Research Topics: Debt Financing

clearly identify a target price for your companyâ€™s business (shoe business)

Target Price Global firms adopt different pricing schemes around the world and these results in some practices being viewed as discriminatory.  This means that consumers are charged different prices for an identical product without a logical reason for doing so. Price discrimination is legal in the United States as long as price differences can be justified based upon costs. When consumers from two nations are charged different prices, it is discriminatory unless valid reasons can be justified for these practices. Valid reasons include tax, tariffs, transport, or higher manufacturing expenses ( &  2003). However, charging different prices to consumer segments, gouging, and dumping all result in some consumers having to pay more than a fair price for their products ( &  2003). The pricing issues that the company encounters include the kind of changes to be done on the prices; how the change in prices can affect the operation of Wallace and how the old and new clients will react to the changes in the prices. The different pricing issues must be given proper solutions in order for the marketing manager to improve his relationship with the board of directors.    The market pricing approach is used when the environmental improvement under consideration causes an increase or decrease in real outputs and/or inputs. Examples may include a decrease in timber harvest and/or extraction of minerals from a legislative enactment that effectively expands the acreage set aside as a wilderness area; the expected increase in fish harvest due to the implementation of a new water pollution control technology; or an increase in crop yield arising from a legislative mandate of a higher air quality standard. In the above examples, benefits from environmental improvement are identified in terms of changes in outputs or inputs; more specifically, timber, minerals, fish and crops ( 2000). These outputs or inputs are expected to have market prices that accurately reflect their scarcity values or, where this is not the case, shadow prices can be easily imputed. Thus, where environmental improvement is directly associated with changes in the quantity or price of marketed outputs or inputs, the benefit directly attributable to the environmental improvement in question can be measured by changes in the consumers’ and producers’ surpluses ( 2000).   For the established clients, the pricing approach for them should concentrate on providing them the best product for the equivalent amount of price they pay. The company should maintain well made products for appropriate prices. The prices for established clients should not be too high or too low. Rather it should be priced according to the quality of product made for them.   The target price for the shoe ranges from to 0 depending on the kind of shoe, style of the shoe and the materials used in making the shoe. The target price of the shoe will depend on the economic situation of the country and the level of demand for the shoes. The shoes will be sold on a limited stock unless there is a high demand for that particular kind of shoes so that costs in making the shoes can be minimized. Unit cost Consequently, it is only when unit costs in all firms increase by the same degree that all prices increase pro rata to maintain a constant margin in each firm. Another traditional industrial organization question concerns the relationship between market power and the ability to set prices above unit costs and here the natural question to pose concerns the effect of an increase in one firm’s market share on the price it sets in balanced conditions (1998).   Any effect is transmitted via the effect of a redistribution of market shares upon average practice unit costs and the average market price. This is not a simple matter to deal with, for if the share of firm is increased so the share of at least one other firm must be reduced pro rata. To clarify the general case, suppose that the offsetting reduction in shares is born equip proportionately by all other firms.  The relationship between a firm’s market share and its price depends on where that firm’s unit costs stand relative to the industry average (1998).If the firm is more efficient than average its price is lower for a higher market share, and conversely if it is less efficient than average. Thus, interdependence of pricing decisions means that there is no simple relation between changes in market shares and the pattern of prices in the industry (1998).    Competitiveness is a chain relationship, and no meaning can be attached to the competitive advantage of any firm without locating its position in the chain. A firm improves its competitiveness by innovating better than its rivals.  Either it reduces its unit costs relative to the population average or it enhances its product quality relative to the population average. This is the point: to increase competitive advantage one must improve relative to average behavior. The normal conditions of balanced expansion help to fix the ideas. If costs are reduced, the firm sets a lower normal price but with a higher profit margin so that its fitness is increased. If it improves product quality it can charge a higher market price and gain margin and fitness in that way (1998). The cost of a product influences channel structure directly. Financing the purchase may be a deciding factor in influencing when to buy and what brand to buy. Major equipment products, such as forklifts, are generally sold by exclusive retailers for specific brands or by company branch retailers. Because of the high purchase price, the direct incentives offered by the manufacturer to the user are of considerable importance ( 1992).   