Tower Company: worksheets, profit and loss statement, balance sheet and cash flow.

1 1 July $4,000,000 cash put into the company by the shareholders

2 1 July $6,000,000 cash from a bank loan. The company agrees to a debt
covenant agreement limiting any future borrowing to a limit of 60% of
‘Long Term Debt to Total Assets’ ratio. The company will be forced
to go into voluntary receivership if it violates the agreement at the
end of any fiscal year. 10% interest expense (compounded annually) is
payable on 1 July of each new fiscal year. The principal amount is not
payable for five years.

3 1 July Purchased a building for $5,400,000 (estimated useful life=20
years, estimated salvage value=$400,000).

4 1 July Purchased machinery for $1,200,000 (estimated useful life=5
years, estimated salvage value=$200,000).

5 1 August Purchased 10,000 units of inventory for $20 each.

6 1 October Purchased 20,000 units of inventory for $30 each.

7 1 December Sold 15,000 units of inventory for $100 each on credit.

8 1 February Purchased 30,000 units of inventory for $40 each.

9 1 April Sold 34,000 units of inventory for $110 each on credit.

10 1 May Past customers paid $5,000,000 of the outstanding Accounts
Receivable.

11 30 June The company accounts for depreciation and interest expense.

12 30 June The company accounts for Cost of Goods Sold and Ending
Inventory.

13 30 June The company paid ‘Other Operating Expenses’ throughout
the year totalling $2,000,000.

14 30 June The company accounts for Bonus Wage Expense to senior
management calculated at 10% of ‘Net Profit Before Tax Before Bonus
Wage Expense’. This is paid 30 days later.

15 30 June The company accounts for Tax Expense. It is payable in 60
days.

16 30 June The company accounts for a $300,000 declaration of dividends.
The dividends will be paid at the Annual General Meeting in 90 days.