Island Foods, Inc Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Question 1

The opening balance sheet for the month ended April 1, 1994 has been prepared in the excel spreadsheet. As the data for the opening inventory and inventory in process is not provided, therefore, the current assets has been assumed as the balancing figure in the excel spreadsheet. The opening balance sheet is as follows:

OPENING BALANCE SHEET APRIL 1, 1994
Assets
Current Assets (Balancing fig.)	32100

Non-Current Assets
Refrigerator, range & grill	26000
Computer System	12000
Food preparation equipments	1200
Furniture & Fixtures	2700
Capitalized improvements and renovations	68000
TOTAL ASSETS	142000

Liabilities & Equity
Current Liabilities
Outstanding Principle Repayment	12000
Rent	0

Long Term Liabilities
Loan	120000
TOTAL LIABILITIES	132000

Equity
Share Capital	10000

TOTAL LIABILITIES & EQUITY	142000

Question 2

The income statement, balance sheet and the cash flow statement for the nine months ending December 31, 1994 has been prepared in the excel spreadsheet. The depreciation has been apportioned for the nine months. As the rent is paid on a monthly basis therefore, there would be no rent payable shown on the balance sheet as the landlord would have 0 rent receivable. The financial statements for the nine months are shown below:

INCOME STATEMENT DECEMBER 31, 1994
Cash Revenue	209000
Less: Cash Expenses	51000
GROSS PROFITS	158000
Less: Operating Expenses
Supply Costs	4800
Utility Charges	7000
Employee Wages	42900
Rent Expense (6 months)	8400
License Fee	900
Insurance Expenses	18000
Total Expenses	82000
OPERATING PROFITS	76000
Less: Interest Expense	9000
OPERATING PROFITS	67000
Less: Income Tax @ 15%	10050
NET PROFITS	65950
Less: Dividends	25000
Retained Earnings	40950

BALANCE SHEET DECEMBER 31, 1994
Assets
Current Assets
Accounts Receivables	3000
Other assets (Balancing fig. including cash of 62875)	95775
Non-Current Assets
Refrigerator, range & grill	22100
Computer System	10500
Food preparation equipments	900
Furniture & Fixtures	2025
Capitalized improvements and renovations	57800
TOTAL ASSETS	192100

Liabilities & Equity
Current Liabilities
Outstanding Principle Repayment	12000
Rent Payable	0
Tax Payable	10050
Accounts Payables	9000
Utility charges payable	1000
Wages payable	1100
Long Term Liabilities
Loan	108000
TOTAL LIABILITIES	141150

Equity
Share Capital	10000
Retained Earnings	40950

TOTAL LIABILITIES & EQUITY	192100

CASH FLOW STATEMENT DECEMBER 31, 1994
Net Income	65950
Add back: Depreciation	16575
Increase in Ac. Receivables	-3000
Increase in Ac. Payables	9000
Increase in Tax payable	10050
Dividend Paid	-25000
Interest Paid	-9000
Cash Flow from Operating Activities	64575

Investing Activities
Capital Expenditures	57800
Purchase of computer system	12000
Purchase of furniture and fixtures	2700
Purchase of Food equipments	1200
Purchase of kitchen equipments	26000
Cash Flow from Investing Activities	-99700

Long Term Borrowings	120000
Long term financing repayments	-12000
Purchase of common Stock	-10000
Cash Flow from Financing Activities	98000

Net cash and cash equivalents	62875
Opening Cash and Cash Equivalents	-
Closing Cash and Cash Equivalents	62875

Question 3

The financial statements for the 12 year ending December 31, 1995 are shown below:

Island Foods, Inc Case Solution

INCOME STATEMENT DECEMBER 31, 1995
Cash Revenue	325000
Less: Cash Expenses	93000
GROSS PROFITS	232000
Less: Operating Expenses
Supply Costs	6200
Utility Charges	11000
Employee Wages	74600
Rent Expense (12 months)	16800
License Fee	0
Insurance Expenses	0
Total Expenses	108600
OPERATING PROFITS	123400
Less: Interest Expense	8100
OPERATING PROFITS	115300
Less: Income Tax @ 15%	17295
NET PROFITS	106105
Less: Dividends	40000
Retained Earnings	66105

BALANCE SHEET DECEMBER 31, 1995
Assets
Current Assets
Accounts Receivables	5000
Other assets (Balancing fig. including cash of 143225)	139575
Non-Current Assets
Referigerator, range & grill	16900
Computer System	8500
Food preparation equipments	500
Furnitures& Fixtures	1125
Capitalized improvements and renovations	44200
TOTAL ASSETS	215800

Liabilities & Equity
Current Liabilities
Outstanding Principle Repayment	12000
Rent Payable	0
Tax Payable	17295
Accounts Payables	12000
Utility charges payable	1000
Wages payable	1400
Long Term Liabilities
Loan	96000
TOTAL LIABILITIES	139695

Equity
Share Capital	10000
Retained Earnings	66105

TOTAL LIABILITIES & EQUITY	215800

CASH FLOW STATEMENT DECEMBER 31, 1995
Net Income	106105
Add back: Depreciation	22100
Increase in Ac. Receivables	2000
Increase in Ac. Payables	3000
Increase in Tax payable	7245
Dividend Paid	-40000
Interest Paid	-8100
Cash Flow from Operating Activities	92350

Investing Activities	0
Cash Flow from Investing Activities	0

Long Term Borrowings	0
Long term financing repayments	-12000
Purchase of common Stock	0
Cash Flow from Financing Activities	-12000

Net cash and cash equivalents	80350
Opening Cash and Cash Equivalents	62875
Closing Cash and Cash Equivalents	143225