Understanding Financial Statements, Cash Flows, and Taxes

Complete the following problems:


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  • Problem 2-1: Preparing Financial Statements
  • Problem 2-2: Preparing the Statement of Cash Flows


*Complete the problems in an Excel spreadsheet. Be sure to show your work to receive credit; no hard keys.


Problem 2-1: Preparing Financial Statements

Information below is for Warner Manufacturing, Inc. for the year ended December 31, 20×1 except where beginning of year numbers indicated. All amounts in SAR unless otherwise stated.

Using the information below:

1. Prepare an income statement with the proper title

2. Prepare end of year balance sheet with the proper title

3. Calculate net working capital

4. Calculate the debt ratio

*Complete the problems in an Excel spreadsheet. Be sure to show your work to receive credit; no hard keys.

Depreciation expense 66,000
Cash 220,000
Long-Term Debt 330,000
Net Sales 615,000
Accounts payable 102,000
Marketing and general and administrative expenses 79,000
Buildings and Equipment 895,000
Notes payable 7,5000
Accounts receivable 156,000
Interest expense 4,750
Accrued expenses 7,900
Common Stock 289,000
Cost of Goods sold 297,000
Inventory 99,300
Taxes 67,300
Accumulated Depreciation -26,3000
Prepaid expenses 14,500
Taxes payable 55,000
Retained earnings 262,900
Problem 2-2 Preparing Statement of Cash Flows
Given the following information, prepare a statement of cash flows.

Increase in accounts receivable 30
Increase in inventories 30
Operating Income 95
Interest Expense 30
Increase in accounts payable 25
Dividends 15
Increase in common stock 20
Increase in net fixed assets 23
Depreciation Expense 12
Income taxes 17
Beginning cash 20
Assume all amounts are in 000’s SAR.

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