We're really struggling trying to get our statement of cash flow to balance for our project. We haven't been able to get them to balance for any of the options, however we've been predominately been focusing on Option 1 since there wasn't much to it. Can someone please help and take a look at the information provided and perhaps offer some guidance as to what we might be doing wrong in Option 1? The excel file includes all the tabs relevant to option 1. Please note all the 2013 data was provided for us as well as the unadjusted trial balance 2014 data.

ACC\t1118\tW15\t\tPrac,ce\tSet\tAssignment COMPANY\tBACKGROUND CM\tCorporation\t(CMC)\twas founded in 1998\tby\tEric\tConner\tand\tPhil Martin.\tThe\tcompany\tdesigns,\tinstalls,\tand\tservices\tsecurity\tsystems\tfor high-tech\tcompanies. The founders, who describe themselves as "entrepreneurial geeks,"\tmet\tin\ta\tcomputer\tlab\twhen\tthey\twere\tteenagers and\tfound\tthey\thad\tcommon\tinterests\tin\tworking\ton\tsecurity\tsystems\tfor critical\tindustries. CMC have released many successful products into the market throughout the\tpast\t16\tyears\tand\tthey\tcontinue\tto\tanticipate growth\tpotential\tfor\tits products,\twhich will require additional funds to finance this growth. As a result, it is\tplanning\tto\tgo\tto\tthe\tmarket\twith\ta\tnew\tcommon\tstock\tissue\tat the\tend\tof\t2015.\tConner\tand\tMartin\thave\tbeen\tinformed\tof\tthe\tdifferent accounting\tframeworks\tavailable to private companies in Canada and have decided to comply with\tInternational Financial Reporting Standards (IFRS) due to their plans of going\tpublic\tin\tthe\tnear\tfuture. CMC\thas\ta\tDecember 31\tfiscal\tyear-end\tdate. CURRENT\tSITUATION It\tis\tnow\tDecember\t1,\t2014\tand\tthe\tcompanys\tDecember\t31,\t2014\tyearend\tis\tfast\tapproaching.\tConnie\tand\tMartin\thave\thired\tyou\tas\tan\taccounting intern\tto\thelp\tthem\tanalyze\tcertain\taccounting\tissues\tso\tthey\tcan\tgain\ta better\tunderstanding\tof\tthe\texisUng\taccounting\tstandards\tand\tmake\tstrategic financial\tdecisions\tbefore\tthe\t2014\tfiscal\tyear\tends. CMC\thas\tequipment\twith\tan\toriginal\tcost\tof\t$440,000\tand\tis\tdepreciated over\tan\teight-year\tlife.\tCMCs\taccounting\tpolicy\tfor\tthis\tgroup\tof\tassets\tis amortized\tcost\tsubject\tto\tannual\tdepreciation\tusing\tthe\tdouble-decliningbalance\tmethod.\tThis\tparticular equipment has an esUmated a residual value of $50,000. AXer\trecording\tdepreciation\texpense\tfor\t2014,\tthe equipment\tis\tnow\tfully\tdepreciated\tto\tits\tsalvage\tvalue\tof\t$50,000. Going\tforward,\tConner\tand\tMartin\tare\tquestioning\tthe\taccounting\tfor depreciation. They argue that they don't think it is necessary to record depreciation\texpense\ton\tthe\tincome\tstatement\tbecause\tit\tdoes\tnot\tinvolve\ta cash\toutlay. In addition, they do not see the necessity for reducing the equipment\tvalue\ton\tthe\tbalance\tsheet.\tThey\twonder\twhether\tCMC\tshould just\tstop\tdepreciating\tits\tequipment\tfrom\tthis\tpoint\tforward. COMPLETE\tREQUIRED\t#1 CMC is considering replacing this equipment. Conner and Martin believe that\tthe best\ttime\tfor this\tequipment replacement\tis\tat\tthe end of 2014 (assume\tDecember 31, 2014). However, they are concerned about the effects this\treplacement might have on their financial statements, specifically on key\tperformance\tratios\tsuch\tas\tQuick\tRatio\t(Acid-Test)\tand Debt-to-Asset\tRatio. Conner\tand\tMartin\ttell\tyou\tthat\tthey\thave\tthought\tof\tfive\toptions\tregarding the\treplacement\tof\tthe\told\tequipment.