In some instances, special options are offered and must be specified to the manufacturer in advance of product delivery. These market characteristics require a short line of communications, no storage or warehousing for wholesale distribution, and frequent involvement by the manufacturer with its retailers ( 1992). The computation for the unit cost is unit cost= total cost/total output. If a company buys shoe parts such as sole which costs .95/piece* 600 pieces=,970, added with heel which costs .95/piece* 600= ,370 and vamp which costs 20.15/piece * 600= ,090. The total cost for making a shoe is ,430 divided by total output which is 600 totals to 34.05. The unit cost for each shoe is .05. Annual income statement Income statements are tremendously useful. They’re also tremendously dangerous because they can be misleading. Looking at the company’s income statement, one can think that they have money to spend when they don’t. People can think that everything in their business is healthy when some parts are not healthy at all. The income statement tracks only the promise and agreement part of a company’s transactions. The income statement is an abstraction. It shows the company whether they are making money on the goods or services provided to clients, once the company has taken all their costs and expenses into account (,  &  2000). But it isn’t real. It doesn’t show how much cash an individual puts in a bank account or how much cash they spent. In fact, if a certain company is growing fast, they may be building up inventory, buying new machinery, opening up new branches, and in general spending a whole lot more cash than they are generating. Your income statement may show that the company is highly profitable and all the while the company might be running out of cash. There’s another downside to accrual-based income statements (,  &  2000).   They provide a huge opportunity for what someone might call creative accounting. Accountants are required to use a code of rules known as Generally Accepted Accounting Principles, or GAAP. The logic behind GAAP is reasonableness; the rules must make sense. Even so, there are many different rules within GAAP for treating depreciation, inventory, and so on. So to a limited extent accountants can choose how they calculate depreciation. They can select one or another method of valuing inventory. They can insert reserves for warranty costs, bad debt, and other eventualities or not. They can record sales differently, depending on the likelihood of returns for credit. All such moves can be perfectly legal and perfectly consistent with accounting standards, but they will make the bottom line of the income statement look very the company is financially sophisticated; they can be fooled by clever accounting. And if they run their own business, what they really want to know isn’t just the bottom line on an income statement but how much cash is actually flowing into the bank account (,  &  2000). The next figure will feature the income statement for the shoe company. Income Statement For the company LM shoes August 2006 – August 2007     Income Sales                                                                        ,620 Cost of goods sold      Inventory         1,000            Purchases     12,000     Direct Labor  10,000 Net Cost of goods sold                                           ,000             Total Income                                                                     ,620   Expenses         Salaries                                                                    $  8,000         Rent                                                                         $  3,000         Supplies                                                                   $  6,000         Travel                                                                       $    500         Advertising                                                               $ 1,000         Utilities                                                                     $    700         Total expenses                                                        ,200 Profit                                                                               $      420   Break Even analysis Measuring the risk associated with the expected cash flows of the project and incorporating this risk into the determination of the net present value (NPV) is essential for any real world project evaluation. There are various ways in which risk can be incorporated into the NPV computation and capital budgeting decision support. These include the risk-adjusted discount rate, the certainty equivalent, sensitivity and break-even analysis and simulation. The break even analysis determines how low an income variable can fall, or how high a cost variable can rise, before the project breaks even at a net present value of zero (. 