Unit VIII Case Study Instructions Cookie Creations (Chapter 18) This assignment is a continuation of the Cookie Creations case study. For this assignment, you will apply what you have learned from Chapter 18 as an introduction to the financial analysis. This assignment will allow you to practice what you have learned so far. Natalie and Curtis have comparative balance sheets and income statements for Cookie & Coffee Creations, Inc. They have been told that they can use these financial statements to prepare horizontal and vertical analyses, to calculate financial ratios, to analyze how their business is doing, and to make some decisions they have been considering. Below, you are provided with the balance sheet and income statement of Cookie & Coffee Creations Inc. for its first year of operations; the year ended October 31, 2021. Review the calculations below, and then review the additional case information to calculate the ratios. Review the additional case information below. Natalie and Curtis are thinking about borrowing an additional $20,000 to buy more equipment. The loan would be repaid over a 4-year period. The terms of the loan provide for equal semi-annual installment payments of $2,500 on May 1 and November 1 of each year, plus interest of 5% on the outstanding balance. Dividends on preferred stock were $1,400. Since this is the first year of operations and the beginning balances are zero, use the ending balance as the average balance where appropriate. Complete the tasks listed below. Calculate the following ratios: current ratio, accounts receivable turnover, inventory turnover, debt to assets ratio, times interest earned, gross profit rate, profit margin, asset turnover, return on assets, and return on common stockholders' equity. Comment on your findings from item “a.” Based on your analysis in items “a” and “b”, do you think a bank would lend Cookie & Coffee Creations Inc. $20,000 to buy the additional equipment? Explain your reasoning. What alternatives could Cookie & Coffee Creations Inc. consider instead of bank financing?

Davy Jones provides the following information for Davy Jones’ Nautical Tours, Inc, a C corporation which he operates with his business partner, William Turner. You’re required to prepare a Form 1120 U.S. Corporation In come Tax Return, an 1120 Statement 1 – Other Deductions, and an 1120 Schedule G – Information on Certain Persons Owning Stock Davy Jones’ Nautical Tours, Inc, is operated by David K. Jones (SSN 000-00-0000) and William W. Turner (SSN 111-11-1111). They are each 50% common shareholders in the business. Principal Business or Professional Activity Code; 114110 Principal business; Charter fishing tours Employer Identification Number 867530950 Business address     1008 North Harbor Drive    San Diego, CA 92103    Home address (David K. Jones) 8700 Lake Murray Blvd #2 San Diego, 92119 The cash accounting method and GAAP are utilized The business was incorporated on January 1st, 2012 Wages consist of $25,000 paid to one employee and $15,000 to another Officer’s Compensation; $42,000 payments to each officer, Jones and Turner. None of this compensation is claimed on Form 1125-A (Cost of Goods Sold). There is no preferred stock Depreciation expense; The Jolly Roger was purchased for $850,000. The depreciation on the income statement is book depreciation and will differ from what is actually used on Line 20 Depreciation of form 1120. The boat is depreciated using the Modified Accelerated Cost Recovery System (MACRS), half year convention, is in its 4th year of service and the 10-year recovery period is used. Utilize Publication 946 How to Depreciate Property to calculate the correct depreciation amount to enter on the 1120 Line 20 (Form 4562 is not required). Locate Table A1 in the Appendix to calculate the tax-deductible depreciation.  Interest expense is interest paid on the loan for the boat; the boat loan is considered nonrecourse Insurance payments were made to cover liability for guests and for the boat Payroll taxes; FICA and FUTA payments made on behalf of employees and corporate officers Travel was purely for business purposes Parking fines are tickets Jones received for parking illegally Lease expense was paid to Honda Motors for his mother’s car lease, who is not involved in the business in any way Estimated payments; The Corporation made four quarterly estimated tax payments of $1,000  They’d like any overpayment refunded to them. Davy Jones’ Nautical Tours, Inc. 2016 Income Statement Revenue $400,950.00 Wages ($40,000.00) Officer's Compensation ($84,000.00) FICA ($9,486.00) FUTA ($169.00) Depreciation ($85,000.00) Interest ($43,900.00) Advertising ($6,350.00) Supplies ($23,795.00) Legal fees ($6,940.00) Insurance ($26,700.00) Boat slip rental ($33,010.00) Travel ($6,250.00) Office expense ($7,940.00) Parking fines ($1,350.00) Lease expense ($3,650.00) Net Profit $22,410.00 Davy Jones' Nautical Tour, Inc    2016 Balance Sheet 1/1/2016 12/31/2016 Cash $15,500.00 $15,500.00 Boat $850,000.00 $850,000.00 Accumulated Depreciation ($255,000.00) ($340,000.00) Total Assets $610,500.00 $525,500.00    Loans $525,000.00 $417,590.00 Equity Investment $50,000.00 $50,000.00 Retained Earnings $35,500.00 $57,910.00 Total Equity + Liability $610,500.00 $525,500.00 Assignment Guidelines To prepare the Corporation’s tax return, complete the following steps: Ensure that you have Adobe Reader installed on your computer to open and use the downloadable IRS forms.  Go to the IRS Web site and download the fill-in tax forms that you will need to complete.  Complete all necessary downloaded fill-in forms on the computer and save.  Save the completed forms as PDFs and upload for grading. You may not utilize Tax preparation software to complete this assignment! This constitutes cheating! Save the completed forms as PDFs and upload for grading; double check your PDFs to ensure data was retained when they were uploaded to Submitted Assignments; blank forms will yield 0 points! You will be required to fill out and submit the following forms:   1120 U.S. Corporation Income Tax Return 1120 Statement 1 - Other Deductions  1120 Schedule G - Information on Certain Persons Owning Stock