1.      Financial Statements: Develop an Income Statement, Cash Flow Statement, and Balance Sheet based on the provided data for year 20XX (the previous year) that follows. Explain the purpose of each financial statement.

a.      Income Statement Data for 20XX:

·  Gross Sales = $33,291

·  Coupons and Discounts = $549

·  Cost of Goods = $10,276

·  Labor = $0 (Mr. and Mr. Lee were the only ones working and did not pay themselves)

·  advertising fees =$2000

·  bank fees = $120

·  phone/internet = $1200

·  shipping = $1380

·  utilities = $900

·  office supplies = $785

·  Income tax = 26 %

b.     Cash Flow Statement Data for 20XX:

·  Cash in bank = $21,120

·  Depreciation = $800

·  Proceeds from disposal of investment = $3,000

·  Capital Expenditure = -$1,600

·  Repayment of Bank Loan = -$5,000

·  Interest Expense Associated with Bank Loan = -$345

·  Consider any data relevant from the income statement.

c.      Balance Sheet Data for 20XX:

·  Cash = $21,120

·  Accounts Receivable = $496

·  Accounts Payable = $200

·  Inventory = $10,507

·  Accumulated Depreciation = -$1,000

·  Common Stock = $0

2.      Financial Ratios: Calculate the following financial ratios and explain the meaning of the results.

a.      Net Profit Margin

b.     Quick Ratio

c.      Debt-to-Equity Ratio

3.      Cost Classification: The Lee’s have provided you with the following costs and relevant information that are assumed for year 20XY. Classify the costs as variable costs or fixed costs. Explain the importance of distinguishing between variable and fixed costs. If business is expected to be steady from month to month, provide a monthly budget based on these figures.

a.      Advertising Fees = $4,000

b.     Labor = $400/month

·  One part-time employee will be hired to take care of packaging and shipping. This employee will be paid $10 per hour. He or she is estimated to work 40 hours total per month.

c.      Packaging Supplies = $3,000

d.     Office Supplies = $800

e.     Phone and Internet Service = $115/month

f.       Product Supplies = $9,000

g.      Shipping Fees = $1,000/month

h.     Conference Exhibitor Fee = $3,000

i.        Travel Expenses for Conference (e.g. airfare, meals, taxi) = $1,200

j.       Utilities for the Home Workshop = $105/month

4.      Net Present Value: The Lees are considering adding a new piece of equipment that will speed up the process of building the bobble heads. The cost of the piece of equipment is $42,000. It is expected that the new piece of equipment will lead to cash flows of $17,000, $29,000, and $40,000 over the next 3 years. If the appropriate discount rate is 12%, what is the NPV of this investment? Explain the findings.

5.      Budget Preparation: The Lees believe that there production could quadruple in one month after being on Shark Tank. They want to be prepared for this. Based on the monthly budget calculated above, create a new monthly budget for quadrupled production. Assume that 70 units were produced in the first budget and 280 units will be produced per month with the new budget.

6.      Incremental Analysis: If production does increase dramatically after their presentation on Shark Tank, the Lees will need more space for production. They have two options. Option 1 is to rent out a spacious warehouse nearby. If they pursue this option, there rent will be $1,200 per month and utilities are estimated to cost an additional $350 per month. Their second option, Option 2, is to rent a smaller storefront space that is also nearby. The storefront rent is $1350 per month. However, utilities will likely only cost an additional $150 per month. They want to compare their options over one year’s time (since each rental contract is a 1 year commitment). What is the incremental analysis if the Lees choose Option 1 over Option 2?

7.      Break-Even Analysis: You have been asked to calculate how many units need to be sold to break even, based on the costs provided in task #3. Assume that only one conference will be attended and the estimated expenses associated with this conference are on target. Also assume that the value for total units per year is based on sales of 70 units per month. Therefore total units sold per year are 840. The selling price per unit is $79.

8.      Contribution Margin: Based on the Break-Even Analysis just performed, what is the contribution margin per unit?

 

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Financial statements are an important product of the accounting process. Provide an example of an internal user. How could he or she be harmed by fraudulent and unethical financial statements?

Financial statements are an important product of the accounting process. Provide an example of aninternal user. How could he or she be harmed by fraudulent and unethical financial statements?…

 

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FINANCIAL STATEMENTS

A potential investor has been identified, but before it is willing to commit, it has requested

information about SunsTruck’s current debt from the junior accountants.

• Identify the correct financial statement for your junior accountants that will provide the

investor with the information it has requested.

Explain to your junior accountants why you are giving them this financial statement and

where the debt information is located.

 

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Financial Statement Preparation Assignment

Required:

Prepare a statement of financial position, multi-step income statement and statement of retained earnings in proper financial statement format for Marmidan Corporation Inc. for the year ended December 31, 2015 from the company’s pre-closing trial balance below. Marmidan Corporation Inc. is a private corporation that was incorporated on January 1, 2015. Your solution must be typed, font 12 and submitted with a cover sheet containing your name and student i.d. number.

                                                                                             Debit                            Credit

Prepaid expenses                                                        $      25,693

Land (cost)                                                                       120,000

Building (cost)                                                                 149,398

Accrued liabilities                                                                                                       37,100

Sales                                                                                                                          754,750

Selling expense                                                                176,035

Interest income on investments                                                                                    8,000

Gain on sale of investments                                                                                        45,095                                                                                                              

Building, accumulated depreciation                                                                             3,845

Income tax payable                                                                                                     14,370         

Accounts receivable, trade                                               158,395                                                                                                                             

Goodwill (cost)                                                                  25,930

Cash                                                                                   10,810

Bank operating line of credit                                                                                      10,000

Equipment (cost)                                                             243,450

General and administrative expenses                              145,760                                                                                                                     

Inventory                                                                           89,194

Accounts payable                                                                                                        37,899

Dividends payable                                                                                                        2,000      

Financial expenses                                                            15,000          

Loan payable to shareholder due on demand                                                                3,743

Income tax expense                                                            8,370

H.s.t.  payable                                                                                                                9,157

Bond payable, 4%, repayable $12,000 per year until maturity                                 120,000

Customer deposits payable                                                                                         10,900   

Equipment, accumulated depreciation                                                                        47,195

Common shares                                                                                                         450,000

Cost of goods sold                                                           375,250                            1554054

Dividends declared                                                            10,769     

                                                                                        1554054        

Marmidan Corporation Inc.Income statementFor the year ended December 31, 2015$Sales 754,750 Less: cost of goods sold (375,250) Operating income 379,500 Interest income on investments 8,000 Gain…

 

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This project requires you to compare renting versus owning a home. Assume a property can be rented for $12,000 per year ($1,000 per month) or purchased for $150,000 with $30,000 down and financed with a fully amortizing mortgage loan of $120,000 at 7 percent interest for 30 years. Other costs associated with owning include maintenance costs of $500, insurance costs of $500, and property taxes of 2% of the purchase price. Assume the federal income tax rate is 28 percent. Growth rates for expenses (insurance, maintenance, property taxes), rents, and property value are a constant 2 percent per year. Afterfive years, the property will be sold. Selling expenses of 7 percent would have to be paid at that time. Be sure to show your work in Excel. In other words, do not simply type values into the boxes, but reference prior cells when calculating results. In your report, identify how much money is saved from owning relative to renting after selling the house in year 5. If an annual after-tax return of 15% is available on an investment of comparable risk, which is the better option, owning or renting?

• Attachment 1
• Attachment 2

 

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