Question

RISING_STAR company was incorporated in the first of June 2020. Money was raised at that time with total $1000 which include 30% from bank loan, 30% from corporate bond and the rest from its own money. The company business is selling laptop. Total equipment costs $600. The company has 150 laptops with total value of $300 and $100 in cash.

The maturity of bank loan and corporate bond are 3 years and 5 years respectively. Lending rate is 9% and coupon rate is 12%. Assume the laptops bought at 01/06/2020 are identical and have the same cost. Corporate tax rate is 23%. Duration of the equipment is 5-year.

Show the income statement, cash flow statement and balance sheet of the company at 31/12/2020 if:

• The company start its operations on June 1st, 2020. Over the period, it sells 60 laptop for $400.

The company invited Diva My Linh to perform on its Grand Opening Day and paid her $10.

The salary paid to the CEO is $2 per month and the other administrative costs are $4 in total. In the 1st of September, it recruited a CFO and the compensation package for him is $10 annually.

On Dec 31, it decides to replenish its stock of laptop with 50 laptops more with the same imported price The fuels and other operating costs are $1,5.

All income and expenses are paid cash (no credit on sale)

• Given the information above and now the company applies equal depreciation. Customers bought laptop with $220 in cash and $180 on credit. However, 15% are collected from $180 before December 2020 and 50 laptops will be paid next March, 2021. In addition, 50% of the tax will be paid in the first quarter next year and so does 10% of the equipment costs. The company decides to pay 20% dividend in cash.

Show the income statement, cash flow statement and balance sheet of the company at 30/06/2021 if:

• In the first 6 months of 2021, the company sells all the laptop left in the store from 2020 with the price of $40 each and replenishes 350 new type laptops with the imported price are twice more expensive than the 2020 version. At 30/06/2021, it decides to change from its old store to a new store in Hai Ba Trung road and cost $10 to change. New equipment for this store is $200. The new equipment will be financed 100% from its own money. However, when moving to the new store, it needs to pay a rental fee of $10 monthly while it receives back $20 of advance deposit from its old store.

Using DuPont analysis to analyze the performance of the company.

Answer 1

The detailed answer for the above question is provided below:

Step 1

An income statement is a financial statement that details revenue and expenses of a firm. A profit and loss statement, statement of operation, a statement of financial result or income, or earnings statement are all terms used to describe the income statement.

Step 2

Capital Structure of the company:

Equity Capital : $400(Being 40% of $1000)

Bank Loan @ 9%p.a.: $300(Being 30% of $1000)

Bond @ 12% Coupon Rate: $300 (Being 30% of $1000)

Income Statement Calculation

Income Statement For RISING STAR Company

Sales	($40*150)	6000
Less :
Cost of Goods Sold
Opening Stock	300
Purchase @ Double price 300 units	1200
Closing Stock (As New stock has not been sold )	-1200	300
Gross Profit		5700

Step 3

Calculation of Depreciation

$600 Equipment has lifespan of 5 years so if we take Depreciation on Straigth Line Method Depreciation per year will be 600/5

= $120 Per Year

As New Addition of equipment of $200 on 30/03/2021 and duration of equipment is not provided in the question we will assume it also at 5 years. So Depreciation for New Equipment for 3 months( As we are Preparing Balancesheet on 30/06/21) it will be (200/5)*(3/12)

= $10

So, toal Depreciation is 120 + 10 = $130

Step 4

Gross Profit : $5700

Less

Depreciation : $130

Store Shift Cost : $10

Rent for 3 Months: $30

Bank Interest:$27

Bond Interest : $36

Add:

Rent Income from Old Store ; (25*3) = $75

Net Profit Before Tax is : $5542

Tax @ 23% : $1274.66

After Tax Profit : $4267.34

Cashflow of the Company

Cash Flow from Operating Activity:

Profit After Tax : 4267.34

Add:

Depreciation : $130

Bond Interest : $36

Decrease In Inventory: $300

Less:

Increase in Inventory : $1200

Total : $3533.34

Cash Flow from Investing Activity

Sale of Equipment : $7

Purchase of Equipment : $200

Total Cash Flow = ($193) (i.e. Negative)

Cash Flow from Financing Activity:

Bond Interest Paymeny : $36

Total Cash Flow : ($36)

So Total Cash Flow From All Activity is : $3304.34

Balance Sheet :

Equity Capital : $4667.34

($400 + 4267.34 Profit)

Bonds : $300

Bank Loans : $300

( No repaymeny schedule has been provided so no treatment is provided)

Total Liability : 5267.34

Equipment : $663

$600 - $130(Depreciation) - $7(Sold) + $200(New Purchase)

Inventory : $1200

Cash :

$100 + 3304.34 = 3404.34

Total Asset : 5267.34

Total Asset : 5267.34