\tThey\tcould\t(1)\tconstruct\tthe\tnew equipment\tthemselves\tand\tthen\tsell\tthe\told\tequipment,\t(2)\texchange\tthe old\tequipment\tfor\tnew\tequipment\tthat\tis\tmore\tefficient,\t(3)\tpurchase\tnew equipment\tand\tsell\tthe\told\tequipment,\t(4)\toverhaul\tthe\told\tequipment,\tor (5)\tlease\tnew\tequipment\tand\tsell\tthe\told\tequipment. Conner and\tMartin appear increasingly confident in your analytical skills, and\tthey have asked you to determine the effects of the above alternatives on the\t2014\tprojected\tfinancial\tstatements\tand\tulUmately recommend\ta\tcourse\tof\taction.\tThey\thave\tgathered\tthe\tfollowing\tinformation to\thelp\twith\tthis\tanalysis. Option\t1:\tConstruct\tthe\tnew\tequipment\tin-house\tand\tsell\tthe\told\tequipment for\tcash\tat\ta\tfair\tvalue\tof\t$60,000.\tCMC\twould\tliquidate\tshort-term investments\t(FV-\tNI)\tto\tfund\tconstruction. The\tshort-term\tinvestments\thave\ta current\tfair\tvalue\tof\t$1\tmillion.\tAnUcipated\tactual\texpenditures\tfor constructing\tthe\tequipment\tare\t$650,000. (Note:\tConstruction\tis\tassumed\tto be\tcompleted\tat\tyear-end.) Option\t2:\tExchange\tthe\tequipment\tfor\ta\tsimilar\tpiece\tof\tequipment\twith\ta fair\tvalue\tof\t$685,000. Conner and\tMartin\thave\tchecked\tthe\tsecondary market\tand\thave\tfound\tthat\tthe\tfair\tvalue\tof\tthe\told\tequipment\tis\t$60,000. They\testimate\tthat\tCMC\tcan\tborrow\t$350,000\ton\ta\tone-year,\t10%\tnote;\tthe balance\twill\tbe\tfunded\twith\tan\taccounts\tpayable\tarrangement\twith\tthe supplier. Option 3: Purchase the new equipment by giving a non-interest-bearing note\twith\tfive\tpayments\tof\t$164,000\tat\tthe\tbeginning\tof\teach\tyear\tto\tthe supplier.\tThe\tprevailing\tinterest\trate\tfor\tobligations\tof\tthis\tnature\tis\t10%. The\told\tequipment\twill\talso\tbe\tsold\tfor\t$60,000\tcash. Option\t4:\tOverhaul\tthe\texisting\tequipment.\tThe\tfollowing\timmediate expenditures\tare\tanUcipated\tunder\tthis\tapproach:\t(1)\tThe\tnormal\tannual\tcost for\tlubrication\tand\treplacement\tof\tminor\tparts\tto\tmaintain\tthe\tintegrity\tof the\texterior\tbody\twould\tbe\t$27,000.\t(2)\tThe\tcost\tof\tre-wiring\tinterior components\tin\tan\toverhaul\twould\tbe\t$125,000.\t(3)\tReplacing\told\tworn components\twould\tcost\t$82,000\twith\tassociated\tlabour\tcosts\tof\t$210,000 for\tinstallation.\tThe\toverhaul\tis\testimated to extend the useful life of the equipment another four years.\tThe\tcomponents being replaced had an original cost of $60,000. (The present\tequipment's\toriginal\tuseful\tlife\twas eight\tyears\tat\tthe\tend\tof\t2014,\tstarting\tJanuary\t1,\t2007.)\tThe\tcosts\twill\tbe financed\tthrough\ta\tone-year\tloan\tfor\t$350,000\tat\t10%,\tand\tthe\tbalance\twill be\tcharged\ton\taccount. Option\t5:\tTyler\tLeasing\tCompany\twould\tacquire\tthe\tequipment\tand\tlease\tit to\tCMC.\tThe\tlease\tpayments\twould\tbe\t$145,661\tfor\tfive\tyears,\tpaid\tat\tthe beginning\tof\teach\tlease\tperiod.\tCMC\twould\tguarantee\tthe\tresidual\tvalue\tof $125,000\tat\tthe\tend\tof\tthe\tlease\tperiod.\tThe\tfair\tmarket\tvalue\tof\tsimilar equipment\tis\t$685,000.\tThe\timplicit\tinterest\trate\tin\tthis\toffer\tis\t10%,\twhich\tis also\tCMCs\tborrowing\trate.