ACTG 2010 Study Guide - Midterm Guide: Free Cash Flow, Inventory Turnover, Cash Flow
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Could you please help me in the following questions. Could youplease take a screenshot of the final cash flow statement etc.Cheers
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Adam
Statement of Cash Flows
You are provided the following financial information for TomHill Form Works, a company specialising in the production ofmoon-sized Imperial battle stations:
Tom HillForm Works
COMPARATIVE BALANCE SHEETS
AS AT 30th JUNE
2015 | 2014 | |||
$'000's | $â000's | |||
Current Assets | ||||
Cash on Hand | 35 | 12 | ||
Cash at Bank | 209 | 98 | ||
Accounts Receivable (net) | 58 | 54 | ||
Inventory | 310 | 330 | ||
Prepaid Expenses | 35 | 647 | 33 | 527 |
Non-Current Assets | ||||
Planet destroying Laser | 840 | 760 | ||
less Acc. Depreciation | 440 | 400 | 408 | 352 |
Buildings | 80 | 180 | ||
Total Assets | 1 127 | 1 059 | ||
Current Liabilities | ||||
Bank Overdraft | 20 | - | ||
Accounts Payable | 64 | 80 | ||
Accrued Stormtroopers wages | 63 | 89 | ||
Loan | 12 | 159 | - | 169 |
Non-Current Liabilities | ||||
Loan | 18 | - | ||
Total Liabilities | 177 | 169 | ||
Net Assets | 950 | 890 | ||
Equity | ||||
T.Hill, Capital | 950 | 890 | ||
Tom Hill Form Works
INCOME STATEMENT
FOR THE YEAR ENDED 30th JUNE2015
$'000's | |||||
Net Sales | 1 990 | ||||
COS | 1 300 | ||||
Less: Discount received | 5 | 1 295 | |||
Gross Profit: | 695 | ||||
Other Revenue: | |||||
Gain on sale of building | 60 | ||||
Interest received | 8 | ||||
763 | |||||
Expenses: | |||||
Selling & Admin Expense | 517 | ||||
Doubtful Debts Expense | 9 | ||||
Interest Expense | 12 | 538 | |||
Profit | 225 | ||||
Additional Information:
Selling & Admin Expense includes depreciation expense of$32,000.
The owner T.Hill, contributed $20,000 during the year
A new planet destroying laser was purchased by extending theloan, and paying the balance in cash
A building which had originally cost $100,000 was sold for$160,000 cash, making the business a gain of $60,000
REQUIRED:
Answer this question on the pro formaprovided
a. Using the template provided below, prepare a statement ofcash flows. Show all calculations on the proforma.
b. The owner of Tom Hill Form Works canât understand why the cash flowfrom operations is so different to the profit figure. As he has atendency to react quite badly to negativenews, carefully explain to Mr Hill at least two ofthe factors that may be causing thisdifference.
c. Explain what information is provided by a Statement of Cash Flowthat is not provided by the other General Purpose Financial Reportsyou have been introduced to in this unit (Income Statement,Statement of Changes in Equity & BalanceSheet)?
Tom Hill Form Works
Cash Flow Statement
FOR THE YEAR ENDED 30thJUNE 2015
$â000 | $â000 | ||
Cash Flows from Operating Activities | |||
Receipts from customers | |||
Payments to suppliers & employees | |||
Cash generated by operations | |||
Interest received | |||
Interest paid | |||
Cash Flows from Investing Activities | |||
Proceeds from sale of buildings | |||
Payment for Laser | |||
Cash Flows from Financing Activities | |||
Contribution by owner | |||
Drawings | |||
Net increase / decrease in cash held | |||
Cash at the beginning of the year | |||
Cash at the end of the year |
ALL WORKINGS MUST BE PRESENTED BELOW OR THE CASHFLOWSTATEMENT WILL RECEIVE NO MARKS
A fire destroyed your firmâs ending balance sheet and income statement after the year-end
but before the financial statements are released. However, you have been successful in obtaining the
numbers for the beginning balance sheet and the statement of cash flows, which are provided to you and
your team members in Excel format. Fields representing the missing balance sheet and income statement
are End of year2 in the Excel sheet
| CONSOLIDATED BALANCE SHEETS (USD $) | End of year 2 | End of year 1 | |
| In Thousands, unless otherwise specified | |||
| Current assets: | |||
| Cash and cash equivalents | ã | 598 | |
| Receivables, net | ã | 230 | |
| Inventories, net | ã | 2309 | |
| Other current assets | ã | 47 | |
| Total current assets | ã | 3184 | |
| Property and equipment, net of accumulated depreciation | ã | 1292 | |
| Assets held for sale | ã | 1 | |
| Goodwill | ã | 76 | |
| Intangible assets, net | ã | 29 | |
| Other assets, net | ã | 32 | |
| Assets, Total | ã | 4614 | |
| Current liabilities: | ã | 0 | |
| Current portion of long-term debt | ã | 0 | |
| Accounts payable | ã | 2030 | |
| Accrued expenses | ã | 380 | |
| Other current liabilities | ã | 150 | |
| Total current liabilities | ã | 2560 | |
| Long-term debt | ã | 604 | |
| Other long-term liabilities | ã | 239 | |
| Commitments and Contingencies | ã | 0 | |
| Stockholders Equity Attributable to Parent [Abstract] | ã | 0 | |
| Preferred stock, nonvoting, $00001 par value | ã | 0 | |
| Common stock, voting, $00001 par value | ã | 0 | |
| Additional paid-in capital | ã | 520 | |
| Treasury stock, at cost | ã | -27 | |
| Accumulated other comprehensive income (loss) | ã | 3 | |
| Retained earnings | ã | 715 | |
| Total stockholders equity | ã | 1210 | |
| Liabilities and Stockholders Equity, Total | ã | 4613 | |
| CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 12 Months Ended | ||
| In Thousands, except Per Share data, unless otherwise specified | Year 2 | ||
| Net sales | ã | ||
| Cost of sales, including purchasing and warehousing costs | ã | ||
| Gross profit | ã | ||
| Selling, general and administrative expenses | ã | ||
| Operating income | ã | ||
| Interest expense | ã | ||
| Other income, net | ã | ||
| Total other, net | ã | ||
| Income before provision for income taxes | ã | ||
