ASSIGNMENT
DUE DATE
Finance and Accounting
Week 5
Senior Accountant Analysis
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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1
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:
• inventory purchases
• automotive maintenance cost
• marketing expenses
• travel expenses
• payroll expenses
• training and development costs
• interest expenses
• office rent
• technology purchases
• raw material purchases
• office supplies expenses
How would you like me to proceed given where we are in the process? Thanks in advance
for your guidance.
Best,
Jenna S.
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SUNSTRUCK SUNGLASSES
INCOME STATEMENT
For Year Ended September 30, 2016
REVENUES
Sales revenues
$778,590
Other revenue
$11,000
Total revenue
$789,590
COST OF GOODS SOLD (COGS)
GROSS PROFIT
($428,225)
$361,366
EXPENSES
Depreciation and amortization
($18,820)
Selling, general and administrative expenses
($78,959)
Marketing and advertising expenses
($55,271)
Total expenses
INCOME FROM OPERATIONS
($153,050)
$208,315
OTHER EXPENSES
Interest expense
PRETAX INCOME
Income tax expense
NET INCOME
($51,000)
$157,315
($55,060)
$102,255
$22,500
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SUNSTRUCK SUNGLASSES
BALANCE SHEET
At September 30, 2016
ASSETS
CURRENT ASSETS
$28,000
Cash
Accounts receivable
$55,220
Merchandise inventories
$62,280
Total current assets
$145,500
LONG-TERM ASSETS
$468,000
Property, truck and equipment
TOTAL ASSETS
$613,500
LIABILITIES
CURRENT LIABILITIES
Accounts Payable
$37,500
LONG-TERM LIABILITIES
Truck loan
$40,000
B+M loan
$360,000
Operating loan
$42,000
Total long-term liabilities
$442,000
TOTAL LIABILITIES
$479,000
SHAREHOLDERS’ EQUITY
CONTRIBUTED CAPITAL
RETAINED EARNINGS
$12,000
$122,000
TOTAL SHAREHOLDERS’ EQUITY
$134,000
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$613,500
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SUNSTRUCK SUNGLASSES
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
$733,780
($524,520)
Cash paid for interest
($55,060)
Cash paid for taxes
($55,060)
Net cash provided by operating activities
$99,139
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid on truck loans
($20,000)
Cash paid on B+M loans
($40,000)
Net cash used for investing activities
($60,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received from operating cash loan
$12,000
Net cash provided by financing activities
$12,000
NET INCREASE IN CASH DURING YEAR
CASH AT BEGINNING OF YEAR
$75,000
CASH AT THE END OF YEAR TO DATE
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$51,139
($23,255)
$28,000
5
NAME:
INSTUCTOR:
DATE:
ASSIGNMENT 2
FINANCE & ACCOUNTING – SENIOR ACCOUNTANT ANALYSIS
DUE DATE: WEEK 5
Note: While representative of possible situations faced by SunsTruck Sunglasses, all scenarios in this assignment
are fictional.
REAL BUSINESS
Large discount retailers like Target and Walmart employ large teams of Finance and Accounting professionals to
help measure and understand the financial health of the business. Financial and accounting information helps
these businesses make educated financial decisions, such as whether or not to continue partnering with a retail
supplier. While often smaller businesses, it is equally important for these retail suppliers to use financial and
accounting data to make educated decisions, such as the best approach to gaining additional funding.
YOUR ROLE
This week, you’ll assume the role of Senior Accountant with SunsTruck Sunglasses.
WHAT IS A SENIOR ACCOUNTANT?
Senior accountants take ownership of reporting costs, profitability, margins and expenditures for a given
business. They use the principles of accounting to analyze sales information, create financial reports,
make recommendations about the financial health of the company, and more. They are also responsible
for training junior accounting staff.
For the last six months, SunsTruck has partnered with the discount retail store to run a pop-up sunglasses stand in
their stores for a big summer promotion. Due to the high customer purchase rate, the store has requested stock for
five additional stores. SunsTruck needs to increase its capacity to meet the additional demand. In order to do so,
SunsTruck needs additional money.
In this assignment, you will need to help determine which type of financing option is best for your company and
train your junior accountants on the accounting cycle and financial statements.
1
BUS100: INTRODUCTION TO BUSINESS
INSTRUCTIONS
STEP 1: FINANCING
The junior accounting team has assembled a Financing Report that (a) offers three options for securing the
additional funds required to meet the new order; and (b) details the criteria Shaun, the owner of SunsTruck, would
like you to consider when choosing one of the three options. Based on this report:
Identify which financing option you think is the best option for SunsTruck to pursue given Shaun’s
constraints. Underline your selection:
Option 1: Equity
Option 2: Debt
Option 3: Debt + Self-Financing
Write 2-5 sentences explaining the rationale for your decision.
Note: You should complete Steps 2 & 3 after reading the material in Week 5.
2
BUS100: INTRODUCTION TO BUSINESS
STEP 2: ACCOUNTING CYCLE
A junior accountant is working to get everything in order for the new financing and has come to you with a
question about what do next in the accounting cycle.
Read the email the junior accountant sent you and identify the best next step to take in the accounting
cycle. Write 1-3 sentences explaining your reasoning.
STEP 3: 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. Underline your selection:
Income Statement
Balance Sheet
Cash Flow Statement
Write 1-3 sentences to explain to your junior accountants why you are giving them this financial statement and
where the debt information is located.
3
BUS100: INTRODUCTION TO BUSINESS
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