\tThe\told\tequipment\tbe\tretained\tunder\tthis option\tand\tused\tinternally\tfor\tparts. COMPLETE\tREQUIRED\t#2\tAND\tREQUIRED\t#3 CMC\treports\tgoodwill\ton\tits\tbalance\tsheet.\tConner\tand\tMartin\tindicate\tthat the\tgoodwill\twas\tfrom\tthe\tacquisition\tof\tsmall\tgarage-type\tsoXware development\tcompanies\tpurchased\ta\tfew\tyears\tago.\tCMC\tpurchased\tthe soXware\tcompanies\tso\tthat\tit\tcould\tincorporate\ttheir\tsoXware\tinto\tthe\tCMC product\tline\tas\twell\tas\tto\tgain\tthe\texpertise\tof\ttheir\temployees. Conner\tand\tMartin\targue\tthat\tno\tamortizaUon\tshould\tbe\trecorded\tfor goodwill\tbecause\tthey\thave\theard\tthere\tis\tno\treliable\tway\tto\testablish\ta useful\tlife\tfor\tthe\tgoodwill. However, they also know that a\tnumber of lawsuits have been filed\tagainst\tcompanies\tthat\thave\taccounted\tfor intangible\tassets\tincorrectly.\tSo\tthey\twant\tto\tknow\tif\tCMC\tis\tdoing\tthe\tright accounting\tin\tregard\tto\tits\tgoodwill. In\taddition,\tthey\thave\theard\tthat\tcompany\tnames\toXen\thave\tvalue similar\tto\ta\tbrand.\tThey\tbelieve\tthat\tthe\tCMC\tname\tis\tbecoming\twell-known in\tthe\tindustry\tand\tbelieve\tthat\trecognizing\tthis\tbrand\tname\tin\tthe\tfinancial statements\tmakes\tsense\tfor\ta\tfair\tpresentation.\tThey\tbelieve\tthat\tthe\tname\tis worth\tat\tleast\t$125,000.\tThey\twonder,\tthough,\twhat\teffect\tthe\trecording\tof this\tintangible\twill\thave\ton\tnet\tincome. Every\tyear\tCMC\tinvests\tsignificantly\tin\tapplied\tresearch\tand\tdevelopment, which\tin\tmany\tcases\tlead\tto\tsuccessful\ttechnological\tadvancements\tin\tthe security equipment they offer customers.\tBoth shareholders aspire to provide\ttheir clientele with the most effective security devices available to the market.\tThey\ttruly\tbelieve\tthat\tthe\texpected\ttotal\tresearch\tand development\tinvestment\tin\t2014\tof\t$200,000\twill\thelp\tthem\tachieve\tthis\tgoal. COMPLETE\tREQUIRED\t#4 CMC purchased some shares of one of its suppliers, Infrared Co., as an investment.\tCMC\tpaid\t$140,186\tfor\tthe\tshares.\tAlthough\tmanagement plans\tto\thold\tthis investment for the\tlong-term,\tthe\tcompany may need\tto sell\tit in\tthe\tfuture for liquidity purposes. Conner and Martin also think that making\tinvestments\tin\tsome\tof\ttheir\tother\tsuppliers\tcan\tbe\ta\tgood\tway to\tensure\tquality\tand\tconsistency\tin\tthe\tcomponents\tthey\tbuy\tfrom\tthese suppliers.\tBecause\tmany\tof its suppliers are public companies, it should be fairly easy for CMC to buy\tshares\ton\tthe\topen\tmarket. Conner\tand\tMartin\tmention\tthat\tthey\tmight\tgo\tso\tfar\tas\tto\tbuy\t1015% of\tthe\tcommon\tstock\tof\tone\tof\ttheir\tmain\tsuppliers\tand\tup\tto\t30%\tof\tthe common\tstock\tof\tanother\tsupplier\tof\trouters,\twhich\tare\ta\tcritical\tpiece\tin\tthe CMC\tsystem.\tThey\twant\tyou\tto\thelp\tthem\tunderstand\twhether\tit\tmakes\ta difference\tif\tthey\tbuy\tjust\t1015%\tor\tif\tthey\tbuy\t30%\tof\tthese\tsuppliers' shares.