2002). For example, management may wish to know how low a product’s price could go in a price war before the project becomes uneconomic. Information about the critical variables allows management to make decisions at two points in time in the investment analysis. During the planning phase, management can commit extra funds to develop more reliable forecasts for variables which will be critical to the venture’s success. Decisions made at this stage are known as before the event decisions. In the operating phase, management can pay special attention to the behavior of identified critical variables so that the project behaves as expected. Decisions made during this phase are known as after the event decisions (. 2002).   Management can use the break-even results in two ways. Initially, management can decide to abandon the project if forecasts show that below break-even values are likely to occur. Later, management can prepare for a worst-case scenario involving the investigated variables being realized during the project’s life. This action could be to suspend production, to try to make production more efficient or to adjust the unit selling price. In using the figures different things should be considered. This includes the variables have been adjusted one at a time. It is unlikely in reality that only one variable will change during the tenor of the project. If decisions are made by observing the behavior of only one variable, then those decisions may be invalid.   Variables have been analyzed as if they are independent (. 2002). Pairs of variables such as sales volume/sales price and production volume/production cost are not independent. Breakeven figures are only reliable if it is assumed that the range over which the variables change is sufficiently modest so as not to affect the related variable. Any project ought to be reviewed at regular points during its life. Analyses taken at particular points in time must refer only to future events, and not to past ones (. 2002).   Breakeven values calculated at the outset may not be accurate, and they should be recalculated at the chosen point in time.  Break-even analysis is essentially pessimistic. Management should be interested in breakeven figures only as a last line of defense in project analysis (. 2002). The break even point is a certain time wherein the total revenue has an equal value with the total cost.  To compute for the break even point the total fixed cost will be divided with the difference between the selling price and the average variable cost.  Thus ,000/(0- 35)= .16. Margin of safety Marketable securities, accounts receivable, and inventories are continually being converted into cash in the normal course of business. This cash is, in turn, used to pay off maturing current liabilities, reinvested in new inventories, used to finance the growth of new accounts receivable, and, as excess cash balances build up, invested in new marketable securities. Additionally, new short-term liabilities are incurred as sales grow and additional investments in current assets are made ( 1997).  Given the various lags in the conversion of inventories to receivables and then to cash, and given the necessity of paying current liabilities when due, normal prudence suggests that a margin of safety of current assets over current liabilities should be maintained. A second margin of safety is dictated by the very nature of current assets. Marketable securities are subject to possible temporary or even permanent declines in market value. Accounts receivable are subject to bad-debt losses. Finally, inventories are subject to physical deterioration, unsaleability, and declines in market value ( 1997).   In order to balance these probable declines in asset values against the fixed requirement to pay one’s debts in full when due, some margin of safety of assets over liabilities is required. The requirements of this margin of safety, coupled with the margin of safety previously discussed, demand that current assets exceed liabilities ( 1997).  The margin of safety is acquired by subtracting actual sales level with breakeven sales level. Thus ,620- .16= ,574.83. Uncertainty analysis During uncertainty analysis, probabilities are estimated and assigned to possible outcomes of relevant uncertain events. The acquisition of additional information is considered, the expected value of that information and the choice to collect it may be determined, and posterior probabilities may be computed. During uncertainty analysis the informational basis for probability assessment has to be carefully identified, so that it becomes clear whether one may rely on the logical, the frequentistic, or the personalistic interpretation of the probability concept (1993).  One method that can be used in the uncertainty analysis is the decision tree. The next figure will feature a decision tree. In the business the main uncertainty is whether the business will be a success. With the kind of business everything is possible thus decisions should be made with regards to the operations of the business. References Credit:ivythesis.typepad.com

clearly identify a target price for your companyâ€™s business (shoe business)

Target Price Global firms adopt different pricing schemes around the world and these results in some practices being viewed as discrimin...

