Assignment Week2

Financial Taxes, Cash Flows and Taxes – Assignment Week 2
Akhil Rangaraju
MG 670 Fundamentals of Corporate Finance
King Graduate School

Question 1: Given the following information about Elkridge Sporting Goods, Inc., construct a balance sheet for June 30, 2011. On that date the firm had cash and marketable securities of $25,135, accounts receivable of $43,758, inventory of $167,112, net fixed assets of $325,422, and other assets of $13,125. It had accounts payables of $67,855, notes payables of $36,454, long-term debt of $223,125, and common stock of $150,000. How much retained earnings did the firm have?

Answer:
Balance sheet shows financial situation of an organization till date.
Elkridge Sporting Goods, Inc.
Balance sheet
For August 30, 2011

ASSETS

Amount

LIABILITIES

Amount
Cash and marketable securities
25,135
Accounts payable
67,855
Accounts receivable
43,758
Notes payable
36,454
Inventory
167,112
Long-term debt
223,125
Other assets
13,125
Common stock
150,000
Net fixed assets
325,422
Retained earnings
97,118

574,552

574,552

Both sides of balance sheet will tally exactly. Since any sort of earning is a liability to a firm you have to include retained earnings in the liability section to make the balance sheet tally.
Calculation of amount of retained earnings:
The amount of retained earnings is not given in the sum. Using the below formula we can calculate retained earnings
Total Assets = Total Liabilities + Retained earnings

There are two parts in the total stockholders’ equity: one is common stock and the other is retained earnings.
In order to find out the amount of retained earnings, the following calculation is done.
$574, 552 = ($67,855 + $36,454 + $223,125) + $150,000 + Retained earnings
$574, 552 = $327,434 + 150,000 + Retained earnings
$574, 552 = $477,434 + Retained earnings
Retained Earnings = $97,118
So, the firm had retained earnings of $97,118

Question 2: The Oakland Mills Company has disclosed the following