\tBoth\tthese\tsuppliers\thave\tbeen\taround\tfor a\twhile,\tand\twith\tvery few\texceptions,\tthe\tparts ordered\tfrom\tthem\thave\tbeen\tof\thigh\tquality\tand delivered\ton\ttime;\tConner\tand\tMartin\ttell\tyou\tthat\tif\tthey\tdo\tbuy\tthese stocks,\tthey\tanticipate\tholding\tthem\tfor\ta\tlong\ttime. COMPLETE\tREQUIRED\t#5 INSTRUCTIONS: THIS\tPRACTICE\tSET\tIS\tDUE\tBY\t11:55\tPM\tEND\tOF\tWEEK\t3 Students\tare\trequired\tto\tsubmit\ta\tprinted\tAND\telectronic\tversion\tof\tthe\tgroup report\twhich\twill\tinclude\tthe\tmain\treport\tand\trelated\texhibits\t(all spreadsheets\tfrom\tRequired\t#1\t(b)\tand\tRequired\t#2). There\tis\tno\tminimum\tor\tmaximum\tlength\trequired\tfor\tthis\tassignment. Main\treport\tmust\tbe\t1.5\tspacing,\t12\tpoint\tfont\tsize. All\tlate-submitted\treports\tor\tincomplete\tcomponents\twill\treceive\ta\tgrade reduction\tof\t10%\tper\tday. Complete the following required in order they appear within the main case\tstudy.\tPlease\tbe\tsure\tto\tcarefully\tread\tthe\trequired,\tincorporate\tcase facts\tand\tuse\tyour\ttextbook\tas\ta\tpoint\tof\treference\tto\tcomplete\tthis\tprac,ce set. Required\t#1\t(10\tmarks) (a) Determine the following concerning depreciation: (1) What\tis the general\tconcept\tunderlying\tdepreciation?\t(2)\tHow\tdoes\tdepreciating\tan asset\tportray\ta more\trealistic\tpicture\tof both the performance\tof the company\tand its\tfinancial position? (3) What is the effect on CMC's financial statements if\tConner\tand\tMartin\tdecide\tnot\tto\tdepreciate\tthe equipment? (b) Use\tan\tExcel\tspreadsheet\tto\tprepare\ta\tdepreciation\tschedule\tfor\tthe\told equipment\tover\tits\teight-year\tlife,\tusing\tthe\tdouble-declining-balance method.\tAlso\twithin\tthis\tspreadsheet,\trecord\tthe\tjournal\tentry\tfor depreciation\tthat\twould\tbe\tmade\tin\tthe\tthird\tyear\tof\tthe\tequipment's useful\tlife.\t(Save\tthis\tunder\tthe\tfile\tname\tRequired\t1\t\tDeprecia,on Schedule) (c) Please\texplain\tthe\tmerits of\tan\taccelerated\tdepreciation\tmethod,\tsuch\tas double-declining-balance.\tIn\tyour\tanswer\taddress\tthe\tfollowing\tissues: Does\tthe type of company or industry have anything to do with the choice of\tdepreciation method selected? What effect does matching have on the\tdecision\tto\tuse\tdouble-declining-balance\tdepreciation\tversus straight-line\tdepreciation? Access the Excel files provided to your group and complete the following\tsteps\tfor\tEACH\toption\tto\treplace\tor\tupgrade\tthe\tequipment: In\tSpreadsheets\t(provided\tby\tinstructor):\t(30\tmarks) 1) Record\tall\tnecessary\tjournal\tentries\tin\tthe\tGeneral\tJournal\ttab. Label\teach\tentry\twith\ta\treference\tnumber\tsuch\tas\tJE#1,\tJE#2. 2) Transfer\tthe\tadjustments\tmade\tin\t(1)\tabove,\tand\treference numbers,\tto\tthe\tproposed\tadjustment\tcolumn in\tthe\tTrial Balance tab to\testablish\tan\tadjusted\ttrial\tbalance. 3) Complete the 2014 projected financial statements (all other tabs) per\tthe adjusted trial balance in (2) above. Careful review should be\tmade\tprior\tto\tsubmikng\tthe\tpractice\tset\tto\tensure specific\tstatements\tbalances properly tie-in with other statements. For example, ensure\tcash\tbalance\ton\tthe\tstatement\tof\tfinancial position\tagrees\tto\tthe\tending\tcash\tbalance\ton\tthe\tstatement\tof\tcash flows. In\tReport\t(produced\tby\tstudents):\t(15\tmarks) 4) Perform pros/cons analysis of each option, including qualitative and\tquantitative factors such as the impact on financial statements areas,\tkey\tratios,\tinvestor\tdecisions,\tetc. Please reference\tyour\tspreadsheets\tas exhibits to your main report when discussing data pertaining to\tthese\tspreadsheets. For further\tinformation\ton\tkey\tratios\t(quick\tratio\tand\tdebt-to-assets raUo),\tplease\tvisit:\twww.investopedia.com 5) Recommend an option for CMC to pursue that is supported by the\tanalysis\tperformed\tin\t(4)\tabove. Be Advised: You are required to work\twith and submit five separate spreadsheet\tfiles\tfor\tthe\tfive\toptions.