Problem:
Prepare basic financial statements.
Description of activity
Using the following beginning balance sheet and income statement, facilitate the creation of an ending balance sheet.
Beginning Balance Sheet Income Statement
Cash $100 Acct Pay $150 Sales $ 2,500
Acct Rec $1,350 Notes Pay $800 CGS $ 1,350
Inventory $450 Gr Profit $ 1,150
Oper Exp $ 350
EBITDA $ 800
Equipment $750 Term Debt $2,000 Depr Exp $ 250
Plant $1,000 EBIT $ 550
Land $ 500 Equity $1,200 Int Exp $ 300
Total $4,150 Total $4,150 Pre-Tax Inc$ 250
Tax $ 100
Net Inc $ 150
Assume the level of accounts receivable, inventory and accounts payable remain unchanged, and prepare an ending balance sheet.
Discuss what management decisions may be warranted before closing the books with respect to additional borrowing or debt repayment.