Question
2. Madison Barlow takes out a loan of $100,000 at 5% yearly interest to start a small landscaping firm. At the end of 2020, her
2. Madison Barlow takes out a loan of $100,000 at 5% yearly interest to start a small landscaping firm. At the end of 2020, her company's first year, she calculates that they have charged customers for work completed $310,000 in total. Of this, $260,000 has been collected, while $50,000 still remains to be paid. Ms. Barlow collects a monthly salary of $6,000. She also employs a head landscaper at a yearly salary of $28,000, as well as two assistant landscapers who each earn an hourly wage of $14/hr., working 40 hours per week for a total of 36 weeks per year. Benefits for Ms. Barlow and her employees totaled $25,800 in 2020. In addition, she paid $22,000 in employment taxes. Ms. Barlow leases two trucks for the business, each at $2,000/month. In addition, she purchased a total of $35,000 of new depreciable equipment. Estimated depreciation on this equipment over the year was $9,200. The firm also purchased a total of $27,000 worth of materials (including mulch, herbicides, and hardscaping components) for use in its various landscaping jobs, all of which was used. Additional miscellaneous operating expenses, including gas, totaled $9000. The firm also purchased $1,100 worth of local advertising. Ms. Barlow's tax rate was 21% during 2020.
1. Prepare a 2020 income statement for Madison Barlows firm (assume Barlow uses accrual accounting, not cash accounting). 2. Evaluate her financial performance over the year using ratio analysis.
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