Question

a) Use the following information for Company COLTIB to create the Balance Sheet and the Income Statement for 2017 and 2018, Tax rate is 30% for both 2017 and 2018. In 2017, depreciation was 500. 2017 2,000 2,500 800 100 Sales for the year Accumulated Depreciation as of Dec 31st Cost of Goods Sold for the year Other Expenses for the year Interest for the year Cash as of Dec 31st Accounts Receivable as of Dec 31St Short-term Notes Pavable as of Dec 31st Long-term Debt as of Dec 315st Total Gross Fixed Assets as of Dec 31st Accounts Payable as of Dec 31st Inventory as of Dec 31St Dividends for the year Accumulated Retained Earnings 2018 2,400 3,000 1,000 200 10% of the Long-term Debt as of the end of the year 800 310 317 2,000 8,000 300 640 300 250 450 1,800 8,000 500 600 One third of the Net Income You should find it, given that this is the only account under Equity! b) Company X has not issued or bought back new stock for the last five years. Calculate total equity for 2016. c) How does the Sales and Total Assets change from 2017 to 18? Do you see this as a positive or a negative change vis-à-vis company's financial health?

Answer 1

a)

Income Statement:
Year:	2017	2018
Sales	2000	2400
Less:COGS	800	1000
GP	1200	1400
Less: expenses:
Interest	180	200
Depre.	500	500
Other exp	100	200
Total exp.	780	900
IBT	420	500
Less: Tax	126	150
Net Income	294	350
Less: Dividend	98	117
Tfr to RE	196	233

Balance Sheet:
Assets:	2017	2018
Cash	300	800
AR	250	310
Inventory	600	640
Current Assets	1150	1750
Gross FA	8000	8000
Less: Acc Dep	-2500	-3000
Net FA	5500	5000
Total Assets	6650	6750
Liabilities & Capi:	2017	2018
STNP	450	317
AP	500	300
Current Liabilities	950	617
LTD	1800	2000
Total Liabilities	2750	2617
Acc. RE:
Ope Bal	3704	3900
Add:N.Income	196	233
Total Liab. & Capi:	6650	6750

b) Total equity at the end of 2016 = 3704

c) The increase in the Total Sales from 2017 to 2018 is 20% ( ie. (2400-2000)/2000 )

whereas The increase in the Total Assets from 2017 to 2018 is 1.5% (ie. (6750-6650)/6650 )

The difference is due to the increase in COGS by 1.67% and increase in expenses from 780 to 900.