NATIONAL ECONOMICS UNIVERSITY

CORPORATE FINANCE

PREPARING THE FINANCIAL STATEMENTS

Problems Financial statements
Problem 1: The data on the balance sheet of Sao Do Co. plc on Dec 31 st, N-1 are as follows: Owner’s equity:
805m. Long-term loan: 220m. Short-term loan: 210m. Payable to suppliers: 120m. Fixed assets: historical costs
800m, net fixed assets 700m. Inventories: 200m. Receivable from customers: 110m. Cash: 345m.
The data for the first quarter of the year N are as follows:
1. The total amount from sales of goods and service provisions including VAT is 880m each month, of which
330m is the total amount from sales of goods subject to SST. 60% of the amount is paid in the month of the sale,
the remaining is paid after 2 months.
2. The total amount payable of raw material purchases to domestic suppliers excluding VAT each month equals 60%
of the total amount from sales of goods and service provisions excluding VAT each month. 50% of the total amount
payable including VAT is paid during the month of the purchases, the remaining is paid after 1 month.
3. The basis for calculating import duty (Note: the imported raw material is NOT subject to SST) each month:
140m. Import tariff: 5%. 50% of the amount of the basis is paid during the month of the purchase, the remaining
is paid in the next month.
4. Direct costs (excluding raw materials and depreciation of fixed assets): 45m each month. These costs are paid
during the month when incurred.
5. Indirect costs (excluding depreciation of fixed assets, outside purchasing services cost, and the other tax):
23m per month of which an amount of 8m is attributed to selling expenses, and the remaining to general &
administrative expenses. These costs are paid during the month when incurred.
6. Depreciation of fixed assets is 21m per month, of which amount of 12m is attributed to direct cost, and the
remaining to general & administrative expenses.
7. The total amount of outside purchasing services excluding VAT: 20m per month. It is attributed to selling
expenses. This cost is paid during the month when incurred.
8. Inventories at the end of the first quarter: 110m
9. Short-term loan interest rate: 1% per month. This interest is paid once per two months, the first payment is
due in February. Long-term loan interest rate: 15% per year. This interest is paid equally twice per year, the first
payment is due in March. Payment of Short-term loan principal at the end of Feb: 24m.
10. Disposal of a fixed asset (subject to VAT 10%) on March 31 st: 17m (excluding VAT). The historical cost:
50m. Net book value: 18m. Other related costs are negligible. The payment is made immediately.
11. Short-term investment in Jan: 100m (paid during the month). Withdrawals of the Short-term investment in
Feb: 120m (paid during the month). Related transaction costs are negligible.
12. VAT: Sao Do is required to use the credit method (also called the deduction method). The VAT rate: 10%
applied to purchases of goods and raw materials, imports, sales, disposal of a fixed asset, and the outside
purchasing services cost. The import duties and VAT of imported goods are paid at importation. SST rate: 50%.
The amount of SST calculated from raw material purchases is 120m per month of which a portion namely 80m
is allocated to goods sold. VAT and SST are calculated during the month but are paid one month later. CIT rate:
20%. CIT is paid for in the next quarter. Another tax attributed to general & administrative expenses is paid in
Feb: 6m.
13. Account receivable from beginning period is paid in Feb: 60m. Account payable from beginning period is
paid in Jan: 40m.
Required
a. What is Sao Do’s total amount of taxes? Construct the income statement for the first quarter of the year N.
b. Prepare a table that shows the computation of cash flows each month of the first quarter.
c. Construct the balance sheet on Jan 1st, N and March 31st, N.
d. Comment on the profitability of Sao Do in the first quarter of the year N.
e. Construct the cash flow statement using the direct method, assuming the direct costs (as indicated in data
point 3) and indirect costs (as indicated in data point 4) are payments to employees.
f. Construct the cash flows statement (indirect method)

Financial statements 2
Problems Financial statements
Problem 2: The data on the balance sheet of Bac Ha Co. plc on Dec 31 st, N-1 are as follows: Owner’s equity:
810m. Long-term loan: 300m. Short-term loan: 200m. Payable to suppliers: 150m. Fixed assets: historical costs
800m, net fixed assets 775m. Inventories: 200m. Receivable from customers: 110m.