Two Question: 1.)procurement arrangement 2.)contractural arrangements

PROCUREMENT ARRANGEMENTS A. Selection of Contractor The Contractor of this project should determine the best ways to utilize its basic factors of production in the safest ways possible. These resources include the construction site’s people, materials, information, and energy needed in the production. The contractor should be the bridge that would link the goals of management and safe operational performance. They should be concerned with the increase in productivity through the proper management of people and choosing the appropriate methods of construction site organization while maintaining a high level of safety (, 1993). In choosing the best contractor, other qualities that have to be taken into consideration include: 1)     They must be able to perform the careful analysis of the construction site’s materials and their requirements as a safety precaution. In this process, they make use of various mathematical methods in its operations research to meet the requirements. 2)     They must also have the capability to develop systems of management control in order to aid in the planning of safety precautions and measures in cases of emergency situations. These systems are eventually subjected to improvements for the effective implementation of the safety plans of the construction site. 3)     The contractor should have the capability to perform the tedious task of selecting which among the various construction site locations have the best combination of raw construction materials availability and safe environment. This time, engineers make use of computers for simulations and robots for controlling various activities and devices. They also are in charge of the development of systems and programs for safety. B. Procurement System Buyers and purchasing agents in this project should be tasked to evaluate construction material suppliers on the basis of price, quality and service support. They would review catalogs as well as the construction industry and company publications in order to help them in their search for the right construction material suppliers. Fortunately for them, a majority of this information can be easily accessed in the Internet (, 1995). They will also do some researching about the reputation and background of the construction material suppliers and may also do some advertisements regarding the foreseen purchase actions in the hope of soliciting bids. At meetings and conferences, they should perform the examination of construction material products as a safety precaution, the evaluation of the productive and distributive capabilities of the construction material suppliers, and the discussion of business considerations that have the possibility of influencing the construction material purchasing decision. As soon as all valuable information about the construction material suppliers is gathered, the placement of construction material orders and contracts are started to be awarded to those construction material suppliers who are able to meet the needs of the purchasers. The typical contracts range for several years and may even have the stipulations of the range of construction material prices, which would allow the purchasers to reorder whenever necessary. There should be a clear distinction between the work of a buyer and that of a purchasing manager. Purchasing agents and buyers focus mainly on the daily purchasing tasks. They specialize in construction materials. Purchasing agents perform the tracking of the conditions of the construction materials for safety, trends in their prices, as well as the future of the markets. Purchasing managers, on the other hand, are in charge of the more complex and critical construction material purchases and handles a team of purchasing agents. B. CONTRACTUAL ARRANGEMENTS             Costs of construction of the building could range to hundreds of millions of dollars. It is very obvious that the owner cannot afford the costs without outside assistance such as banks and other financial institutions. Sources of capital to finance the construction of the building will depend on the type of the building. Financing of the construction of the building will depend on what type of business is going to be established. Basic sources of capital can be through equity finance, debt finance or internally generated funds (, 1999). Cost of construction of the building depends on the nature, size, location and management organization of the project. Project managers and designers such as the architect and engineer should realize that the costs are only estimated values and may vary depending on the changes, schedule adjustments and site conditions.             Capital cost that has to be agreed in the contract for the project includes: ·         land acquisition, including assembly, holding and improvement ·         planning and feasibility studies ·         architectural and engineering design ·         construction, including materials, equipment and labor ·         field supervision of construction ·         construction financing ·         insurance and taxes during construction ·         inspection and testing ·         owner’s general office overhead Engineers and contractors used different types of cost estimation and should be weighed and compared to determine the most cost-effective estimate. The foundation of this contract is freedom of contract or the standard of autonomy. This denotes that when monitoring and following the appropriate legal limits, individuals can take part in whatever contractual affairs they prefer. However, they must understand that the moment they have determined to do so, they are bind by this contract. This principle has been used in the legal system for such a considerable amount of time by disputes on contractual relations specifically, the use of fine prints and other stipulations that are not easily recognizable for one of the contracting parties have been contended with. REFERENCES Credit:ivythesis.typepad.com

Two Question: 1.)procurement arrangement 2.)contractural arrangements

PROCUREMENT ARRANGEMENTS A. Selection of Contractor The Contractor of this project should determine the best ways to utilize its basic fac...

