Question

Innovative Product Incorporated needs to prepare financial statements based on the information given below for the...

Innovative Product Incorporated needs to prepare financial statements based on the information given below for the year end 31st December 2019. The information obtain are as follows:-

Interest revenue 50,000

Depreciation 5,000

Administrative expenses 6000

Sales 50,000

Interest expenses 1,000

Selling expenses 9,000

Cost of good sold 25,000

Tax 35%

Equipment 60,000

Inventory 20,000

Vehicles 40,000

Land and building 180,000

Cash and cash equivalent 200,000

Income tax payable 70,000

Account payable 64,000

Retained earnings 100,000

Account Receivable 34,000

Common stock 100,000

Long term debt 200,000

Question.

  1. Prepare the financial statements necessary based on the information given.
  2. Analyze the Innovative Product Incorporated financial strength by quantifying the financial ratios.
  3. Forecast the changes in the financial strength that might take place if the following changes takes place in the macroeconomic fundamentals.
  • Expected inflation rate to increase 3%
  • Current GDP is -4.5 %
  • Unemployment rate 3%
  • Interest rate 4%
  • Exchange rate has depreciated 5%
  • Government is giving out subsidy and also increasing tax rates to finance its expenditure.

Homework Answers

Answer #1

Financial statements are balance sheet and income statement that are as follows :-

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