Question

1) Given the following financial information for 2014 and 2015, construct an Income Statement, Balance Sheet and Statement of Cash Flows for Grand Twins.
   - The Income Statement information is for the entire year.

   - The Balance Sheet information is for December 31 of each year.

                                                  2014                    2015

Accounts Payable                    $2,065,168           $3,732,362

Accounts Receivable               47,677,904           53,413,866

Cash                                      5,786,943           1,260,691

Common Stock                       27,280,000           27,280,000

Cost of Goods Sold                  45,014,348           50,298,751

Depreciation Expense                   975,000             975,000

Dividends                               1,200,000           1,200,000

Interest Expense                             90,430              103,266

Inventory                                8,399,133           8,989,075

Long-Term Debt                                  0                          0  

Notes Payable                                    0                         ?           

Other Current Liabilities           5,209,356           4,320,784

Net Property, Plant & Equip.    9,295,976           11,608,208

Retained Earnings                    35,732,145                            ?

Revenue                                 56,611,367           56,775,078

Selling, General, & Admin.      6,165,153           4,742,619

Total Assets                                           ?                          ?

Tax Rate = 20%

           

2) Can you complete a 2014 Balance Sheet without being given Retained Earnings or Total Assets?

3) Can you complete a 2015 Balance Sheet without being given Retained Earnings, Total Assets, or Notes Payable?

4) What is your assessment of GTI’s financial performance for 2015?

5) What clues to GTI’s issues does the Balance Sheets provide?

Answer 1

Grand Twins Balance sheet As at 2015 2014 Assets Current Assets: Cash 5786943 1260691 Accounts Receivable 53413866 47677904 8989075 Inventory 8399133 61863980 63663632 Net Property, Plant & Equip. 9295976 11608208 Total Assets 71159956 75271840 Liabilities & Stockholders Equity Current Liabilities: Accounts Payable 2065168 3732362 Other Current Liabilities 5209356 4320784 Income Tax Payable 131088 873287 8147811 8184234 Long Term Liabilities: Long Term Debt Note Payable 4751107 4751107 Stockholders Equity : Common Stock 27280000 27280000 Retained Earnings - Beginning 36058858 35732145 Add;Net income of the year 873287 524354 Less:Dividends 1200000 1200000 Retained Earnings - Ending 35732145 35056499 Total Liabilities & Stockholders Equity 71159956 75271840

Requirement 4 • GTI's financial performance for 2015 demonstrates a decrease in productivity when contrasted with 2014 essentially by virtue of greater Cost of Goods Sold which has expanded in 2015 by 12% over that of 2014 and higher interest expense which has expanded by 14% more than 2014. This expansion in expenses has been somewhat remunerated by negligible increment in revenue of 0.3% and decrease in Selling, General and Administrative expense by 23%. The net effect of the above has been a fall in the net income in 2015 by 15% more than 2014. Requirement 5 • The organization has likewise not possessed the capacity to understand its receivables resulting an increase in its receivable turnover ratio which has gone up from 84% to 94% in 2015. The decrease in overall gain and increment in receivables has resulted in funds shortfall which the organization appears to have financed through the Notes Payable which thus has brought about higher interest outgo. In general, the total assets of the organization has decrease by 2% in 2015.