Prepare the income statement and balance sheet

Reference no: EM1348199

I need to create prospective financial statements (Balance Sheet, Income Statement, Statement of Retained earnings and Cash Flow Statement) using the information below.

1. The National Nursing Home Co., has current assets of $147 million: property plant and equipment of $206 million; and other assets totaling $58 million. Current liabilities are $154 million and long term liabilities total $148 million.

a. Use the data above to write National Nursing Home Co's accounting equation.

b. How much in resources does the company have to work with?

c. How much does the company owe its creditors?

d. How much of the company's assets do the National Nursing Home Co's stockholders actually own?

2. Amounts of assets and liabilities of Central Home Care, as of December 31, 2010, are given as follows. Also given are revenue and expense figures for the year ended on that date. (amounts in millions)

Property plant equipment, net $4 Total revenue $35
Investment assets $72 Receivables $253
Long-term liabilities $73 Current liabilities $290
Other expenses $14 Common stock $12
Cash $28 Interest expense $3
Retained earnings, beginning $19 Salary/benefit expense $9
Retained earnings, ending ??? Other assets $43

a. Prepare the balance sheet of Central Home Care as of December 31, 2010.

b. Prepare the income statement for Central Home Care for the year ended December 31, 2010.

c. What amount of dividends did Central Home Care declare during the year ended December 31, 2010.
Hint: Prepare a statement of Retained Earnings.

3. The Safe Haven Nursing Home Company began 2010 with $95,000 in cash. During 2010, Safe Haven Nursing Home Company earned net income of $300,000 and adjustments to reconcile to net cash provided by operations totaled $60,000, a positive amount. Investing activities used cash of $400,000 and financing activities provided cash of $70,000. The company ended 2010 with total assets of $250,000 and total liabilities of $110,000.

Prepare Safe Havens statement of cash flows for the year ended December 31, 2010. Identify the data given that does not appear on the cash flow statement. Also, identify the financial statement that reports each unused item.

4. Assume Elder Medical Services of the West Shore ended the month of July 2010 with these data:

Payments of cash: Cash balance, June 30, 2009 $0
Acquisition of equipment: $36,000 Cash balance, July 31, 2009 $8,100
Dividends $ 2,000

Retained earnings, Cash receipts:
June 30, 2009 $0 Issuance (sale) of stock to owners $35,000
July 31, 2009 ?????

Utilities expense $200 Rent expense $700
Common Stock $35,000
Adjustments to reconcile Equipment $36,000
cash provided by operations: $2,000 Office Supplies $1,200
Accounts Payable $3,200
Salary expense $4,000 Service Revenue $14,000

a. Prepare the income statement for the month ending July 31, 2010.

b. Prepare the statement of retained earnings for the month ending July 31, 2010.

c. Prepare the balance sheet as of July 31, 2010.

d. Prepare the statement of cash flows for the month of July 2010.

5. The owner of Elder Medical Services seek your advice as to whether he should continue or cases operations. Write a summary report of your opinion of net income, dividends, financial position and cash flows during his first month of business. Cite specifics from the financial statements to support your opinion. Should he stay in business or not?

6. Apply your understanding of the relationships among financial statements to answer the following questions.

a. How can a business earn large profits but have a small balance in retained earnings?

b. Give 2 reasons why a business can have a steady stream of net income over a 5 year period and still experience a cash shortage.

c. If you could pick a single source of cash for your business, what would it be? why?

d. How can a business lose money several years in a row and still have plenty of cash

Reference no: EM1348199

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