total Liab/Equity 2044 2169
Indirect Method – Statement of Cash Flows

Cash Flow from Operating Activities

Net Income 91 S
Depreciation 30 S
Decrease, accounts receivable 16 S
Increase, inventories -80 U
Increase, accum. tax prepay -1 U

Net cash provided (used) by operating activities 56

Cash Flow from Investing Activities

Additions to Fixed Assets -100 U

Net cash provided (used) by investing activities -100

Cash Flow from Financing Activities

Decrease, notes payable -5 U

Increase, long-term debt 77 S
Dividends paid -38 U

Net cash provided (used) by financing activities 34

Net increase or decrease in cash -10

Assets 2006 2007 +/- +/- S/U
Cash 100 90 -10 - S
Acct. Rec. 410 394 -16 - S
Inventories 616 696 80 + U
Prepaid Exp 5 5
Accum Tax Prepay 9 10 1+ U
Current Assets 1140 1195 N/A #N/A
Fixed Assets (@Cost) 930 1030 100 N/A #N/A
Less: Acc. Depr. 299 329 N/A #N/A
Net Fix. Assets 631 701 70 + U
Investment, LT 50 50
Other Assets, LT 223 223
Total Assets 2044 2169

Basket Wonders Statement of Earnings (in thousands) for Year Ending December 31, 2007

Net Sales 2211

Cost of Goods Sold 1599
Gross Profit 612
SG&A Expenses 402
EBIT 210
Interest Expense 59
EBT 151
Income Taxes 60
EAT (Net Profit) 91
Cash Dividends 38
Increase in RE 53
 Liabilities and Equity 2006 2007 +/- +/- S/U
Notes Payable 295 290 -5 - U
Acct. Payable 94 94
Accrued Taxes 16 16
Other Accrued Liab. 100 100
Current Liab. 505 500 N/A #N/A
Long-Term Debt 453 530 77 + S

Shareholders’ Equity 2006 2007

Com. Stock ($1 par) 200 200
Add Pd in Capital 729 729
Retained Earnings 157 210 53 + S
Total Equity 1086 1139
Total Liab/Equity 2044 2169

or Year Ending December 31, 2007

Direct Method – Statement of Cash Flows Worksheet for Preparing Ope

Cash Flow from Operating Activities

+(-)
Cash received from customers 2227 S
Cash paid to suppliers and employees -2051 U
Interest paid -59 U
Taxes paid -61 U +(-)

Net cash provided (used) by operating activities 56

Cash Flow from Investing Activities +(-)

Additions to Fixed Assets -100 U

Net cash provided (used) by investing activities -100

Cash Flow from Financing Activities

Decrease, notes payable -5 U

Increase, long-term debt 77 S
Dividends paid -38 U Cost of Goods Sold
Increase, Depreciation
Net cash provided (used) by financing activities 34 SG&A Expenses
COGS - Depreciation + SGA
Net increase or decrease in cash -10
Worksheet for Preparing Operating Activities Section Assets 2006
Cash 100
Sales 2211 Acct. Rec. 410
Decrease (increase) in Acct. Rec. 16 Inventories 616
Cash received from customers 2227 Prepaid Exp 5
Accum Tax Prepay 9
COGS - Depreciation + SGA 1971 Current Assets 1140
Increase (decrease) in inventory 80 Fixed Assets (@Cost) 930
Cash paid to suppliers and employees 2051 Less: Acc. Depr. 299
Net Fix. Assets 631
Income taxes (federal/state) 60 Investment, LT 50
Incr (Decr) in accum. tax prepay 1 Other Assets, LT 223
Taxes paid 61 Total Assets 2044

Basket Wonders Statement of Earn

Net Sales
Cost of Goods Sold
Cost of Goods Sold 1599 Gross Profit
Increase, Depreciation 30 SG&A Expenses
SG&A Expenses 402 EBIT
COGS - Depreciation + SGA 1971 Interest Expense
EBT
Income Taxes
EAT (Net Profit)
Cash Dividends
Increase in RE
 2007 +/- +/- S/U Liabilities 2006 2007 +/- +/-
90 -10 - S Notes Paya 295 290 -5 -
394 -16 - S Acct. Payab 94 94
696 80 + U Accrued Ta 16 16
5 Other Accru 100 100
10 1+ U Current Lia 505 500 N/A
1195 N/A #N/A Long-Term 453 530 77 +
1030 100 N/A #N/A
329 30 N/A #N/A Shareholder 2006 2007
701 70 + U Com. Stock 200 200
50 Add Pd in C 729 729
223 Retained E 157 210 53 +
2169 Total Equit 1086 1139
Total Liab/ 2044 2169

Wonders Statement of Earnings (in thousands) for Year Ending December 31, 2007

2211
1599
612
402
210
59
151
60
91
38
53
S/U
U

#N/A
S

S
BW’s Cash Flow Forecast

Lisa Miller has finalized a cash flow forecast for the first six months of 2008.
Lisa is expecting 90% of monthly sales will be credit sales with 80% of credit sales collected in 30 days, 20% in 60 days, and no

Collections and Other Cash Receipts (Thousands)

2007 2007 2008
Sales November December January
Credit Sales, 90% 193 212 154
Cash Sales, 10% 21 24 17
Total Sales, 100% 214 236 171

Cash Collections

Cash sales, current 17

80% of last month’s credit sales 170
20% of 2-month-old credit sales 39
Total cash sales receipts 226

Schedule of Projected Cash Disbursements (Thousands)

Purchases 39 35

Cash disbursements for purchases and operating expenses

100% of last month’s purchases 39

Wages paid 90
Other expenses paid 34
Total disbursements (purchases and operating expenses) 163

Capital expenditures 70
Dividend payments 0
Income taxes 25
Total cash disbursements 258

Projected Net Cash Flows and Cash Balances

Beginning cash balance 90

Total cash receipts 226
Total cash disbursements 258
Net cash flow -32
Ending cash balance without additional financing 58
n 30 days, 20% in 60 days, and no “bad debts.”

