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Learning Module 2Financial Statements & EPS
Annabella, Inc.
Prepare the financial statements for the year ending December 31, 2015.
Annabella, Inc. declared and paid a $5,000 dividend in 2015. Beginning common
stock was $50,000 and beginning retained earnings was $259,000.
Cash 58,000 Common Stock 50,000
Accounts Receivable 15,000 Retained Earnings 324,000
Inventory 80,000 Sales 410,000
Building 200,000 Cost of Goods Sold 200,000
Equipment 100,000 Salary Expense 50,000
Accumulated Depreciation 20,000 Rent Expense 36,000
Security Deposit 3,000 Depreciation Expense 10,000
Accounts Payable 12,000 Office Expense 10,000
Salaries Payable 4,000 Interest Revenue 1,000
Taxes Payable 6,000 Interest Expense 5,000
Note Payable, Long-Term 40,000 Tax Expense 30,000
Sales 410,000$
Cost of Goods Sold 200,000
Gross Profit 210,000
Operating Expenses
Salary Expense 50,000$
Rent Expense 36,000
Depreciation Expense 10,000
Office Expense 10,000
Total Operating Expenses 106,000
Operating Income 104,000
Other Revenue & (Expenses)
Interest Revenue 1,000
Interest Expense (5,000)
Total Other Revenue & (Expenses) (4,000)
Income before Taxes 100,000
Tax Expense 30,000
Net Income 70,000$
Annabella, Inc.
Income Statement
For the Year Ended December 31, 2015
Common Retained
Stock Earnings Total
Beginning Balance, December 31, 2014 50,000$ 259,000$ 309,000$
Common Stock Issued -
Net Income 70,000 70,000
Less: Dividends Declared (5,000) (5,000)
Ending Balance, December 31, 2015 50,000$ 324,000$ 374,000$
Annabella, Inc.
Statement of Owners' Equity
For the Year Ended December 31, 2015
Assets Liabilities & Owners' Equity
Liabilities
Current Assets Current Liabilities
Cash 58,000$ Accounts Payable 12,000$
Accounts Receivable 15,000 Salaries Payable 4,000
Inventory 80,000 Taxes Payable 6,000
Total Current Assets 153,000 Total Current Liabilities 22,000
Fixed Assets Long-Term Debt
Building 200,000$ Note Payable 40,000$
Equipment 100,000 Total Liabilities 62,000
Total Fixed Assets 300,000 Owners' Equity
Less: Accumulated Depreciation (20,000) Common Stock 50,000$
Net Fixed Assets 280,000 Retained Earnings 324,000
Other Assets Total Owners' Equity 374,000
Security Deposit 3,000$
Total Assets 436,000$ Total Liabilities & Owners' Equity 436,000$
Annabella, Inc.
Balance Sheet
December 31, 2015
Earnings Per Share (EPS)
Basic EPS is a performance metric which shows the earnings per share based on
the weighted average of the actual common shares outstanding (shares issued less
shares repurchased) throughout the period.
Diluted EPS is a performance metric which shows the earnings per share based on
the weighted average of the actual common shares outstanding plus all convertible
securities assuming they had been exercised and converted into common stock.
Examples of convertible securities include stock options, warrants, convertible
preferred stock, and convertible bonds.
EPS =Weighted Average Shares Oustanding
Net Income
Greges Corporation EPS
Greges Corporation had net income for 2014 of $100,000. At the beginning of the
year, they had 10,000 shares of common stock outstanding. On April 1, they sold
4,000 shares to the public. On October 1, they sold 3,000 more shares. At
December 31, they had total assets of $1,000,000 and total liabilities of $600,000.
Calculate EPS.Weighted
Shares Fraction Average Shares
Outstanding of Year Outstanding
Jan 1 10,000 x 3/12 = 2,500
Apr 1 14,000 x 6/12 = 7,000
Oct 1 17,000 x 3/12 = 4,250
13,750
100,000$
13,750= = 7.27$ EPS
Bella Company EPS
For 2014, Bella Company earned $100,000. The company had 6,000 shares
outstanding on January 1, sold 2,000 shares on March 1, sold 4,000 shares on June
1, and another 4,000 on July 1. Calculate EPS.
Weighted
Shares Fraction Average Shares
Outstanding of Year Outstanding
Jan 1 6,000 x 2/12 = 1,000
Mar 1 8,000 x 3/12 = 2,000
Jun 1 12,000 x 1/12 = 1,000
Jul 1 16,000 x 6/12 = 8,000
12,000
100,000$
12,000EPS = = 8.33$
Homework
Complete the Dariko, Inc. problem on page 26 of The Map – including income
statement, statement of owners’ equity, and balance sheet
Fill in the blanks on page 29 of The Map
Colton, Inc.
Prepare the financial statements for the year ending December 31, 2015.
The tax rate is 30% of the earnings before tax and there are 10,000 shares of common stock
outstanding at December 31, 2015. The company sold 3,000 shares of common stock on November
1, 2015 and declared and paid a dividend of $15,000. The beginning common stock was $126,000
and the beginning retained earnings was $115,000.
