B INSTRUCTIONS The following worksheet is called a Balance Sheet Equation Worksheet. The worksheet lists the key events in the life of UWP over years 1 through 3: each of these events is likely to affect the financial statements of UWP. The impact of the events on the UWP Balance Sheet for years 1 and 2 has been sketched out. a. Using the completed transactions from years 1 and 2 as a guide, fill in the worksheet for year 3. b. Now, prepare an Income Statement, Balance Sheet, and Cash Flow Statement for years 2 and 3. c. Do you agree with all of the accounting assumptions in the worksheet? If not, what would you change? A B C D E F G H I J K L M N P 12345 4 YEAR 1 ASSETS = LIABILITIES & OWNERS' EQUITY Cash Filters Vehicles Prepaid Costs Debt Paid-in Capital Retained Earnings Check if zero 6189 Beginning-of-year activities 7 1 Founders' Investment, HBS Prize Money $25,000 2 Alumnus Investment $200,000 $25,000 $200,000 $0 $0 3 Blue Future Contract Charge ($40,000) $40,000 $0 10 4 Slowsand Filters ($20,000) $20,000 $0 11 5 Motorcycles and Trucks ($20,000) $20,000 $0 12 6 Prepaid Marketing, Brand Ambassador ($100,000) $100,000 $0 13 Through-the-year activities 14 7 Revenues $219,000 $219,000 $0 15 Revenue Underreporting ($32,850) ($32,850) $0 16 Cost of Revenue, Vendor Compensation ($37,230) ($37,230) $0 17 8 Technicians' Wages ($3,600) ($3,600) $0 18 9 Local Management Salaries ($120,000) ($120,000) $0 19 10 Sales Staff Salaries $0 20 11 Water Testing & Filter Maintenance ($10,200) ($10,200) $0 21 12 Marketing Expenses ($10,000) ($50,000) ($60,000) $0 22 13 Vehicle Expenses ($2,500) ($2,500) $0 23 14 Other Costs ($29,784) ($29,784) $0 24 Year-closing activities $0 25 15 Depreciation 26 Blue Future Contract ($2,667) ($2,667) $0 27 Slowsand Filters ($1,333) ($1,333) $0 28 Motorcycles and Trucks ($4,000) ($4,000) $0 29 30 YEAR 1 CLOSING TOTALS $17,836 $18,667 $16,000 $87,333 $0 $225,000 ($85,164) $0 31 33 ASSETS LIABILITIES & OWNERS' EQUITY 34 35 36 37 38 39 2 40 41 42 7 YEAR 2 Opening Balances Beginning-of-year activities 1 Debt Slowsand Filters 3 Motorcycles and Trucks Through-the-year activities Revenues $17,836 $1,000,000 ($487,500) $487,500 ($492,500) $492,500 $8,760,000 43 Revenue Underreporting ($1,314,000) 44 Cost of Revenue, Vendor Compensation ($1,489,200) 45 8 Technicians' Wages ($120,000) 46 9 Local Management Salaries 47 10 Sales Staff Salaries 48 11 Water Testing & Filter Maintenance 49 12 Marketing Expenses 50 13 Vehicle Expenses 51 14 Other Costs 52 Year-closing activities 53 15 Depreciation 54 Blue Future Contract 55 Slowsand Filters 56 Motorcycles and Trucks 57 16 Repay Debt 58 17 Interest Charge 59 60 YEAR 2 CLOSING TOTALS 61 Cash Filters Vehicles Prepaid Costs Debt Paid-in Capital Retained Earnings Check if zero $18,667 $16,000 $87,333 $0 $225,000 ($85,164) $0 $1,000,000 $0 $0 $0 $8,760,000 $0 ($1,314,000) $0 ($1,489,200) $0 ($120,000) $0 ($325,000) ($325,000) $0 ($36,000) ($408,000) ($25,000) ($65,000) ($1,191,360) ($36,000) $0 ($408,000) $0 ($50,000) ($75,000) $0 ($65,000) $0 ($1,191,360) $0 $0 ($2,667) ($2,667) $0 ($33,833) ($33,833) $0 ($102,500) ($102,500) $0 ($1,000,000) ($100,000) ($1,000,000) $0 ($100,000) $0 $2,724,276 $472,334 $406,000 $34,666 $0 $225,000 $3,412,276 $0 62 63 2371 74 8 75 9 YEAR 3 Opening Balances Beginning-of-year activities 64 65 66 67 68 69 70 71 7 1 Slowsand Filters 2 Motorcycles and Trucks Through-the-year activities Revenues Revenue Underreporting Cost of Revenue, Vendor Compensation Technicians' Wages Local Management Salaries 76 10 Sales Staff Salaries 77 11 Water Testing & Filter Maintenance 78 12 Marketing Expenses 79 13 Vehicle Expenses 80 14 Other Costs 81 Year-closing activities 82 15 Depreciation 83 84 85 Blue Future Contract Slowsand Filters Motorcycles and Trucks 86 87 YEAR 3 CLOSING TOTALS 88 89 90 ASSETS LIABILITIES & OWNERS' EQUITY Cash Filters Vehicles Prepaid Costs Debt Paid-in Capital Retained Earnings Check if zero $2,724,276 $472,334 $40,600 $34,666 $0 $225,000 $3,412,276 ($365,400) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $2,724,276 $472,334 $40,600 $34,666 $0 $225,000 $3,412,276 ($365,400)