\tYou\tmay\tadjust\tthe\tstructure\tof\tthe trial\tbalance\tand\tindividual\tstatements\tby\tadding\taccounts\tand\tline\titems as\tyou\tsee\tfit.\tMake\tsure\tthat\tall\tnew\titems\tcreated\tare\tproperly\tflowing to\tall\tinter-\trelated schedules of the financial statements. Please ensure that all\tspreadsheet\tformulas\tused\t(if\tany)\tare\tproperly\tformaned as\tmarks\tare\tbased\ton\tthe\tnumbers\tprovided\tand\tnot\tformulas. At the next management team meeting, Conner and Martin express some\tconcern\tthat\tany\tnew\tequipment\tacquired\tto\treplace\tthe\told equipment\tmay\tbecome\tobsolete\twithin\tthe\tnext\ttwo\tto\tfive\tyears.\tA number\tof\tpopular-press\tarticles\thave\trecently\tdiscussed\tthe\tincreasing number\tof\tasset\timpairments\toccurring\tin\ttheir\tindustry.\tConner\tand Martin\ttherefore\twant\tto\tknow\thow\tthe accounting rules for impairments would apply to any new equipment.\tRefer\tto\tyour\ttext\tto determine\tthe\tguidance\tfor\ton\timpairments\tincluding\tthe\ttiming\tand calculation\tof\tthe\tamount\tunder\tboth\taccounting\tmodels\t(ASPE\tand IFRS)\tand\trecommend\twhich\tshould\tbe\tused\tat\tCMC. Recall\tthat\tConner and\tMartin\tthink\tthat\texpenses\tthat\tdo\tnot\tinvolve\tcash\touolow\tshould not\tbe\trecorded,\tso\tbe\tsure\tyou\tdescribe\tthe\treasons\tfor\trecording impairments. Required\t#4\t(5\tmarks) Provide\tsome\tguidance\tto\tCMC\tmanagement\tabout\tthe\tproper\ttreatment\tof goodwill and company names or brands. Also provide some clarification relating\tto\tthe\ttreatment\tof\tthe\tcompanys\t$200,000\tinvestment\tin\tR&D activities\twhich\thave\thistorically\tbeen\texpensed.\tRemember\tto\twrite\tfor\tnonaccountants\tso\tthey\tknow\tthat\tyou\tknow\twhat\tyou\tare\ttalking\tabout. Required\t#5\t(4\tmarks) Use\tthe\tinvestment\tin\tInfrared\tCo.\tto\tillustrate\tthe\taccounting\tand\tfinancial reporting\timplications\tof\tan\tequity\tinvestment\tin\ta\tsupplier.\tWhile\tthe growth\tprospects\tfor\tInfrared\tare\tquite\tgood,\tin\tthe\tcurrent\tyear\tit\treported\ta net\tloss\tof\t$120,000\tand\tpaid\tcash\tdividends\tof\t$24,000.\tThe\tfair\tvalue\tof the\tInfrared shares is $150,000 at year-end.\tPrepare journal entries for the Infrared\tinvestment,\tassuming: (a) CMC's\tinvestment\trepresents\t10%\tof\tInfrared\tshares. (b) CMC's\tinvestment\trepresents\t30%\tof\tInfrared\tshares. Indicate\tthe\tdifferenUal\teffect\ton\tincome\tbetween\tthe\taccounting\tfor\tthe conditions\tunder\tassumptions\t(a)\tand\t(b). General Journal Date Account Title Dec 31/14 Cash loss on short term investments (FV-NI) JE # Debit Credit 1,000,000.00 50,000.00 Short term investments 1,050,000.00 (Sale of short term investments to fund new equipment construction) Dec 31/14 Cash Accumulated depreciation equipment 60,000.00 390,000.00 Equipment 440,000.00 Gain on disposal of PPE 10,000.00 (Sale of old equipment) Dec 31/14 New equipment Cash (Constructed new equipment) 650,000.00 650,000.00 General Ledger Account Names Statement of Financial Position Accoun Cash and cash equivalents Short-term investments Accounts receivable Balance 12/31/13 Debit Prepaid