| Provision for income taxes | ã | ||
| Net income | ã | ||
| CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | ||
| In Thousands, unless otherwise specified | Year 2 | ||
| Cash flows from operating activities: | |||
| Net income | $392 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||
| Depreciation and amortization | 208 | ||
| Share-based compensation | 13 | ||
| Loss on property and equipment, net | 1 | ||
| Other | 2 | ||
| Provision for deferred income taxes | -2 | ||
| Excess tax benefit from share-based compensation | -16 | ||
| Increase Decrease in Operating Capital | |||
| Receivables, net | -32 | ||
| Inventories, net | -204 | ||
| Other assets | 11 | ||
| Accounts payable | 113 | ||
| Accrued expenses | 63 | ||
| Other liabilities | -4 | ||
| Net cash provided by operating activities | 545 | ||
| Cash flows from investing activities: | |||
| Purchases of property and equipment | -196 | ||
| Payments to Acquire Businesses, Gross | -186 | ||
| Sale of certain assets of acquired business | 19 | ||
| Proceeds from sales of property and equipment | 1 | ||
| Net cash used in investing activities | -362 | ||
| Cash flows from financing activities: | |||
| (Decrease) increase in bank overdrafts | -3 | ||
| Decrease in financed vendor accounts payable | 0 | ||
| Issuance of senior unsecured notes | 449 | ||
| Payment of debt related costs | -9 | ||
| Borrowings under credit facilities | 0 | ||
| Payments on credit facilities | 0 | ||
| Dividends paid | -18 | ||
| Proceeds from the issuance of common stock, primarily exercise of stock options | 4 | ||
| Tax withholdings related to the exercise of stock appreciation rights | -22 | ||
| Excess tax benefit from share-based compensation | 16 | ||
| Repurchase of common stock | -81 | ||
| Contingent payment accrued on acquisitions | 5 | ||
| Other | -1 | ||
| Net cash provided by (used in) financing activities | 331 | ||
| Net increase (decrease) in cash and cash equivalents | 514 | ||
| Cash and cash equivalents, beginning of period | 598 | ||
| Cash and cash equivalents, end of period | 1,112 | ||
| Supplemental cash flow information: | |||
| Interest paid | 35 | ||
| Income tax payments | 219 | ||
| Non-cash transactions: | |||
| Accrued purchases of property and equipment | 21 | ||
| Retirement of common stock | 0 | ||
| Contingent consideration accrued on acquisitions | 0 | ||
| Changes in other comprehensive income | 1 | ||
| Declared but unpaid cash dividends | $4 | ||
Gibson Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2019. The company president formed a planning committee to prepare a master budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks:
a. October sales are estimated to be $320,000, of which 45 percent will be cash and 55 percent will be credit. The company expects sales to increase at the rate of 20 percent per month. Prepare a sales budget.
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b. The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. Prepare a schedule of cash receipts.
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c. The cost of goods sold is 70 percent of sales. The company desires to maintain a minimum ending inventory equal to 20 percent of the next monthâs cost of goods sold. However, ending inventory of December is expected to be $12,700. Assume that all purchases are made on account. Prepare an inventory purchases budget.
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d. The company pays 80 percent of accounts payable in the month of purchase and the remaining 20 percent in the following month. Prepare a cash payments budget for inventory purchases. (Round your final answers to the nearest whole dollar amounts.)
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e. Budgeted selling and administrative expenses per month follow:
| Salary expense (fixed) | $ | 18,700 | ||||||||||||||||||||||||||||||||||||||||||||
| Sales commissions | 4 | % of Sales | ||||||||||||||||||||||||||||||||||||||||||||
| Supplies expense | 2 | % of Sales | ||||||||||||||||||||||||||||||||||||||||||||
| Utilities (fixed) | $ | 2,100 | ||||||||||||||||||||||||||||||||||||||||||||
| Depreciation on store fixtures (fixed)* | $ | 4,700 | ||||||||||||||||||||||||||||||||||||||||||||
| Rent (fixed) | $ | 5,500 | ||||||||||||||||||||||||||||||||||||||||||||
| Miscellaneous (fixed) | $ | 1,900 | ||||||||||||||||||||||||||||||||||||||||||||
| *The capital expenditures budget indicates that Gibson will spend $139,800 on October 1 for store fixtures, which are expected to have a $27,000 salvage value and a two-year (24-month) useful life. Prepare a selling and administrative expenses budget using the information listed in E
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f. Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for selling and administrative expenses.
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g. Gibson borrows funds, in increments of $1,000, and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. It pays interest of 2 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $19,000 cash cushion. Prepare a cash budget. (Any repayments/shortage which should be indicated with a minus sign.)
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h. Prepare a pro forma income statement for the quarter.
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i. Prepare a pro forma balance sheet at the end of the quarter. (Amounts to be deducted should be indicated by a minus sign.)
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j. Prepare a pro forma statement of cash flows for the quarter. (Amounts to be deducted should be indicated by a minus sign.)
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