LETTER OF ADVICE – ASSIGNMENT

Criteria (equally weighted, each criteria 9 marks) Unsatisfactory (1-3 marks)   1                        2       3                 Low Pass  – Pass grade (4-5 marks) 4                            5                      Above average (6-7 marks)   6                                              7 Excellent (8-9 marks)   8                                  9   Content   The letter did not satisfactorily explain how the income figure is derived or the difference between personal and business assets, investments and expenses. Further the letter did not analyse the situation or advise whether to borrow. There was no justification of advice given, ie, analysis of data, through revised income statement or cash at bank account. There was some explanation of how the income figure is derived or the difference between personal and business assets, investments and expenses. There was some analysis of the situation and advice as to whether to borrow. There was some justification of advice given, but no inclusion of analysis of data, through revised income statement or cash at bank account. There was a satisfactory explanation how the income figure is derived and the difference between personal and business assets, investments and expenses. Further the letter satisfactorily analysed the situation and advised whether to borrow. There was satisfactory justification of advice given, ie, analysis of data, through revised income statement or cash at bank account. The letter fully explained how the income figure is derived and the difference between personal and business assets, investments and expenses. Further the letter fully analysed the situation and advised whether to borrow. There was full justification of advice given, ie, analysis of data, through a completely revised income statement.                 /9 Written expression: USE OF WRITING TIPS provided in lectures The student’s work reflects poor English expression and does not use the writing tips provided.  Writing is unclear, lacks fluency, and is frequently grammatically incorrect. The student’s work reflects fair to satisfactory English expression and some use of the writing tips provided.  Writing is unclear and lacks fluency on some occasions, and there are some grammatical errors. The student’s work reflects good English expression and a good use of the writing tips provided.  Writing is fluent and clear, with few grammatical errors. The student’s work reflects excellent English expression and excellent use of the writing tips provided.  Writing is fluent and very clear, with very few, if any, grammatical errors.                   /8   Unsatisfactory 0                                      1 Low Pass 2                                     3 Above average 4                                        5 Excellent 6   Logical Structure of Argument The letter did not have any logical structure leading to a satisfactory conclusion. The letter showed some evidence of a logical structure that led to and supported  a  conclusion The letter showed good evidence of a logical structure that led to and supported a conclusion. The letter showed strong evidence of a logical structure that led to and supported a conclusion.            /5   Unsatisfactory 0 Low Pass  1 Above average 2 Excellent 3   Writing and presentation style: USE OF MODEL provided in lectures The letter is not presented using the appropriate model provided.   Sometimes, but not always consistently, the letter is presented using the appropriate model provided. On most occasions, the letter is presented using the appropriate model provided. The letter has been consistently presented using the appropriate model provided.                /5 Student Portfolio A printout of the student portfolio experience was not submitted. The  printout of the student portfolio experience indicates a minimal attempt at  recording the experience.                                         The printout of the student portfolio indicates a reasonable attempt at recording the experience. The printout of the student portfolio experience indicates a comprehensive attempt at recording the experience.                                                               /3 Total Marks                           /30                                                     Johnson & Robertson Accounting Practice   Merilyn and Bob Haines Brisbane Water Tank Solutions   18 September 2007 Dear Ms & Mr Haines   Brisbane Water Tank Solutions’ Income Statement Query   1. Facts It is in my understanding that based on the assessment of your company, Brisbane Water Tank Solutions, to your income statement ended 01 September 2007, and you have concluded that you are ready for expansion.  This decision is due to the fact that your initial analysis of income statement can result to a net profit of at least 0,000.  However, such decision is less certain because there is a mixed of personal and business assets, investments and expenses.  You wish to be more accurate in income statement analysis to make your company financially ready for the nearing expansion plan.   2. Re-Assessment of the Income Statement In the appendix, there are several methods that were applied to determine the consistency of the initial analysis of the firm.  The complete presentation of income statement was focused on re-assessing the decision of the firm to expand based on 0,000 net profit benchmark.  