A. Using the information, provide an income statement and a balance sheet in narrative form for Schutz Building Services for the current period.
B. How would the financial statements you produce help the supplier of building materials decide whether or not to trade with Johan? What parts of the financial statements would be positive indicators that Schutz Building Services would pay for supplies on time and what items may cause some concern for the supplier?

Schutz Building Services is a fast-growing business in the housing industry. Johan Schutz started the business 3 years ago and has worked hard to establish the firm. Johan has no accounting knowledge and simply keeps his invoices and receipts in a shoebox that he takes to his accountant once a year to be sorted out and turned into financial statements for tax purposes. Johan does not use the financial statements for decision making. So long as he has cash in the bank, Johan is satisfied with how his business is operating. Unfortunately, Johan’s accountant has suddenly left the country and retired to South America.

Johan is negotiating a contract with a supplier of building materials who wants to see his financial statements to ensure that Johan can meet his payments each month. Johan has asked you to prepare financial statements. Based on his last tax return and the contents of his shoebox for this year, you have established the following items:

Cash in the shoebox (with the receipts and invoices) Cash in the bank account Building services provided Amounts owed by customers Wages paid to employees Wages owed to the employees Equipment Building supplies used Building supplies on hand Amounts owed to suppliers Motor vehicle Motor vehicle expenses Electricity and telephone expense Cash used by Johan for personal expenditure

$

500 3800 550000 80000 150000 3500 68000 310000 18000 30000 32000 5600 4000 5700