Question

the size of the investment ($200,000) how does this impact the following financial statements:

- ASSETS 2014 - 2013

CURRENT ASSETS

Cash 456,500 - 222,400

Receivables 3,936,400 - 3,320,000

Inventory 89,800 - 100,200

Other assets 119,500 - 84,300

Total current assets 4,602,200 - 3,726,900

LONG TERM ASSETS

Note Receivable 380,600 - 280,700

Equipment (net of depreciation) 975,000 - 1,017,800

Total long term assets 1,355,600 - 1,298,500

TOTAL ASSETS 5,957,800 - 5,025,400

- LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable 2,783,100 - 2,805,700

Note payable (current maturities) 177,550 - 172,550

Other accrued liabilities 165,300 - 114,600

Total current liabilities 3,125,950 - 3,092,850

LONG TERM LIABILITIES

Notes payable (long term) 354,800 - 354,800

Long term accrued liabilities 289,550 - 220,250

Total long term liabilities 644,350 - 575,050

TOTAL LIABILITIES 3,770,300 - 3,667,900

- STOCKHOLDERS' EQUITY

Common stock 300,000 - 300,000

Retained Earnings 1,887,500 - 1,057,500

Total stockholders' equity 2,187,500 - 1,357,500

TOTAL LIABILITIES AND STOCKHOLDERS EQUITY 5,957,800 - 5,025,400

_________________________

Income Statement 2014 - 2013

Service Contract Revenues 9,700,000 - 6,295,400

Service Contract Costs (7,503,100) (4,957,800)

Gross Profit 2,196,900 - 1,337,600

General and Administrative Expenses (896,000) (756,000)

Operating Income 1,300,900 - 518,600

Gain on sale of equipment 59,900 - 7,700

Interest expense (69,500) (70,800)

Other expense (9,600) (63,100)

Income before taxes 1,281,700 - 455,400

Taxes (451,700) (300,900)

Net Income 830,000 - 154,500

Retained Earnings, Beginning Balance 1,057,500 - 1,053,000

1,887,500 - 1,207,500

Less: Dividends paid 0 - (150,000)

Retained Earnings, Ending Balance 1,887,500 - 1,057,500

Answer 1

If the size of capital investment is of 200000 and it is in the form of common shares, then this will have a impact on the balance sheet of the company. From this transaction on the one hand assets will increase by 200000 as new investment in the form of cash would be inflowed in the organization and on the other side value of common stock will increase by 200000 which would results in increased shareholdrs equity by 200000 and overall total of liabilities and shareholders equity.