Case Study

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xnev0687

Business Finance

Description

The document attached is a case study. I am Jefferson's accountant and need to answer the following:

1. Record the correcting entry 2. Prepare financial statements 3. Current owners want $250,000 for the business. Jefferson does not want to pay more than Net Worth x 1.5. Should he buy? For how much?

Please explain in detail each one. Thanks!

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Case 1 [ART SPECIALISTS, INC.] Jefferson Jerome is interested in purchasing “Art Specialists Inc.”, an auction house. The company receives the right to sell art but not to purchase the art themselves for a 5% commission. Art Specialists rents office space and Chelsea and holds its auctions at local hotels. Art Specialist Inc. Unadjusted Trial Balance December 31, 2013 Cash Accounts receivable Supplies Equipment Accumulated Depreciation Accounts payable Dividends Capital stock Retained earnings Commission income Rent Expense Wages Expense Auction Expenses Depreciation Expenses Membership Expenses Supplies Expense $ $ $ $ 35,000.00 60,000.00 8,000.00 53,000.00 $ $ $ $ $ $ TOTAL $ 374,000.00 $ $ $ 14,500.00 5,600.00 50,000.00 $ 25,000.00 $ 84,900.00 $ 244,000.00 20,000.00 70,000.00 56,000.00 7,000.00 6,000.00 9,000.00 $ 374,000.00 As Jefferson’s accountant, you have received the trial balance above as well as the general ledger. The review has found the following errors:  Year end bank reconciliation showed that the balance should be $30,000. A customer should have been billed for commissions earned but it was recorded as a cash payment of the commission income.  Membership expenses are not related to the business and should be shown as a dividend to shareholder.  Depreciation expense should be $3,500 for the year.  Supplies expenses failed to record $2,000 in packing supplies used during the year.  Accounts receivables that have not been billed $10,000. Required: 1. Record the correcting entry. 2. Prepare financial statements 3. Current owners want $250,000 for the business. Jefferson does not want to pay more than Net Worth x 1.5. Should he buy? For how much?
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Explanation & Answer

find attached solution to your problem ... Do let me know If you have any question regarding this assignment .. At the end please review this project ... Good Luck

ART SPECLIST INC
Student Name
Subject
Professor Name
8th October 2017

Unajusted Trial Balance
December 31, 2013
Cash
Accounts receivable
Supplies
Equipment
Accumulated Depreciation
Accounts payable
Dividends
Capital stock
Retained earnings
Commission income
Rent Expense
Wages Expense
Auction Expenses
Depreciation Expenses
Membership Expenses
Supplies Expense
TOTAL

$35.000
$60.000
$8.000
$53.000

$50.000

...


Anonymous
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