BUS 508

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ASSIGNMENT

Finance and Accounting

Senior Accountant Analysis

DUE DATE

Week 5

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

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 selffinance

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

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)

$102,255

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