The data for the first quarter of the year N are as follows:

1. The total amount from sales of goods and service provisions excluding both VAT and SCT is 600m each
month, of which 200m is the total amount from sales of goods subject to SST. Customers pay 30% by cash in
the month of the sale, the remaining is paid after 2 months.
2. The total amount payable of raw material purchases excluding both VAT and SCT each month equals 83% of the
total amount from sales of goods and service provisions excluding both VAT and SCT each month. 40% of the total
amount payable including VAT is paid during the month of the purchases, the remaining is paid after 2 months.
3. Direct costs (excluding raw materials and depreciation of fixed assets): 30m each month. These costs are paid
during the month when incurred.
4. Indirect costs (excluding depreciation of fixed assets, outside purchasing services cost, and the other tax):
20m per month. 60% of these costs are attributed to selling expenses, and the remaining to general &
administrative expenses. These costs are paid during the month when incurred.
5. Depreciation of fixed assets is 20m per month, of which 12m is attributed to direct cost, and the remaining to
selling expenses.
6. The total amount of outside purchasing services cost including VAT: 11m per month. It is attributed to selling
expenses. This cost is paid during the month when incurred.
7. Inventories at the end of the first quarter: 300m
8. Short-term loan interest rate: 1% per month. This interest is paid every month. Long-term loan interest rate:
15% per year. This interest is paid quarterly, at the end of each quarter. Payment of Short-term loan principal at
the end of March: 15m.
9. Disposal of a fixed asset (subject to VAT 10%) on March 31 st: 17m (excluding VAT). The historical cost:
52m. Net book value: 18m. Other related costs are negligible. The payment is made immediately.
10. Short-term investment in Jan: 100m (paid during the month). Withdrawals of the Short-term investment in
Feb: 95m (paid during the month). Related transaction costs are negligible.
11. VAT: Bac Ha is required to use the credit method (also called the deduction method). The VAT rate: 10%
applied to purchases of goods and raw materials, sales, disposal of a fixed asset, and the outside purchasing
services cost. SST rate: 50%. The amount of SST calculated from raw material purchases is 55m per month of
which a portion namely 50m is allocated to goods sold. VAT and SST are calculated during the month but are
paid one month later. CIT rate: 20%. CIT is paid temporarily 5m per month. Another tax attributed to general &
administrative expenses is paid in Feb: 10m.
12. Account receivable from beginning period is paid in Feb: 60m. Account payable from beginning period is
paid in March: 140m.

Required

a. What is Bac Ha’s total amount of taxes? Construct the income statement for the first quarter of the year N.
b. Prepare a table that shows the computation of cash flows each month of the first quarter.
c. Construct the balance sheet on Jan 1st, N and March 31st, N.
d. Comment on the liquidity of Bac Ha.
e. Construct the cash flow statement using the direct method, assuming the direct costs (as indicated in data
point 3) and indirect costs (as indicated in data point 4) are payments to employees.
f. Construct the cash flows statement (indirect method)

Financial statements 3
Problems Financial statements
Problem 3: The data on the balance sheet of Dong Do Co.plc on Dec 31 st, N-1 are as follows: Owner’s equity:
500m. Long-term loan: 300m. Short-term loan: 700m. Fixed assets: historical costs 700m, net fixed assets
600m. Inventories: 200m.

The data for the first quarter of the year N are as follows:

1. The total amount from sales of goods and service provisions excluding VAT is 700m each month, of which
300m is the total amount from sales excluding VAT of goods subject to SST. Customers pay 60% in cash in the
month of the sale, the remaining is paid after 1 month.
2. The total amount payable of raw material purchases excluding VAT each month equals 555m. 50% of the total
amount payable including VAT is paid during the month of the purchases, the remaining is paid after 1 month.
3. Direct costs (excluding raw materials and depreciation of fixed assets): 40m each month. These costs are paid
during the month when incurred.
4. Indirect costs (excluding depreciation of fixed assets, outside purchasing services cost, and the other tax):
20m per month. 40% of these costs are attributed to selling expenses, and the remaining to general &
administrative expenses. These costs are paid during the month when incurred.
5. Depreciation of fixed assets is 20m per month, of which 12m is attributed to direct cost, and the remaining to
selling expenses.
6. The total amount of outside purchasing services cost including VAT: 11m per month. It is attributed to selling
expenses. This cost is paid during the month when incurred.
7. Inventories at the end of the first quarter: 300m
8. Short-term loan interest rate: 1% per month. This interest is paid once per two months, the first payment is
due in February. Long-term loan interest rate: 15% per year. This interest is paid equally twice per year in
March and October. Payment of Short-term loan principal at the end of Feb: 700m.
9. Disposal of a fixed asset (subject to VAT) on March 31 st: 19m (excluding VAT). The historical cost: 50m.
Net book value: 18m. Other related costs are negligible. The payment is made immediately.
10. Short-term investment in Jan: 100m (paid during the month). Withdrawals of the Short-term investment in
Feb: 95m (paid during the month). Related transaction costs are negligible.
11. Capital contributions by fixed assets from shareholders on 31 st March, N: 800m. Related costs are
negligible.
12. VAT: Dong Do is required to use the credit method (also called the deduction method). The VAT rate: 10%
applied to purchases of goods and raw materials, sales, disposal of a fixed asset, and the outside purchasing
services cost. SST rate: 50%. The amount of SST calculated from raw material purchases is 55m per month of
which a portion namely 50m is allocated to goods sold. VAT and SST are calculated during the month but are
paid one month later. CIT rate: 20%. CIT is paid in the next quarter. Another tax attributed to general &
administrative expenses is paid in Feb: 10m.

