CORPORATION SIMULATION

ACTIVITY 3: Horizontal & Vertical Analysis of Financial Statements

TASK 1:

Using horizontal analysis, determine dollar and percent changes for the Balance Sheet and Income Statement

(Use the ACTIVITY3 Excel template-TASK 1 Worksheet)....See below

TASK 2:

Using vertical analysis, determine common-size comparisons for the Balance Sheet and Income Statement

(Use the ACTIVITY3 Excel template-TASK 2 Worksheet)...See below

TASK 3:

Prepare the Statement of Cash Flows for the current year using the following additional information

(Use the ACTIVITY3 Excel Template-TASK 3 Worksheet):...See below

1. Equipment with a cost of $20,000 and accumulated depreciation of $12,000 was sold for $2,000 cash. Equipment was purchased for $53,000 cash.

2. Long-term investments with a cost of $16,000 were sold for $31,000 cash. Additional investments were purchased for $28,000 cash.

3. Notes payable in the amount of $35,000 were repaid, and new notes payable in the amount of $29,000 were issued for cash.

4. Common stock was issued for $14,000 cash. 5. Cash dividends of $5,000 were paid

TASK 4:

Assuming there are no prior-period (2008) adjustments, and cash dividends of $5,000 were paid in 2009, prepare a current year Statement of Retained Earnings.

(Use the ACTIVITY3 Excel Template-TASK 4 Worksheet)...See below

BROOKE SPORTSWEAR
Comparative Income Statement
For years ended December 31, 2009 and 2008
			Dollar	Percent
	2009	2008	Change	Change
Sales Revenues	472,000	429,000
Cost of Goods Sold	232,000	199,000
Gross profit	240,000	230,000
Less operating expenses:
Wages expense	(142,000)	(129,000)
Insurance expense	(15,000)	(14,000)
Depreciation expense	(40,000)	(38,000)
Income from Operations	43,000	49,000
Other Income and Expenses:
Loss on sale of equipment	(6,000)
Gain on sale of investment	15,000
Interest Expense	(5,000)	(5,000)
Income before taxes	47,000	44,000
Less: Income tax expense	8,000	7,400
Net Income	39,000	36,600
BROOKE SPORTSWEAR
Comparative Balance Sheet
December 31, 2009 and 2008
			Dollar	Percent
ASSETS	2009	2008	Change	Change
Current Assets:
Cash and equivalents	15,000	13,000
Accounts Receivable	53,000	46,000
Prepaid Insurance	1,000	2,000
Inventory	63,000	51,000
TOTAL Current Assets	132,000	112,000
Property, Plant & Equipment:
Land	325,000	325,000
Equipment	243,000	210,000
Accumulated Depreciation	(178,000)	(150,000)
Investments	53,000	41,000
TOTAL PP&E	443,000	426,000
TOTAL Assets	575,000	538,000
LIABILITIES
CURRENT LIABILITIES
Accounts Payable	13,000	17,000
Wages Payable	3,500	2,000
Interest Payable	1,500	1,000
Income Taxes Payable	3,000	6,000
TOTAL Current Liabilities	21,000	26,000
Long-term liabilities
Notes payable	109,000	115,000
TOTAL LIABILITIES	130,000	141,000
SHAREHOLDERS' EQUITY
Common Stock	165,000	151,000
Retained Earnings	280,000	246,000
TOTAL Stockholders' Equity	445,000	397,000
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY	575,000	538,000