Module 2 Critical Thinking Assignment:

Understanding Financial Statements, Cash Flows and Taxes

*Complete the problems in an Excel spreadsheet. Be sure to show your work to receive credit; no hard keys.

Problem 2-1: Preparing Financial Statements

Information below is for Warner Manufacturing, Inc. for the year ended December 31, 20×1 except where beginning of year numbers indicated. All amounts in SAR unless otherwise stated.Using the information below:1. Prepare an income statement with the proper title2. Prepare end of year balance sheet with the proper title3. Calculate net working capital4. Calculate the debt ratio*Complete the problems in an Excel spreadsheet. Be sure to show your work to receive credit; no hard keys.DATADepreciation expense66,000Cash220,000Long-Term Debt330,000Net Sales615,000Accounts payable102,000Marketing and general and administrative expenses79,000Buildings and Equipment895,000Notes payable7,5000Accounts receivable156,000Interest expense4,750Accrued expenses7,900Common Stock289,000Cost of Goods sold297,000Inventory99,300Taxes67,300Accumulated Depreciation-26,3000Prepaid expenses14,500Taxes payable55,000Retained earnings262,900
Problem 2-2 Preparing Statement of Cash Flows
Given the following information, prepare a statement of cash flows.DATAIncrease in accounts receivable30Increase in inventories30Operating Income95Interest Expense30Increase in accounts payable25Dividends15Increase in common stock20Increase in net fixed assets23Depreciation Expense12Income taxes17Beginning cash20
Assume all amounts are in 000’s SAR.

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