Required

a. What is Dong Do’s total amount of taxes? Construct the income statement for the first quarter of the year N.
b. Prepare a table that shows the computation of cash flows each month of the first quarter.
c. Construct the balance sheet on Jan 1st, N and March 31st, N.
d. Comment on the capital structure of Dong Do.
e. Construct the cash flow statement using the direct method, assuming the direct costs (as indicated in data
point 3) and indirect costs (as indicated in data point 4) are payments to employees.
f. Construct the cash flows statement (indirect method)

Financial statements 4
Problems Financial statements
Problem 4: The data on the balance sheet of Hai Son Co.plc on Dec 31 st, N-1 are as follows: Owner’s equity:
800m. Long-term loan: 200m. Short-term loan: 200m. Fixed assets: historical costs 800m, net fixed assets
700m. Inventories: 200m.

The data for the first quarter of the year N are as follows:

1. The total amount from sales of goods and service provisions including VAT is 880m each month, of which
300m is the total amount from sales excluding VAT of goods subject to SST. Customers pay 60% in cash in the
month of the sale, the remaining is paid after 1 month.
2. The total amount payable of raw material purchases excluding VAT each month equals 700m. 50% of the total
amount payable including VAT is paid during the month of the purchases, the remaining is paid after 1 month.
3. Direct costs (excluding raw materials and depreciation of fixed assets): 40m each month. These costs are paid
4. Indirect costs (excluding depreciation of fixed assets, outside purchasing services cost, and the other tax):
20m per month. 40% of these costs are attributed to selling expenses, and the remaining to general &
administrative expenses. These costs are paid during the month when incurred.
5. Depreciation of fixed assets is 20m per month, of which 12m is attributed to direct cost, and the remaining to
selling expenses.
6. The total amount of outside purchasing services cost including VAT: 11m per month. It is attributed to selling
expenses. This cost is paid during the month when incurred.
7. Inventories at the end of the first quarter: 150m
8. Short-term loan interest rate: 1% per month. This interest is paid every month. Long-term loan interest rate:
15% per year. This interest is paid at the end of each quarter. Payment of Short-term loan principal at the end of
March: 15m.
9. Disposal of a fixed asset (not subject to VAT) on March 31 st: 19m. The historical cost: 50m. Net book value:
18m. Other related costs are negligible. The payment is made immediately.
10. Short-term investment in Jan: 100m (paid during the month). Withdrawals of the Short-term investment in
Feb: 95m (paid during the month). Related transaction costs are negligible.
11. VAT: Hai Son is required to use the credit method (also called the deduction method). The VAT rate: 10%
applied to purchases of goods and raw materials, sales, disposal of a fixed asset, and the outside purchasing
services cost. SST rate: 50%. The amount of SST calculated from raw material purchases is 55m per month of
which a portion namely 50m is allocated to goods sold. VAT and SST are calculated during the month but are
paid one month later. CIT rate: 20%. CIT is paid at the end of the first quarter. Another tax attributed to general
& administrative expenses is paid in Feb: 10m.

Required

a. What is Hai Son’s total amount of taxes? Construct the income statement for the first quarter of the year N.
b. Prepare a table that shows the computation of cash flows each month of the first quarter.
c. Construct the balance sheet on Jan 1st, N and March 31st, N.
d. Comment on the profitability of Hai Son in the first quarter of the year N.
e. Construct the cash flow statement using the direct method, assuming the direct costs (as indicated in data
point 3) and indirect costs (as indicated in data point 4) are payments to employees.
f. Construct the cash flows statement (indirect method)

Financial statements 5