expenses Unadjusted Trial Balance 2014 Debit 40,277 1,040,000 Proposed Adjustments Debit 1,050,000 782,080 Credit 210,277 JE# Credit 815,275 Allowance for doubtful accounts Inventory Credit 102,470 410,000 Adjusted Trial Bal 12/31/14 Debit Credit 620,277 620,277.00 1,000,000 + 60,000 - 640,000 = 410,000 1,050,000 Sold for 1,000,000 (50,000 loss) 815,275 119,000 119,000 1,340,902 1,745,585 1,745,585 17,174 17,174 17,174 1,195,192 1,195,192 1,405,192.00 Property, plant and equipment 210,000 1,405,192 New 650,000 - old 440,000 ### Accumumlated depreciation - PPE 528,585 666,085 390,000 276,085 440,000 less 50,000 residual value Long-term investments 140,186 140,186 140,186 Goodwill 397,740 397,740 397,740 Intangible assets 253,900 248,900 248,900 Accounts payable 1,228,441 1,418,915 1,418,915 Dividends payable 110,000 115,000 115,000 Accrued liabilities 381,661 574,335 574,335 70,800 105,000 105,000 Long term bonds payable 888,500 708,500 708,500 Common shares 920,000 920,000 920,000 Preferred shares 200,000 200,000 200,000 Retained earnings, beginning balance 678,994 776,994 776,994 Unearned revenue Dividends 110,000 Net Income 115,000 208,000 5,317,451 5,317,451 115,000 331,500 5,935,329 5,935,329 (40,000) 1,010,000 1,010,000 291,500 5,505,329 5,505,329 Income Statement Accounts Product sales revenue 8,400,000 Product sales returns & discounts Products cost of goods sold Service cost of goods sold Bad debt expense Depreciation and amortization Gain/loss on disposal of PPE Income tax expense 9,100,000 675,000 Service revenue 9,100,000 985,000 985,000 462,000 500,000 500,000 4,956,000 5,400,000 5,400,000 310,000 450,000 450,000 46,000 20,000 20,000 120,000 137,500 137,500 4,000 10,000 10,000 Gain on sale of equipment 199,000 178,500 178,500 Insurance 77,000 80,000 80,000 Interest expense 65,000 48,000 48,000 Investment income (loss) 17,000 10,500 50,000 39,500 Other operating expenses 828,000 900,000 900,000 Research and development 117,000 200,000 200,000 1,700,000 1,850,000 loss on short term investments 1,850,000 Wages and benefits Net (Income) Loss (208,000) 8,884,000 8,884,000 (331,500) 9,764,000 9,764,000 40,000 50,000 50,000 (291,500) 9,803,500 9,803,500 CM Corporation Remember the 2014 column is Statement of Financial Position management's projection As at December 31, 2014 December 31, 2013 Assets Current assets Cash and cash equivalents $620,277 0 Prepaid expenses 1,340,902 17,174 Inventory 679,610 1,745,585 Accounts receivable, net of AFDA 1,040,000 696,275 Short-term investments $40,277 17,174 Total current assets 3,079,311 Property, plant and equipment 1,405,192 Accumulated depreciation (B) 404,683.00 3,117,963 (A) 1,195,192 (276,085) Net fixed assets (16,665.00) ### (528,585) 1,129,107 ### 666,607 Other Assets Long-term investments 140,186 140,186 Goodwill 397,740 397,740 Other intangible assets 248,900 253,900 786,826 Total assets 5,000.00 791,826 $4,995,244 $4,576,396 (E) Liabilities and Stockholders' Equity Current liabilities Accounts payable $1,418,915 $1,228,441 Dividends payable 115,000 110,000 Unearned revenue 105,000 70,800 (34,200.00) Accrued liabilities 574,335 381,661 ### Total current liabilities 2,213,250 Long-term bonds payable 1,790,902 (C) 708,500 Total liabilities ### 888,500 2,921,750 2,679,402 (D) Stockholders' equity Contributed capital: Common shares, $2 par value (4,000,000 shares authorized,460,000 shares