Island Foods, Inc Harvard Case Solution & Analysis

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

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