Accounts Payable 34,000 Accumulated Depreciation 48,000
Accounts Receivable 48,000 Retained Earnings 240,000
Notes Payable - Long-Term 104,000 Sales Revenue 820,000
Cash 140,000 Advertising Expense 73,000
Depreciation Expense 24,000 Supplies Expense 16,000
Common Stock 180,000 Wage Expense 100,000
Cost of Goods Sold 400,000 Security Deposits 50,000
Equipment 136,000 Interest Expense 7,000
Inventory 34,000 Wages Payable 12,000
Land 180,000 Tax Expense ???
Prepaid Insurance 30,000
Colton, Inc.
How much is gross profit?
Sales 820,000$
Cost of Goods Sold 400,000
Gross Profit 420,000
Colton, Inc.
How much is operating income?
Gross Profit 420,000$
Operating Expenses
Wage Expense 100,000$
Advertising Expense 73,000
Depreciation Expense 24,000
Supplies Expense 16,000
Total Operating Expenses 213,000
Operating Income 207,000
Colton, Inc.
How much is income before taxes?
Operating Income 207,000$
Other Revenue & (Expenses)
Interest Expense (7,000)
Income before Taxes 200,000
Colton, Inc.
How much is net income?
Income before Taxes 200,000$
Tax Expense 60,000
Net Income 140,000$
Colton, Inc.
How much is earnings per share?
Colton, Inc. has 10,000 shares of common stock outstanding at December 31, 2015.
The company sold 3,000 shares of common stock on November 1, 2015.
Weighted
Shares Fraction Average Shares
Outstanding of Year Outstanding
Jan 1 7,000 x 10/12 = 5,833.33
Nov 1 10,000 x 2/12 = 1,666.67
7,500
140,000$
7,500= 18.67$ EPS =
Sales 820,000$
Cost of Goods Sold 400,000
Gross Profit 420,000
Operating Expenses
Wage Expense 100,000$
Advertising Expense 73,000
Depreciation Expense 24,000
Supplies Expense 16,000
Total Operating Expenses 213,000
Operating Income 207,000
Other Revenue & (Expenses)
Interest Expense (7,000)
Income before Taxes 200,000
Tax Expense 60,000
Net Income 140,000$
Earnings per share 18.67$
Colton, Inc.
Income Statement
For the Year Ended December 31, 2015
Colton, Inc.
How much is total current assets?
Current Assets
Cash 140,000$
Accounts Receivable 48,000
Inventory 34,000
Prepaid Insurance 30,000
Total Current Assets 252,000
Colton, Inc.
How much is net fixed assets?
Fixed Assets
Land 180,000$
Equipment 136,000
Total Fixed Assets 316,000
Less: Accumulated Depreciation (48,000)
Net Fixed Assets 268,000
Colton, Inc.
How much is other assets? How much is total assets?
Total Current Assets 252,000$
Net Fixed Assets 268,000
Other Assets
Security Deposits 50,000
Total Assets 570,000$
Colton, Inc.
How much is total current liabilities?
Current Liabilities
Accounts Payable 34,000$
Wages Payable 12,000
Total Current Liabilities 46,000
Colton, Inc.
How much is total long-term liabilities? How much is total liabilities?
Total Current Liabilities 46,000$
Long-Term Debt
Note Payable 104,000
Total Liabilities 150,000
Colton, Inc.
How much is total owners’ equity? How much is total liabilities and owners’ equity?
Total Liabilities 150,000$
Owners' Equity
Common Stock 180,000$
Retained Earnings 240,000
Total Owners' Equity 420,000
Total Liabilities & Owners' Equity 570,000$
Assets Liabilities & Owners' Equity
Current Assets Liabilities
Cash 140,000$ Current Liabilities
Accounts Receivable 48,000 Accounts Payable 34,000$
Inventory 34,000 Wages Payable 12,000
Prepaid Insurance 30,000
Total Current Assets 252,000 Total Current Liabilities 46,000
Fixed Assets Long-Term Debt
Land 180,000$ Note Payable 104,000$
Equipment 136,000 Total Liabilities 150,000
Total Fixed Assets 316,000 Owners' Equity
Less: Accumulated Depreciation (48,000) Common Stock 180,000$
Net Fixed Assets 268,000 Retained Earnings 240,000
Other Assets Total Owners' Equity 420,000
Security Deposits 50,000$
Total Assets 570,000$ Total Liabilities & Owners' Equity 570,000$
Colton, Inc.
Balance Sheet
December 31, 2015
Colton, Inc.
How much common stock was issued? How much profit was reinvested? (2015)
Common Retained
Stock Earnings Total
Beginning Balance, December 31, 2014 126,000$ 115,000$ 241,000$
Common Stock Issued 54,000 54,000
Net Income 140,000 140,000
Less: Dividends Declared (15,000) (15,000)
Ending Balance, December 31, 2015 180,000$ 240,000$ 420,000$
Colton, Inc.
Statement of Owners' Equity
For the Year Ended December 31, 2015
Homework
Complete problems 2-1, 2-2, 2-3, and 2-4 on page 32 of The Map
Read pages 35-40 of The Map
![Statement of Assets & Liabilities [Result]](https://img.pdfslide.net/doc/110x75/577c7c011a28abe05498e4c2/statement-of-assets-liabilities-result.jpg)