There are several findings that are as follows that can dissolve the accuracy of the initial assessment: ·         Proceeds from the sale of family car, holiday cost of the Bahamas tour and investment of Merilyn and Bob are personal costs ·         Cash receipts do not include bank borrowing ·         Credit sales and cash receipts from sales collection will both be included in sales account ·         Opening and closing inventory as well as purchases regardless of payment terms will be included under cost of goods sold account. ·         Cash or non-cash transactions will be considered in income statement as long it is appropriate to carry respective accounts ·         All accounts that are not considered in income statement will be included in balance sheet   Supposedly, the personal gains and costs that have been mistakenly included in the initial income statement should be adjusted (e.g. either added or deducted).  However, it will be two times problematic when the revised income statement will be adjusted because all other accounts will be changed.  For convenience and since the firm already carry-out their finances by including there personal gains and costs, the revised income statement is prepared by including them.  They are automatically absorbed by the capital account as shown in the notes to journal entries.  Specifically, these include investment of Merilyn and Bob, sale of family car and the Bahamas tour.    Further, there are accounts that must not be included in the revised income statement rather in the balance sheet.  Specifically, these include cash, factory, delivery trucks and cranes, merchandise inventory, payments, receivables, bank borrowings and the contra-account of accumulated depreciation.    According to  (1999), the income statement is a financial statement that reflects the movement and final result of corporate operations which may result to net income or net loss.  To re-assess the initial analysis of the company that the seven-month operation from February 1 to September 1, 2007 results to net income of at least 0,000, six basic parts of the income statement are considered, computed and analyzed as follows: ·         Revenue on sales ·         Cost of goods sold ·         Gross profit on sales ·         Operating expenses ·         Other income/ expenses ·         Net income or net loss   According to , the structure of the income statement is shown formally in paragraphs 81, 82 and 87. Paragraph 81. As a minimum, the face of the income statement shall include line items that present the following amounts for the period: (a)    revenue; (b)    finance costs; (c)    share of the profit or loss of associates and joint ventures accounted for using the equity method; (d)    tax expense; (e)    a single amount comprising of (i) the post‑tax profit or loss of discontinued operations and (ii) the post‑tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation; and (f)     profit or loss. Paragraph  82. The following items shall be disclosed on the face of the income statement as allocations of profit or loss for the period: (a)    profit or loss attributable to minority interest; and (b)    profit or loss attributable to equity holders of the parent. Paragraph  87. Circumstances that would give rise to the separate disclosure of items of income and expense include: (a)    write-downs of inventories to net realisable value or of property, plant and equipment to recoverable amount, as well as reversals of such write-downs; (b)    restructurings of the activities of an entity and reversals of any provisions for the costs of restructuring; (c)    disposals of items of property, plant and equipment; (d)    disposals of investments; (e)    discontinued operations; (f)     litigation settlements; and (g)    other reversals of provisions. These basic parts comprised the presentation in the revised income statement (standard).  The computation explicitly showed that the firm resulted to a net income of ,800 at least 50% short of the benchmark for expansion of at least 0,000.  The computation can be checked using the worksheet, t-accounts and journal entries for accuracy.  Due to this, the firm is not in line with the benchmark and has overstated their income statement performance.  The source of the problem is the inclusion of personal expenses and investments including inappropriate placing of some accounts which must be in the balance sheet.    I recommend that the annual income statement in particular and financial statement in general of the firm should have a clear stance regarding personal accounts and business accounts.  This can be done by avoiding deposit/ drawings of personal accounts into the business accounts.  Separation of them should be clearly established.  Otherwise, misjudgment based on income statement will deviate from real financial performance.  It is also suggested that a certified accountant should handle the operational recording and adjustments on the company’s books.     3. Conclusion In my conclusion, it is in my opinion that Brisbane Water Tank Solutions erred in their initial evaluation of the income statement of the business particularly on meeting the 0,000 benchmark.  This is based on the re-assessment applied on a seven-month performance from February 1 to September 1, 2007.  The revised income statement resulted to a new value of net income which is ,800 after application of specific approaches based on academic books and AASB income statement provisions.   As a final note, Brisbane Water Tank Solutions should tap alternative ways to finance its expansion plan because the revised net income is short of the benchmark.  There are different ways of financing expansion efforts such as different types of equity and debt financing.  