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How much would they change

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Below is an Income Statement and Balance Sheet. Suppose $100,000 is spent on new office furniture with $20,000 paid on the furniture when received and $80,000 to be paid in 30 days. Which line items and totals would change, by how much would they change, and what would be the resulting values in the following Income statement and balance sheet ? To simplify this problem, assume that the furniture will not be depreciated. Show the answers in the following table. Some lines in the table below may not be needed.

 

Income Statement Year x
  Balance Sheet Year x
Revenue $15,000,000
Assets

 
  Returns, Credits, etc. ($5,000)
  Current Assets  
  Net Sales (Revenue) $14,995,000
 
Cash $80,000
Direct Costs  
 
Accounts receivable $90,000
  Labor ($4,000,000)
 
Finished Goods Inventory $40,000
  Materials ($2,500,000)
 
Materials Inventory $60,000
  Cost of Goods Sold (COGS) ($6,500,000)
  Total Current Assets $270,000
  Gross Margin $8,495,000
 

 
Selling General and Admin.  
  Long term Assets  
  Marketing ($1,250,000)
 
Buildings $10,000,000
  Research and Development ($1,000,000)
 
Furniture $3,000,000
  Administration ($750,000)
 
Other $1,500,000
  Other ($500,000)
  Total Fixed Assets $14,500,000
  Depreciation ($250,000)
Total Assets
  $14,770,000
  S G & A ($3,750,000)
 

 
Earnings Before Interest and Taxes (EBIT) $4,745,000
Liabilities

 
  Interest Expense/Income ($165,000)
  Current Liabilities  
  Pre-tax Income $4,580,000
 
Notes Payable $100,000
  Income Tax @ 30% ($1,374,000)
 
Accounts Payable $110,000
  Net Income $3,206,000
 
Taxes Payable $10,000




  Total Current Liabilities $220,000




  Long Term Liabilities  




 
Bank Loans @ 6% $500,000

Current Stock Price $28.00
 
Mortgage @ 4.5% $3,000,000

Current Outstanding Shares 600,000
  Total Long Term Liabilities $3,500,000




 

 




  Capital Stock  $9,900,000




 
Retained Earnings $1,150,000




  Stockholders Equity   $11,050,000




Total Liabilities and Stockholders equity   $14,770,000

 

Reference no: EM13508905

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