SENIOR ACCOUNTANT ANALYSIS

ASSIGNM E NT

Finance and Accounting

Senior Accountant Analysis

1

DU E DATE

Week 5

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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. Cash flow is going to be tight, so I’d like to minimize interest payments

4. I’d like to maintain or increase our profit margins

5. Since I don’t have a lot of experience with big discount retailers, I’d like to add a thought partner with experience in this channel

6. 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

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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

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SUNSTRUCK SUNG LASSES 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

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SUNSTRUCK SUNG LASSES 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

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$75,000

SUNSTRUCK SUNG LASSES 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)