Question

Prepare the following financial statements based on below info:
1. Balance sheet as on 31 Dec 2017
2. P&L statement for year ending 31 Dec 2018
3. Balance sheet as on 31 Dec 2018
4. Statement of cash flows for the year ending 31 Dec 2018.

Financial Information:
The Company was initially set up by issuing 240,000 shares at an issue price of $1 each.
A factory was at a cost of $500,000.
The new factory was largely financed by taking out a $450,000 mortgage loan. In addition to the mortgage loan, the company took out a $482,000 interest-only unsecured bank loan.
In addition to the factory, the company purchased the following:
Plant&Equipment to the value of $200,000, Furniture&Fixtures to the value of $140,000, Inventory to the value of $184,000.
All these occurred in late Dec 2017. Any cash remaining was put into a bank account.

On 1 Mar 2018, the company took out a bank overdraft. The outstanbding balance on 31 Dec 2018 was $20,000 (This is to be recorded separately from cash balalnce rather than combined.)
On 1 July 2018, motor vehicles to the value of $160,000 were purchased.
On 31 Dec 2018, the company issued corporate bonds to the value of $700,000 and used the proceeds to purchase an additional factory costing $700,000.
On 31 Dec 2018, the company issued 142,000 new ordinary shares at $2 each and 260,000 new preferance shares at $1 each. Some of the amount raised was used to buy additional plant & equipment for the new factory at a cost of $240,000.

During the course of the year ending 31 December 2018, the following transactions occurred.
Products to the value of $1,992,000 were sold & delivered. These sales were m,ade on the basis on one month credit. Of the $1,992,000 in sales occuring in 2018, products to the value of $199,000 were delivered in Dcember 2018 and will not be paid for until January 2019.
Raw materials to the value of $996,000 were ordered and taken delivery of. These purchases were made on the basis of one month's credit. Of the $996,000 in raw materials purchased in 2018, raw materials to the value of $98,000 were ordered and taken delivery of in December 2018 and will not be paid of until Jan 2019.
Payment of wages ($148,000).
Payment of Rent for 2018 ($130,000)
Payment of motor vehicle running expenses ($53,000)
Payment of insurance for 2018 ($49,000)
Payment of interest ($84,000)
Payment for printing & stationery ($30,000)
Payment for Heating & Lighting for 2018 ($31,000)
Payment for Telephone, Postage & internet charges ($20,000)
In addition, an additional $46,000 was paid in December for January's rent.
In addition to the above interest payment, the principle owing on the mortgage loan was reduced by $42,000.
The value of inventory on 31 Dec 2018 was $213,000.

Additional Info : Depreciation on motor vehicles, plant&equipment and furniture&fixtures is calculated on a straight-line basis at the rate of 10% per year.
The company faces a tax rate of 20% . The company's Dividend payout ratio is 75%.

Answer 1

1		Balance Sheet as on 31st Dec 2017
		Assets
		Current Assets
		Inventory				$184,000
		Bank Account				$148,000
		Fixed Assets
		Factory				$500,000
		Plant and Equipment				$200,000
		Furniture and Fixture				$140,000
		Total Assets				$1,172,000
		Long Term Loan
		Mortgage Loan				$450,000
		Unsecured Bank Loan				$482,000
		Common Stock				$240,000
		(Issued 240000 shares at $1 each)
		Total Liabilities and Equity				$1,172,000
		Cash Available
		Common Stock				$240,000
		Mortgage Loan				$450,000
		Unsecured Bank Loan				$482,000
						$1,172,000
		Less :
		Factory				$500,000
		Plant and Equipment				$200,000
		Furniture and Fixture				$140,000
		Inventory				$184,000
		Total Spending				$1,024,000
		Cash Available				$148,000
2		Profit and Loss statement for the year ending 31st Dec 2018
		Sales				$1,992,000
		Less:
		Raw Materials				$996,000
		Gross Profit				$996,000
		Less:
		Wages Expense			$148,000
		Rent Expense			$130,000
		Motor Vehicle Running Expense			$53,000
		Insurance			$49,000
		Printing and Stationery			$30,000
		Telephone, Postage and Internet Charges			$20,000
		Depreciation			$74,000
		($200000+140000+240000+160000)*10%				$504,000
		Earnings before interest and Tax				$492,000
		Interest				$84,000
		Earnings before Tax				$408,000
		Tax @ 20%				$81,600
		Earnings after Tax				$326,400
		Dividend @ 75%				$244,800
		*No details on depreciation of factory is given and hence it is assumed there is no depreciation for the same
	3	Balance Sheet as on 31st Dec 2018
		Assets
		Current Assets
		Inventory				$213,000
		Bank Account				$249,600
		Accounts receivable				$199,000
		Prepaid Rent				$46,000
		Fixed Assets
		Factory				$1,200,000
		Plant and Equipment			$440,000
		Furniture and Fixture			$140,000
		Motor Vehicles			$160,000
		Less : Depreciation @ 10%			($74,000)	$666,000
		Total Assets				$2,573,600
		Liabilities and Equity
		Current Liabilities
		Accounts Payable				$98,000
		Bank Overdraft				$20,000
		Long Term Loan
		Mortgage Loan				$408,000
		Unsecured Bank Loan				$482,000
		Corporate Bond				$700,000
		Shareholder's Equity
		Preference Shares				$260,000
		(Issued 260000 shares at $ 1 each)
		Common Stock				$240,000
		(Issued 240000 shares at $1 each)
		Common Stock				$284,000
		(Issued 142000 shares at $2 each)
		Retained Earnings				$81,600
		Total Liabilities and Equity				$2,573,600
	4	Statement of Cash flows for the year ending 31 Dec 2018
		Cash, beginning of the year				$148,000
		Cash flows from operating activities
		Profit before taxation				$408,000
		Adjustments for:
		Depreciation				$74,000
		Working capital changes:
		Increase in Accounts Receivable				($199,000)
		Increase in inventories				($29,000)
		Increase in prepaid Rent				($46,000)
		Increase in Accounts Payable				$98,000
		Taxes Paid				($81,600)
		Cash generated from operations				$224,400
		Net cash from operating activities				0
		Cash flows from investing activities
		Purchase of Motor Vehicles				($160,000)
		Purchase of Factory				($700,000)
		Plant and Equipment				($240,000)
		Net cash used in investing activities				($1,100,000)
		Cash flows from financing activities
		Issue of new common stock				$284,000
		Issue of Preference shares				$260,000
		Corporate Bond Issued				$700,000
		Bank Overdraft				$20,000
		Repayment of mortgage Principal				($42,000)
		Dividend paid				($244,800)
		Net cash used in financing activities				$977,200
		Net increase in cash and cash equivalents				$101,600
		Cash and cash equivalents at end of period				$249,600