For each of the transactions below, record whether it would result in an increase or decrease in assets, liabilities, and/ or net assets. An organization:
Earns revenue
Receives a donor pledge
Purchases supplies with cash
Purchases supplies on account
Takes out a loan
Repays loan principal
Receives payment on a pledge
Makes a payment on an amount it owes
Prepays for insurance
Uses prepaid insurance
Uses supplies
Uses a capital asset
Receives cash in advance of providing goods or services goods or services to a client.
Provides goods and services to a client in exchanging for a cash payment that was made in advance.
Employee workers who earn wages
Pays employee wages that have been earned
Deems a portion of a pledge is uncollectible
Pays interest on a loan
For each of the transactions below, record whether it would result in an increase or decrease in assets, liabilities, and/ or net assets. An organization:
Earns revenue
Receives a donor pledge
Purchases supplies with cash
Purchases supplies on account
Takes out a loan
Repays loan principal
Receives payment on a pledge
Makes a payment on an amount it owes
Prepays for insurance
Uses prepaid insurance
Uses supplies
Uses a capital asset
Receives cash in advance of providing goods or services goods or services to a client.
Provides goods and services to a client in exchanging for a cash payment that was made in advance.
Employee workers who earn wages
Pays employee wages that have been earned
Deems a portion of a pledge is uncollectible
Pays interest on a loan
Related questions
Use the income statement and balance sheet provided to make recommendation for the amount of dividend (if any). How are retained earnings impacted and what does this mean for the organization?
Compute the Internal Growth Rate and Sustainable Growth Rate using current (2015) financial information and then a second scenario; if we issue a dividend payment of $3 million.
Explain your thought process and rationale for a recommended dividend strategy.
Concept Check: Dividends are distributions of profits to your investors who placed their capital at risk for you. Theoretically every company should eventually provide a dividend distribution to their investors.
| CME Iron | Balance Sheet | ||
| Assets | |||
| Current assets: | 2014 | 2015 | change |
| Cash | 500,000 | 600,000 | 100,000 |
| Investments | 1,000,000 | 1,025,000 | 25,000 |
| Inventories | 110,000,000 | 117,000,000 | 7,000,000 |
| Accounts receivable | 11,750,000 | 12,500,000 | 750,000 |
| Pre-paid expenses | 2,500,000 | 2,600,000 | 100,000 |
| Other | 0 | 0 | - |
| Total current assets | 125,750,000 | 133,725,000 | 7,975,000 |
| Fixed assets: | 2014 | 2015 | change |
| Property and equipment | 165,000,000 | 175,000,000 | 10,000,000 |
| Leasehold improvements | 0 | 0 | - |
| Equity and other investments | 55,000,000 | 65,000,000 | 10,000,000 |
| Less accumulated depreciation | 15,000,000 | 15,500,000 | 500,000 |
| Total fixed assets | 235,000,000 | 255,500,000 | 20,500,000 |
| Other assets: | 2014 | 2015 | change |
| Goodwill | 75,000,000 | 70,000,000 | (5,000,000) |
| Total other assets | 75,000,000 | 70,000,000 | (5,000,000) |
| Total assets | 435,750,000 | 459,225,000 | 23,475,000 |
| Liabilities and owner's equity | |||
| Current liabilities: | 2014 | 2015 | change |
| Accounts payable | 40,500,000 | 42,400,000 | 1,900,000 |
| Accrued wages | 85,000,000 | 90,500,000 | 5,500,000 |
| Accrued compensation | 10,000,000 | 10,855,000 | 855,000 |
| Income taxes payable | 4,024,000 | 4,697,000 | 673,000 |
| current portion of LT debt | 5,500,000 | 10,350,000 | 4,850,000 |
| Other | 0 | 0 | - |
| Total current liabilities | 145,024,000 | 158,802,000 | 13,778,000 |
| Long-term liabilities: | 2014 | 2015 | change |
| Long term debt | 125,000,000 | 130,000,000 | 5,000,000 |
| Total long-term liabilities | 125,000,000 | 130,000,000 | 5,000,000 |
| Owner's equity: | 2014 | 2015 | change |
| Common stock | 122,000,000 | 122,000,000 | - |
| Preferred stock | 16,725,000 | 16,725,000 | - |
| Accumulated retained earnings | 27,001,000 | 31,698,000 | 4,697,000 |
| Total owner's equity | 165,726,000 | 170,423,000 | 4,697,000 |
| Total liabilities and owner's equity | 435,750,000 | 459,225,000 | 23,475,000 |
Income Statement
ACME Iron
December 2015
Financial Statements in '000s of U.S. Dollars
| REVENUE | |
| Gross Sales | 250,000 |
| Less: Sales Returns & Allowances | 2,500 |
| Net Sales | 247,500 |
| COST OF GOODS SOLD | |
| Beginning Inventory | 7,500 |
| Add: Purchases | 4,500 |
| Freight-in | - |
| Direct Labor | 75,000 |
| Indirect Expenses | 15,000 |
| Inventory Available | 102,000 |
| Less: Ending Inventory | |
| Cost of Goods Sold | 102,000 |
| Gross Profit (Loss) | 145,500 |
| EXPENSES | |
| Advertising | 7,500 |
| Amortization | - |
| Bad Debts | 5,000 |
| Depreciation | 500 |
| Dues and Subscriptions | - |
| Employee Benefit Programs | 18,750 |
| Insurance | 2,500 |
| Interest | 10,350 |
| Legal & Professional Fees | 100 |
| Licenses & Fees | - |
| Miscellaneous | 10 |
| Office Expenses | 100 |
| Payroll Taxes | 5,625 |
| Postage | 3 |
| Rent | - |
| Repairs & Maintenance | 5,000 |
| Supplies | 2,000 |
| Telephone | 120 |
| Travel | 1,750 |
| Utilities | 50,000 |
| Vehicle Expenses | 450 |
| Wages | 25,000 |
| Total Expenses | 134,758 |
| Net Operating Income | 10,742 |
| OTHER INCOME | |
| Gain (Loss) on Sale of Assets | - |
| Interest Income | 1,000 |
| Total Other Income | 1,000 |
| TAXES | 4,697 |
| Net Income (Loss) | 7,045 |
