Finance and Accounting
ASSIGNMENT
Finance and Accounting
Senior Accountant Analysis
1
DUE DATE
Week 5
STRAYER UNIVERSITY | COPYRIGHT © 2016. ALL RIGHTS RESERVED.
SHAUN’S CRITERIA Hi Team,
I wanted to provide you some guidelines as you determine how we’ll finance our expansion. Please give this careful consideration, as we need to get this right.
1. I estimate we’ll need $150,000 to increase capacity in order to stock the five additional pop-up stands
2. We’ll need to make sure we have additional funds available to increase our marketing efforts to stimulate demand
3. I’d like to maintain or increase our profit margins
4. If we’re successful over the next two years, we’ll likely seek additional capital to expand into more stores, so I’d like to do all we can now to enhance our credibility
We need to move on this quickly, so I’d like an answer by the end of the week.
-Shaun
STRAYER UNIVERSITY | COPYRIGHT © 2016. ALL RIGHTS RESERVED. 2
FINANCING OPTIONS
Option 1: Equity Raise $150,000 from a venture capital firm in exchange for 30% of the company
Option 2: Debt
Secure a loan of $150,000 at a 10% annual interest rate, to be repaid over 7 years
Option 3: Debt + Self-Financing
Secure a loan of $100,000 at a 7% annual interest rate, to be repaid over 7 years, and self- finance the remaining $50,000
JUNIOR ACCOUNTANT EMAIL
Hi,
I’m working on expenses from the last quarter for the revised income statement, but I’m unsure of what to do next. I grouped similar transactions to compile the following list:
How would you like me to proceed given where we are in the process? Thanks in advance for your guidance.
Best,
Jenna S.
• automotive maintenance cost
• travel expenses
• training and development costs
• office rent
• raw material purchases
• inventory purchases
• marketing expenses
• payroll expenses
• interest expenses
• technology purchases
• office supplies expenses
STRAYER UNIVERSITY | COPYRIGHT © 2016. ALL RIGHTS RESERVED. 3
SUNSTRUCK SUNGLASSES INCOME STATEMENT
For Year Ended September 30, 2016
REVENUES
Sales revenues
Other revenue
Total revenue
COST OF GOODS SOLD (COGS)
GROSS PROFIT
EXPENSES
Selling, general and administrative expenses
Marketing and advertising expenses
Total expenses
INCOME FROM OPERATIONS
OTHER EXPENSES
Interest expense
$778,590
$11,000
$789,590
($428,225)
$361,365
($78,959)
($55,271)
($153,050)
$208,314
($51,000)
$157,315
Income tax expense
NET INCOME
PRETAX INCOME
($55,060)
$22,500
Depreciation and amortization ($18,820)
$102,255NET INCOME
4 STRAYER UNIVERSITY | COPYRIGHT © 2016. ALL RIGHTS RESERVED.
SUNSTRUCK SUNGLASSES BALANCE SHEET
At September 30, 2016
ASSETS
CURRENT ASSETS
Cash
Accounts receivable
Merchandise inventories
Total current assets
LONG-TERM ASSETS
Property, truck and equipment
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
$145,500
$468,000
$613,500
$37,500
LONG-TERM LIABILITIES
Truck loan
Accounts Payable
$28,000
$55,220
$62,280
$40,000
B+M loan $360,000
Total long-term liabilities
TOTAL LIABILITIES $479,500
SHAREHOLDERS’ EQUITY
CONTRIBUTED CAPITAL $12,000
RETAINED EARNINGS
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
TOTAL SHAREHOLDERS’ EQUITY
$122,000
$442,000
$134,000
$613,500
Operating loan $42,000
STRAYER UNIVERSITY | COPYRIGHT © 2016. ALL RIGHTS RESERVED. 5
$75,000
SUNSTRUCK SUNGLASSES STATEMENT OF CASH FLOWS
For Year Ended September 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Cash collected from customers
Cash paid to suppliers and employees
Cash paid for interest
Cash paid for taxes
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid on truck loans
$99,140
($20,000)
($529,580)
($50,000)
($55,060)
$733,780
Net cash used for investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received from operating cash loan
($60,000)
$12,000
NET INCREASE IN CASH DURING YEAR
CASH AT BEGINNING OF YEAR
Net cash provided by financing activities
($23,255)
CASH AT THE END OF YEAR TO DATE $27,885
$12,000
$51,140
Cash paid on B+M loans ($40,000)