ENGITE 566 Finance for Engineering management Homework #1 Due February 14 Proble
ID: 2335257 • Letter: E
Question
ENGITE 566 Finance for Engineering management Homework #1 Due February 14 Problem l Using the example for the hardware store in the book "Understanding Finance Statements" oin page 9, please prepare a balance sheet for the end of week 2, 3, 4, & 5 (four balance sheets). XYZ HARDWARE AND BUILDING SUPPLY DECEMBER 31, YEAR BALANCE SHEET ASSETS LIABILITIES& NET WORTH Cash Accounts receivable Inventory Total Current Assets S2,000Accounts Payable 18,000 65,000 95,000 $ 297,000Tol Current Liabilities 178,000 85,000Notes Payable 210,000 Accruals Land/Buildings 144,000 50,000Total Long Term Debt 144,000 50,000 Mortgage ipment Furniture & Fixtures Total Fixed Assets 25,000 Total Liabilities $ 322,000 $125,000 Net Worth $100,000 Total Assets $ 422,000otal Liabilities & Net Worth S 422,000 The above example represents the first week of business Balance Sheet (Gill J. 1999) Assumptions: 1) Assume that $25,000 of inventory will be sold in week 2, and the gross margin is 25% of sales 2) Sales increase by $5000 each week for the following three weeks. Sales proportion of credit vs. cash will be 60% cash vs 40% credit. For simplicity, assume sales are made on the first day of the week 2) Add a weekly expenses of $3,000 for wages and other expenses. This will be paid from the cash account at the end of each week. Shall be subtracted from the Net Worth beginning 3) The receivable and payable amount for week one will be received and paid at first day of week 4) Accruals will be due for payment every quarter Instructor Dr. Brian LillyExplanation / Answer
Assets
Liabilities
1
2
3
4
5
1
2
3.00
4.00
5.00
Cash
2000
19000
42000
68000
164000
Accounts Payable
18000
18000
18000
18000
0
Account Receivable
85000
98333.33333
113666.6667
131000
65333.33333
Notes Payable
65000
65000
65000
65000
65000
Inventory
210000
185000
156250
123750
87500
Accruals
95000
95000
95000
95000
95000
Total Current Assets
297000
302333.3333
311916.6667
322750
316833.3333
Total Current liabilities
178000
178000
178000
178000
160000
Land/Building
50000
50000
50000
50000
50000
Mortgage
144000
144000
144000
144000
144000
Equipment
50000
50000
50000
50000
50000
Furniture and Fixtures
25000
25000
25000
25000
25000
Total Fixed Assets
125000
125000
125000
125000
125000
Total Long term Debt
144000
144000
144000
144000
144000
Networth
100000
105333.3333
114,916.7
125,750.00
137,833.33
422000
427333.3333
436916.6667
447750
441833.3333
422000
427333.3333
436916.6667
447750
441833.3333
Note 1
2
3
4
5
Sales
33333.33
38333.33
43333.33
48333.33
Cash sales (60%)
20000
23000
26000
29000
Credit (40%)
13333.33
15333.33
17333.33
19333.33
Inventory (75% of sales)
25000
28750
32500
36250
Gross margin (25% of sales)
8333.333
9583.333
10833.33
12083.33
Assumptions
1,2
25000 inventory will be sold in week 2 with 25% margin hence first week sales will be (25000*75%)*100%=33333.3), Subsequent week sales will be increased by 5000 as given in assumption 2. Inventory of every week will be reduced by cost of sales and cash and receivable balance will be increase as per proportion given in assumption 2.Further GP margin will be added in networth. (Refer Note 1 for calculations)
2
Weekly expenses of 3000 is in cash hence cash will be reduced by 3000 and networth will be reduced by 3000 since it is item to be reduced from gross margin
3
Receivable and payble of week 1 will be deducted from receivable and payable of week 5 since these are recovered and cash will be adjusted accordingly
4
Accrual will be continue till week 5 since it will be paid ay the end of quarter.
Rest of the item of balane sheet will continue as it is
Assets
Liabilities
1
2
3
4
5
1
2
3.00
4.00
5.00
Cash
2000
19000
42000
68000
164000
Accounts Payable
18000
18000
18000
18000
0
Account Receivable
85000
98333.33333
113666.6667
131000
65333.33333
Notes Payable
65000
65000
65000
65000
65000
Inventory
210000
185000
156250
123750
87500
Accruals
95000
95000
95000
95000
95000
Total Current Assets
297000
302333.3333
311916.6667
322750
316833.3333
Total Current liabilities
178000
178000
178000
178000
160000
Land/Building
50000
50000
50000
50000
50000
Mortgage
144000
144000
144000
144000
144000
Equipment
50000
50000
50000
50000
50000
Furniture and Fixtures
25000
25000
25000
25000
25000
Total Fixed Assets
125000
125000
125000
125000
125000
Total Long term Debt
144000
144000
144000
144000
144000
Networth
100000
105333.3333
114,916.7
125,750.00
137,833.33
422000
427333.3333
436916.6667
447750
441833.3333
422000
427333.3333
436916.6667
447750
441833.3333
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