These finances are not required to be 100% exclusive of one type rather can also be vertical (one type of equity/ debt to another type of equity/ debt) and horizontal (one type of equity to one type of debt) combination.   Should you have any further queries in relation to these matters, please do not hesitate to contact me.     Yours faithfully,   Hui Chun Yang Senior Manager, Small Business Section Johnson & Robertson                                                         Appendix   Brisbane Water Tank Solutions Revised Income Statement (Worksheet) Seven-Month Period from February 1 – September 1, 2007 Account Title Trial Balance Adjustments Income Statement Balance Sheet Dr Cr Dr Cr Dr Cr Dr Cr Cash 5,000   0,000 4,700     0,300   Accounts Receivable      345,000         345,000   Factory   200,000             200,000   Delivery Trucks and Cranes   110,000             110,000   Accumulated Depreciation       11,500       11,500 Merchandise Inventory   210,000   0,000  330,000 0,000  330,000   330,000   Account Payables     270,000 480,000       210,000 Bank Payables       150,000       150,000 Brisbane Water Tank Solutions, Capital    685,000 330,000   75,000       430,000 Brisbane Water Tank Solutions, Drawing       40,000           40,000   Sales       660,000       660,000     Purchases      480,000    480,000       Cash Expenses      244,700    244,700       Depreciation Expense (Factory, truck and cranes)        11,500      11,500             Brisbane Water Tank Solutions Revised Income Statement (T-Accounts) Seven-Month Period from February 1 – September 1, 2007   Cash Factory Truck and Cranes Merchandise Inventory Capital        165,000        270,000        200,000    110,000.00          210,000       330,000   330,000       165,000          45,000          40,000                 120,000         200,000        150,000        244,700                     110,000          30,000        554,700                     210,000        315,000                        45,000        705,000                        30,000        150,300                       760,000                         430,000                     Bank Payables Sales Accounts Receivable Purchases Accounts Payable          150,000      315,000       345,000          480,000     270,000       480,000          345,000                 210,000          660,000                                 Cash Expenses Depreciation Expense Accumulated Depreciation Drawing            244,700          11,500        11,500            40,000                                   Brisbane Water Tank Solutions Revised Income Statement (Standard) Seven-Month Period from February 1 – September 1, 2007   Revenue from Sales Sales                                                              660,000   Cost of Goods Sold Merchandise Inventory, Beginning          210,000 Add: Purchases                                           480,000 Less: Merchandise Inventory, Ending     330,000 COGS                                                                        360,000   Gross Profit on Sales Sales                                      660,000 Less: COGS                          360,000 Gross Profit on Sales                                  300,000   Less: Operating Expenses Cash Expenses                   244,700 Depreciation Expense          11,500 Operating Expenses                                   256,200   Net Income/ (Loss)                                      43,800     Notes to Income Statement – Journal Entries   Cash                                      165,000             Brisbane Water Tank Solutions, Capital             165,000   Factory                                   200,000 Brisbane Water Tank Solutions, Capital             200,000   Trucks and Cranes              110,000             Brisbane Water Tank Solutions, Capital             110,000   Merchandise Inventory       210,000             Brisbane Water Tank Solutions, Capital             210,000   Cash                                      45,000             Brisbane Water Tank Solutions, Capital             45,000   Cash                                      150,000 Bank Payables                                                         150,000   Cash                                      30,000             Brisbane Water Tank Solutions, Capital             30,000   Cash                                      315,000             Sales                                                                          315,000   Accounts Receivable          345,000             Sales                                                                          345,000   Purchases                             480,000             Accounts Payable                                                   480,000   Brisbane Water Tank Solutions, Capital 330,000             Merchandise Inventory                                           330,000   Accounts Payable               270,000             Cash                                                                          270,000   Brisbane Water Tank Solutions, Drawing 40,000             Cash                                                                          40,000   Cash Expenses                   244,700             Cash                                                                          244,700   Accumulated Depreciation            11,500 Depreciation Expense                                            11,500                                       Credit:ivythesis.typepad.com

LETTER OF ADVICE – ASSIGNMENT

Criteria (equally weighted, each criteria 9 marks) Unsatisfactory (1-3 marks) 1 ...