Drill exercises:

E2.1
a
Given:
Total assets = $400 million
Shareholders equity = $250 million
Find: Firms liabilities = ?
Formula: Total assets = Shareholders equity + Firms liabilities
Answer: $150 million
b
Given:
Net income = $30 million
Total expenses = $175 million
Find: Firms revenues
Formula: Revenues - Total expenses = Net income
Answer: $205 million
c
Given:
Beginning balance for the period: $230 million
Ending balance for the period: $250 million (from a)
Net payout to shareholders: $12 million
Net income: $30 million (from b)
Find:
Comprehensive income
Other comprehensive income
Formula:
Ending equity = Beginning equity + Comprehensive income Net payout to
shareholders
Comprehensive income = Net income + Other comprehensive income
Answer:
Comprehensive income = $32 million
Other comprehensive income = $2 million
d
Given:
no stock purchases or share issues
Net payout to shareholders: $12 million
Find: payment in dividends

Formula: Dividends + Share purchases = Total payout Share issues = Net payout
Answer: $12 million
E2.2
Given:
Change in cash : $130 million
Cash from operations: $400 million
Cash from financing: -$75 million
Formula:
Cash from operations + Cash from investment + Cash from financing = Change in
cash
Find: Cash from investment
Answer: -$195 million
E2.4
Income statement
Sales
Cost of goods sold
Gross margin
Selling expenses
Research and development costs
Income before taxes
Income taxes
Net income available to common

$4458
$3348
$1110
$1230
$450
($570)
($200)
($370)

Statement of shareholders equity

Balance at the beginning of the year
Net income
Other comprehensive income:
Unrealized gain on securities
available for sale
Share issues
Common dividends paid
Balance at the end of the year

$3270
($370)
$76
$680
$140
$3516

Comprehensive income = Net income (-370$) + Other comprehensive income (76$)

= -$294
Net payout = Dividends ($140) - Share issues ($680) = -$540
When company worked with a loss, which means firm didnt earn any profits,
government can pay them money. This activity is in order to support firms
operations and save them from bankruptcy.

E2.9
a
Total liabilities = Total assets ($17679) Total stockholders equity ($5648) = $12031
b
Dividends ($648) + Stock purchases ($692) = Total payout ($1340) Share issues
($603) = Net payout ($737)
Comprehensive income = Ending equity ($5648) + Net payout ($737) Beginning
equity ($5417) = $968
E2.11
a
Net payout = Beginning equity ($31931) + Comprehensive income ($6526) Ending
equity ($32304) = $6153
b
Net payout ($6153) + Share issues ($2869) = Total payout ($9022) Dividends (0) =
Share purchases ($9022)
E2.12
Given:
Beginning equity = -$37094
Ending equity = -$56990
Dividends = $283
No other transactions with shareholders
a
Comprehensive income = Net payout ($283) + Ending equity (-$56990) Beginning
equity (-$37094) = -$19613
b
Other comprehensive income = Comprehensive income (-$19613) Net income ($18722) = -$891
c
Revenue = Net income (-$18722) + Total expense and other losses including taxes
($60895) = $42173
d
Total assets
Shareholders equity
Total liabilities

At the end of 2007

$148883
-$37094
$185977

June 30, 2008

$136046
-$56990
$193036

e
Firm can have a negative shareholders equity when there are lots of accumulated
loss. Other reasons could be leveraged buyouts (or borrowing), severe depreciation in
currency positions and substantial adjustments to intangible property (patents, copyrights,
goodwill and the like)1.

1 Resource: Investopedia