ACCOUNTANT ANALYSIS

ASSIGNMENT Finance and Accounting Senior Accountant Analysis D U E DAT E Week 5 STR AYE R U N IVE RSIT Y | COPYRIGHT © 2016. ALL RIGHTS RESE RVE D. SHAUN’S CRITERIA Hi Tea m, 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 ne e d to move on this quickly, so I’d like an answer by the end of the week. -Shaun 1 STR AYE R U N IVE RSIT Y | COPYRIGHT © 2016. ALL RIGHTS RESE RVE D. 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 worki ng 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 2 STR AYE R U N IVE RSIT Y | COPYRIGHT © 2016. ALL RIGHTS RESE RVE D. SUNSTRUCK SUNGLASSES INCOME STATEMENT For Year Ended Sep\fember 3\b, 2\b16 REVENUES Sales revenues O\fher revenue Total revenue COST O\f GOODS SOLD \bCOGS GROSS PRO\fIT EXPENSES Selling, general and adminis\fra\five expenses Marke\fing and adver\fising expenses Total expenses INCOME \fROM OPERATIONS OTHER EXPENSES In\feres\f expense $778,59\b $11,\b\b\b $789,590 ($428,225) $361,365 ($78,959) ($55,271) ($153,\b5\b) $208,314 ($51,\b\b\b) $157,315 Income \fax expense NET INCOME PRETAX INCOME ($55,\b6\b) $22,500 Deprecia\fion and amor\fiza\fion ($18,82\b) $102,255 NET INCOME 3 STR AYE R U N IVE RSIT Y | COPYRIGHT © 2016. ALL RIGHTS RESE RVE D. SUNSTRUCK SUNGLASSES BALANCE SHEET At September 30, \f016 ASSETS CURRENT ASSETS Ca\bh Account\b receivable Merchandi\be inventorie\b Total current assets \fONG TER\b ASSETS Property, truck and equipment TOTA\f ASSETS \fIABI\fITIES CURRENT \fIABI\fITIES $145,500 $468,000 $613,500 $37,500 \fONG TER\b \fIABI\fITIES Truck loanAccount\b Payable $\f8,000 $55,\f\f0 $6\f,\f80 $40,000 B+M loan $360,000 Total long-term liabilities TOTA\f \fIABI\fITIES $479,500 SHAREHO\fDERS’ EQUITY CONTRIBUTED CAPITA\f $1\f,000 RETAINED EARNINGS TOTA\f \fIABI\fITIES AND SHAREHO\fDERS’ EQUITY TOTA\f SHAREHO\fDERS’ EQUITY $1\f\f,000$44\f,000 $134,000 $613,500 Operating loan $4\f,000 4 STR AYE R U N IVE RSIT Y | COPYRIGHT © 2016. ALL RIGHTS RESE RVE D. $75,000 SUNSTRUCK SUNGLASSES STATEMENT OF CASH FLOWS Fo\f Yea\f E\bded Septembe\f 30, 2016 CASH FLOWS FROM OPERATING ACTIVITIES Cash collected f\fom custome\fs Cash paid to supplie\fs a\bd employees Cash paid fo\f i\bte\fest Cash paid fo\f taxes Ne\f cas\b provided by opera\fing ac\fivi\fies CASH FLOWS FROM INVESTING ACTIVITIES Cash paid o\b t\fuck loa\bs $99,140 ($20,000) ($529,580) ($50,000)($55,060) $733,780 Ne\f cas\b used for inves\fing ac\fivi\fies CASH FLOWS FROM FINANCING ACTIVITIES Cash \feceived f\fom ope\fati\bg cash loa\b ($60,000) $12,000 NET INCREASE IN CASH DURING YEAR CASH AT BEGINNING OF YEAR Ne\f cas\b provided by nancing ac\fivi\fies ($23,255) CASH AT THE END OF YEAR TO DATE $27,885 $12,000 $51,140 Cash paid o\b B+M loa\bs ($40,000) 5