Q1: Construct a balance sheet for given following data. What is shareholders equ
ID: 2674329 • Letter: Q
Question
Q1: Construct a balance sheet for given following data. What is shareholders equity?Cash balances: $10,000
Inventory of sofas:$200,000
Store and property: 100,000
Accounts Receivable:22,000
Accounts Payable:$17,000
Long-term Debt: 170,000
Q2: We characterized the balance sheet as providing a snapshot of the firm at one point in time and the income statement as providing a video. What did we mean by this? is the statement of cash flow more like a snapshot or video?
Q3: Explain why accounting income generally will differ from a firm's cash inflows.
Explanation / Answer
(Q1)
Cash balances: $10,000 -----Asset
Inventory of sofas:$200,000 -----Asset
Store and property: 100,000 -----Asset
Accounts Receivable:22,000 -----Asset
Accounts Payable:$17,000 -----Liability
Long-term Debt: 170,000 -----Liability
Total Assets = 10000 + 200000 + 100000 + 22000 = 332000
Total liabilities = 17000 + 170000 = 187000
Equity = Assets - Liabilities = 332000 - 187000 = 145000
(Q2)
Balance sheet gives the overview of the company at a given point of time. What is the total assets, liabilities, cash etc on that particular day. While income stament gives what is the income earned, costs inccurred etc over the period of the statement (how much did the balance sheet change during the period). So balance sheet is like a snapshot and the income statement gives how the balances changed over the period from balance sheet1 to balance sheet2 (like a video, going from one picture to another picture after some time)
Statement of cash flows is like a video as it talks about the change in things over a period of time (but not at a given instance)
(Q3)
Accounting income can account for other non traditional income like increase in intangible assets like brand etc, and some depreciation/ammortization expenses, some tax adjustment which do not really show up in the cash flow statement but are included which calculating the accounting income.
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