issued and outstanding) 920,000 920,000 200,000 200,000 Preferred shares, $1 non-cumulative (1,000,000 shares authorized, 60,000 issued and outstanding) Total contributed capital 1,120,000 953,494 Total stockholders' equity Total liabilities and stockholders' equity 776,994 2,073,494 Retained earnings 1,120,000 1,896,994 $4,995,244 $4,576,396 0.60 0.99 0.58 0.59 KEY RATIO ANALYSIS Quick Ratio (A) - (B) (C) Debt-to-Asset Ratio (D) (E ) 176.50 CM Corporation Remember the 2014 column is management's projection Income Statement For the Years Ended December 31, 2014 December 31, 2013 Revenue Net product sales revenue Service revenue $8,600,000 $7,938,000 985,000 675,000 Total revenue $9,585,000 $8,613,000 Cost of goods sold Products 5,400,000 4,956,000 Services 450,000 310,000 Total cost of goods sold 5,850,000 3,735,000 Gross profit 5,266,000 3,347,000 Operating expenses Bad debt expense 20,000 46,000 137,500 120,000 80,000 77,000 Other operating expenses 900,000 828,000 Research and development 200,000 117,000 1,850,000 1,700,000 Depreciation and amortization Insurance Wages - Employees Total operating expenses 3,187,500 547,500 Income (loss) from operations 2,888,000 459,000 Other income and (expense) Interest expense Gain (loss) on disposal of assets Investment income Total other income (expense) (48,000) (65,000) 10,000 (4,000) (39,500) 17,000 (77,500) (52,000) Income (loss) before income taxes 470,000 407,000 Income tax expense 178,500 199,000 $291,500 $208,000 Net income (loss) CM Corporation Remember the 2014 column is management's projection Statement of Retained Earnings For the Years Ended December 31, 2014 Retained Earnings, Beginning balance December 31, 2013 $776,994 $678,994 291,500 208,000 Dividends (115,000) (110,000) Retained Earnings, Ending balance $953,494 $776,994 Net income (loss) CM Corporation Statement of Cash Flows Remember the 2014 column is management's projection (Indirect Method) For the Years Ended December 31, 2014 December 31, 2013 Cash flows from operating activities Net income (loss) $291,500 $208,000 137,500 120,000 Adjustments to reconcile net income to Net cash provided from operating activities Depreciation and amortization Net (gain) loss on disposal of short-term investment 39,500 Net (gain) loss on disposal of PPE (10,000) (Increase) decrease in accounts receivable, net of AFDA (16,665) (18,131) (404,683) (493,442) (Increase) decrease in inventory (Increase) decrease in prepaid expenses 4,000 0 1,667 1,040,000 177,157 190,474 528,860 Increase (decrease) in dividends payable 5,000 20,000 Increase (decrease) in unearned revenue 34,200 (Increase) decrease in short-term investments Increase (decrease) in accounts payable Increase (decrease) in accrued liabilities (2,700) 192,674 67,544 Total adjustments 1,208,000 404,955 Net cash provided by operating activities 1,499,500 612,955 Cash flows from investing activities Proceeds from sale (purchase) of fixed assets (590,000) (Purchase) of intangibles 0 (Purchase) of long-term investments Net cash used by investing activities (460,087) (455,200) (40,036) (590,000) (955,323) (180,000) 309,975 Cash flows from financing activities Proceeds from (payment on) long-term liabilities Dividends paid Net cash used by financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period (48,000) (180,000) 261,975 729,500 (80,393) 40,277 120,670 $769,777 $40,277 s/b $620,277