ACCOUNTING

Jason Jones wants to start his own business providing computer security to small businesses. He is an experienced IT professional who has written several software programs that offer digital protection for small networks. Jones plans to license his current software and hire programmers to develop related network security products. He has prepared a business plan with the pro forma financials liste below.

Balance Sheet

Income Statement

He has called you to help him because his balance sheet does not balance.

ANALYZE Jasons strategic business plan as reflected in his pro forma financials by identifying the expected growth in Jasons forecast income and expense.

RELATE this growth to the capital he expects to invest.

EXPLAIN what he needs to do to get his balance sheet to balance.

IDENTIFY any other problems you see with his financials.

YO Y1 Y2 Y3 Y4 Y5 $25.000 0 0 25.000 $25.000 0 151.252 176.252 $25.000 24.000 845.395 894.395 $25.000 25.000 2.065.630 2.115.630 $25.000 30.000 4.192.986 4.247.986 $25.000 35.000 7.323.688 7.383.688 Current Assets Cash Marketable Securities Accounts Receivable Total Current Assets Long-term Assets Computer Hardware Total Assets Liabilities and Owners' Equity Accounts Payable Total Current Liabilities 750.000 750.000 750.000 $775.000 $926.252 $1.644.395 800.000 800.000 $2.915.630) $5.047.986 800.000 $8.183.688 250 250 750 750 750 750 1.000 1.000 1.250 1.250 1.250 1.250 Total Liabilities 250 750 750 1.000 1.250 1.250 Retained Earnings Shareholder Equity Total Liabilities and Equity 0 -574.488 750.000 750.000 $750,250 $176.262 183.420 750.000 $934.170 1.498.326 750.000 $2.249.326 3.794.441 750.000 $4.545.691 7.171.351 750.000 $7.922.601 Y1 Y2 Y3 Y4 Y5 $152.500 $150.000 376.875 1.500.000 529.375 1.650.000 15.250 15.000 514.125 1.635.000 $200.000 2.550.000 2.750.000 20.000 2.730.000 $250.000 3.900.000 4.150.000 25.000 4.125.000 $250.000 5.400.000 5.650.000 25.000 5.625.000 Revenues Software Licenses Maintenance Fees Total Sales Cost of Goods Sold Gross Profit Operating Expenses Network Access Fees Software Development Salaries Selling Expense Office Expense Other Total SG & A Expense Operating Profit Other Expenses Interest Income Earnings Before Taxes Income Taxes Extraord. Item: Tax Refund or Carryforward Net Income 120.000 204.000 582.000 120.000 62.400 12.000 1.100.400 -586.275 24.000 12.000 611.100 120.000 62.400 12.000 841.5001 793.500 24.000 12.000 641.655 126.000 65.520 12.600 881.775 1.848.225 24.000 12.000 673.738 132.300 68.796 13.230 924.064 3.200.936 24.000 12.000 707.425 138.915 72.236 13.892 968.468 4.656.532 0 0 3.213 7.928 6.624 586.275 795.481 1.878.438 3.280.164 4.824.157 2.393 238.644 563.531 984.049 1.447.247 2.393 201.071 0 0 0 ($586.275) $757.908 $1.314.907 $2.296.115 $3.376.910 YO Y1 Y2 Y3 Y4 Y5 $25.000 0 0 25.000 $25.000 0 151.252 176.252 $25.000 24.000 845.395 894.395 $25.000 25.000 2.065.630 2.115.630 $25.000 30.000 4.192.986 4.247.986 $25.000 35.000 7.323.688 7.383.688 Current Assets Cash Marketable Securities Accounts Receivable Total Current Assets Long-term Assets Computer Hardware Total Assets Liabilities and Owners' Equity Accounts Payable Total Current Liabilities 750.000 750.000 750.000 $775.000 $926.252 $1.644.395 800.000 800.000 $2.915.630) $5.047.986 800.000 $8.183.688 250 250 750 750 750 750 1.000 1.000 1.250 1.250 1.250 1.250 Total Liabilities 250 750 750 1.000 1.250 1.250 Retained Earnings Shareholder Equity Total Liabilities and Equity 0 -574.488 750.000 750.000 $750,250 $176.262 183.420 750.000 $934.170 1.498.326 750.000 $2.249.326 3.794.441 750.000 $4.545.691 7.171.351 750.000 $7.922.601 Y1 Y2 Y3 Y4 Y5 $152.500 $150.000 376.875 1.500.000 529.375 1.650.000 15.250 15.000 514.125 1.635.000 $200.000 2.550.000 2.750.000 20.000 2.730.000 $250.000 3.900.000 4.150.000 25.000 4.125.000 $250.000 5.400.000 5.650.000 25.000 5.625.000 Revenues Software Licenses Maintenance Fees Total Sales Cost of Goods Sold Gross Profit Operating Expenses Network Access Fees Software Development Salaries Selling Expense Office Expense Other Total SG & A Expense Operating Profit Other Expenses Interest Income Earnings Before Taxes Income Taxes Extraord. Item: Tax Refund or Carryforward Net Income 120.000 204.000 582.000 120.000 62.400 12.000 1.100.400 -586.275 24.000 12.000 611.100 120.000 62.400 12.000 841.5001 793.500 24.000 12.000 641.655 126.000 65.520 12.600 881.775 1.848.225 24.000 12.000 673.738 132.300 68.796 13.230 924.064 3.200.936 24.000 12.000 707.425 138.915 72.236 13.892 968.468 4.656.532 0 0 3.213 7.928 6.624 586.275 795.481 1.878.438 3.280.164 4.824.157 2.393 238.644 563.531 984.049 1.447.247 2.393 201.071 0 0 0 ($586.275) $757.908 $1.314.907 $2.296.115 $3.376.910