Construct a balance sheet for Sophie’s Sofas given the following data.

Construct a balance sheet for Sophie’s Sofas given the following data.

Cash balances	=	$	13,000
Inventory of sofas	=	$	230,000
Store and property	=	$	130,000
Accounts receivable	=	$	25,000
Accounts payable	=	$	20,000
Long-term debt	=	$	200,000

South Sea Baubles has the following (incomplete) balance sheet and income statement.

BALANCE SHEET AT END OF YEAR
(Figures in $ millions)
Assets	2015			2016			Liabilities and Shareholders' Equity	2015			2016
Current assets	$	96		$	170		Current liabilities	$	62		$	78
Net fixed assets		860			960		Long-term debt		630			810

INCOME STATEMENT, 2016
(Figures in $ millions)
Revenue	$	1,980
Cost of goods sold		1,060
Depreciation		380
Interest expense		246

a&b. What is shareholders’ equity in 2015 and 2016?
 
c&d. What is net working capital in 2015 and 2016?



e. What are taxes paid in 2016? Assume the firm pays taxes equal to 35% of taxable income.



f. What is cash provided by operations during 2016?



g. Net fixed assets increased from $860 million to $960 million during 2016. What must have been South Sea’s gross investment in fixed assets during 2016?



Explanation

a&b.
Shareholders' equity = Total assets – Total liabilities
2015: Shareholders' equity = $956 – 692 = $264
2016: Shareholders' equity = $1,130 – 888 = $242

c&d.
Net working capital = Current assets – Current liabilities
2015: Net working capital = $96 – 62 = $34
2016: Net working capital = $170 – 78 = $92

e.
Taxable income = $1,980 – 1,060 – 380 – 246 = $294
Taxes paid = 0.35 × $294 = $102.90
Net income = $191.10

f.

Net income	$	191.10
Depreciation		380.00
Decrease (increase) in current assets		(74.00	)
Increase (decrease) in current liabilities		16.00
Cash provided by operations	$	513.10

g.
Gross investment = Increase in net fixed assets + Depreciation
= $100 + 380 = $480