2008 2008 2008 2008 2008

February March April May June
135 256 205 160 190
15 28 23 18 21
150 284 228 178 211

15 28 23 18 21
123 108 205 164 128
42 31 27 51 41
180 167 255 233 190

64 53 40 48 50

35 64 53 40 48
94 111 107 92 92
34 34 34 34 34
163 209 194 166 174

40 0 0 0 0
0 9 0 0 10
0 0 25 0 0
203 218 219 166 184

58 35 -16 20 87
180 167 255 233 190
203 218 219 166 184
-23 -51 36 67 6
35 -16 20 87 93
Forecasting BW’s Income Statement BW’s Cash Flow Forecast

Lisa Miller is forecasting the income statement for 2008. Lisa Miller has finalized a cash flow forecast for the first six months of 2008.
She estimates that sales for the 6 months ended June 30 will be $1,222,000. Lisa is expecting 90% of monthly sales will be credit sales with 80% of credit sales collected in 30 days, 20% in 60 days, and no “bad debts.”
COGS are estimated from the average of years 2005 through 2007.
Selling, general, and administrative costs are forecasted at $34,000 per month, while the income tax rate is assumed equal to 40%.
Cash dividends and interest expenses are expected to remain constant.
Collections and Other Cash Receipts (Thousands)
2007 2007 2008 2008 2008 2008 2008 2008
Sales NovemberDecemberJanuary February March April May June
Basket Wonders Statement of Earnings (in thousands) for Year Ending December 31, 2007 Credit Sales, 90% 193 212 154 135 256 205 160 190
Cash Sales, 10% 21 24 17 15 28 23 18 21
Net Sales 2211 Total Sales, 100% 214 236 171 150 284 228 178 211
Cost of Goods Sold 1599
Gross Profit 612 Cash Collections
SG&A Expenses 402
EBIT 210 Cash sales, current 17 15 28 23 18 21
Interest Expense 59 80% of last month’s credit sales 170 123 108 205 164 128
EBT 151 20% of 2-month-old credit sales 39 42 31 27 51 41
Income Taxes 60 Total cash sales receipts 226 180 167 255 233 190
EAT (Net Profit) 91
Cash Dividends 38
Increase in RE 53
Schedule of Projected Cash Disbursements (Thousands)

Basket Wonders’ Forecasted Income Statement Purchases 39 35 64 53 40 48 50

Basket Wonders Forecasted Statement of Earnings (in thousands) for Six Months Ending June 30, 2008
Cash disbursements for purchases and operating expenses
Net Sales 1222
Cost of Goods Sold 865 COGS percentage in net sales 100% of last month’s purchases 39 35 64 53 40 48
Gross Profit 357 Wages paid 90 94 111 107 92 92
SG&A Expenses 204 2005 2006 2007 Other expenses paid 34 34 34 34 34 34
EBIT 153 69% 71% 72% Total disbursements (purchases and operating expe 163 163 209 194 166 174
Interest Expense 29
EBT 124 2005-2007 (Average) Capital expenditures 70 40 0 0 0 0
Income Taxes 50 70.8% Dividend payments 0 0 9 0 0 10
EAT (Net Profit) 74 Income taxes 25 0 0 25 0 0
Cash Dividends 19 * Interest expense assumed to be $29,000 Total cash disbursements 258 203 218 219 166 184
Increase in RE 55

Forecasted Balance Sheet (thousands) June 30, 2008 Projected Net Cash Flows and Cash Balances

Assets 2007 2008 Liabilities 2007 2008 Beginning cash balance 90 58 35 -16 20 87
Cash 90 93 Notes Payable 290 133 Total cash receipts 226 180 167 255 233 190
Acct. Rec. 394 222 Acct. Payable 94 144 Total cash disbursements 258 203 218 219 166 184
Inventories 696 692 Accrued Taxes 16 16 Net cash flow -32 -23 -51 36 67 6
Prepaid Exp 5 5 Other Accrued Liab. 100 20 Ending cash balance without additional financing 58 35 -16 20 87 93
Accum Tax Prepay 10 10 Current Liab. 500 313
Current Assets 1195 1022 Long-Term Debt 530 530
Fixed Assets (@Cost) 1030 1140
Less: Acc. Depr. 329 398 Shareholders’ Equity
Net Fix. Assets 701 742 Com. Stock ($1 par) 200 200 Minimum cash balance ($20,000) 20 20 20 20 20 20
Investment, LT 50 50 Add Pd in Capital 729 729 "Cumulative" borrowing (or payment) required to -38 -15 36 0 -67 -73
Other Assets, LT 223 223 Retained Earnings 210 265 Ending cash balance with additional financing 252 237 273 273 206 133
Total Equity 1139 1194
Total Assets 2169 2037 Total Liab/Equity 2169 2037 Unpaid wages (Monthly wages = $111,000) 21 17 0 4 19 19