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Written Assignment Unit 1

Financial Statements of Polly’s Pet Products Company

Student Name

Department of Business Administration, University of the People

BUS 5110-01 Managerial Accounting

Dr. Kathryn Denning

February 02, 2023

Financial Statements of Polly’s Pet Products Company

Financial statements are reports that summarize the performance of a business. They

report the financial condition of the business in numerical form. Financial statements are

often verified by government agencies, accountants, or businesses in order to ensure accuracy

and for tax, funding, or investment purposes. For-profit primary financial reports include the

balance sheet, income statement, and cash flow statement (Murphy, 2022a). This assignment

discusses the financial statements of Polly’s Pet Products.

Balance Sheet

A company's balance sheet reveals the firm's assets, liabilities, and owners' equity (net

worth). Such information is important for the investors to understand the company financial

performance and status (The Investopedia Team, 2022). In this exercise the following

accounts were required under the Balance Sheet:

• Cash; the cash value here has a relationship with the “Cash balance, end of year” from

the “Stmt of Cash Flows”. So, Cash=200 ,000 .

• Total Current Assets; This includes cash and cash equivalents, accounts receivable,

and inventory. In this case

Total Current Assets=Cash+ Accounts receivable+Other assets=275,000.

• TOTAL ASSETS; is the summary of all types of assets

¿ Total current assets + LONGTERM ASSETS +¿ Assets=350 , 000.

• Accrued Expenses; this is one of the current liabilities and equal the total liabilities

minus all current liabilities. Accrued Expenses =Total current liabilities−¿.

• Notes Payable (Long Term) ¿ TOTAL LIABILITIES−Total current liabilities=3 8 , 000 .

• Retained Earnings; this value has a relationship with “Retained Earnings, Ending

Balance” from the “Income Statement” ¿ 168,500.

Financial Statements of Polly’s Pet Products Company

• Total stockholders' equity

¿ Common stock + Additional paid−¿ capital + Retained Earnings=188,500 .

• TOTAL LIABILITIES AND STOCKHOLDERS EQUITY

¿ T OTAL LIABILITIES+ Total stockholders' equity=350 , 0 00.

Income Statement

The income statement is part of the company's financial reports that are dedicated to

the evaluation of performance. The income statement is comprised of four primary

components: revenue, expenses, income and loss. (Chen, 2022). The required accounts under

the Income Statement are:

• Operating Costs ¿ Gross Profit −Revenues =445,000.

• Operating Income ¿ Gross Profit −General∧ Administrative Expenses=130,000.

• Income Before Provision for Income Taxes

¿ Operating Income−Other Expense=70,000

• Net Income

¿ Income Before Provision for Income Taxes−Provision for Income Taxes=65,000.

• Retained Earnings, Ending Balance

¿ Retained Earnings , Beginning Balance+ Net Income=168,500.

Statement of Cash Flows

The cash flow statement, is a financial statement that summarizes the movement of

cash and cash equivalents that come in and go out of a company. It measures how well a

company manages its cash position, meaning how well the company generates cash to pay its

debt obligations and fund its operating expenses (Murphy, 2022b). The required accounts

under the Statement of Cash Flows are:

Financial Statements of Polly’s Pet Products Company

• Cash paid out to suppliers and employees

¿ Net cash provided by operating activities−(Cash received¿ customers+ Interest paid +Taxes paid )=(4

• Net cash provided by financing activities

¿ New loans+ Repayments on loans+ Issuance of common shares of stoc k=10,000 .

• Net change in Cash

¿ Net cash provided by operating activities+ Net cash used ∈investing activities+ Net cash provided by fi

• Cash balance, beginning of year

¿ Net change ∈Cash+Cash balance , beginning of year =200,000.

Conclusion

Polly’s Pet Products company appears healthy and has money to grow. It has 600,000

of sales; it shows a Net Income of 65,000; has 170,000 in the bank; and has a Cash Variation

of 170,000. The company’s initial balance of 103,500 shows that it’s capable of saving and

investing. When compared to sales levels and cash reserves, the company looks like an early-

stage of evolution as per Churchill and Lewis (1993).

Financial Statements of Polly’s Pet Products Company

References

Chen, J. (2022, August 17). Income Statement: How to Read and Use It. Investopedia.

Retrieved Feb 2, 2023 from

https://www.investopedia.com/terms/i/incomestatement.asp

Churchill, N. C. & Lewis, V. L. (1993, May). The Five Stages of Small Business Growth.

Harvard Business Review. Retrieved Feb 2, 2023 from https://hbr.org/1983/05/the-

five-stages-of-small-business-growth

Murphy, C. B. (2022a, August 15). Financial Statements: List of Types and How to Read

Them. Investopedia. Retrieved Feb 2, 2023 from

https://www.investopedia.com/terms/f/financial-statements.asp

Murphy, C. B. (2022b, November 15). Understanding the Cash Flow Statement.

Investopedia. Retrieved Feb 2, 2023 from

https://www.investopedia.com/investing/what-is-a-cash-flow-statement/

The Investopedia Team. (2022, September 06). How Do You Read a Balance Sheet?.

Investopedia. Retrieved Feb 2, 2023 from

https://www.investopedia.com/articles/04/031004.asp#toc-how-to-read-a-balance-

sheet