The Mathematics of Money

504 Chapter 12 Financial Statements

Other Financial Statements

You might have wondered when we were discussing depreciation how Hilbert Hotels

would reconcile the listing the $50,000 expense over 10 years with the fact that they actu-

ally paid $500,000 when they bought the equipment. Income statements and balance sheets

are by no means the only financial statements in common use. Cash flow statements, for

example, detail the actual flow of dollars into and out of the business, ignoring income and

expenses that do not involve the direct actual flow of cash (such as depreciation).

While we have provided a basic introduction to financial statements and the calculations

that go into them, there is much more to the story. Students who have a professional or

personal interest in a deeper understanding of these subjects are encouraged to pursue more

in-depth coursework in accounting.

A. Basic Balance Sheets

1. A company’s assets are $515,000 and its liabilities are $375,000. What is the owners’ equity?


2. A corporation has assets of $15,763,909 and liabilities are $12,444,929. What is the shareholders’ equity?


3. A company has liabilities of $62,500 and equity of $44,900. What are the company’s total assets?


4. A company has liabilities of $873,944 and shareholder’s equity is $540,875. What is the total of the assets listed on the
   balance sheet?

EXERCISES 12.2

Liabilities

Change

2007 2006 Amount Percent

Current liabilities:

Accounts payable $404,029 $713,515 $(309,486) 
43.37%

Note due May 1, 2008 $300,000 n/a n/a n/a

Salaries payable $125,055 $87,530 $37,525 42.87%

To tal current liabilities $829,084 $801,045 $28,039 3.50%

Long-term liabilities:

Mortgage notes: $3,725,000 $3,785,000 $(60,000) 
1.59%

Other long-term debt $525,000 $895,000 $(370,000) 
41.34%

To tal long-term liabilities $4,250,000 $4,680,000 $(430,000) 
9.19%

To tal liabilities $5,079,084 $5,481,045 $(401,961) 
7.33%

Equity

Change

2007 2006 Amount Percent

Contributed capital $750,000 $750,000 0 0.00%

Retained earnings $3,349,395 $3,740,699 $(391,304) 
10.46%

To tal equity $4,099,395 $4,490,699 $(391,304) 
8.71%

To tal liabilities and equity $9,178,479 $9,971,744 $(793,265) 
7.96%