Case 1

Use the following information to create a case exercise.

Criteria:

1. Excel: all information presented in Excel.

2. Formatting:

a. use correct accounting formats for the prepared financial statements, including headers and sub-headers. Use chapter #1 and/or #5 examples to guide you.

b. Include only those accounts utilized in this exercise.

c. All worksheets must be formatted to fit into an 8.5 x 11 inch printable page. Landscape or portrait orientation is acceptable.

3. Formulas: all calculations must be indicated using Excel formula functions

Requirements: Use the following information to prepare the case.

1. Record all transactions using the financial transaction horizontal model. Use the example template below to format your transaction analysis

a. Show ending balance values for each account

2. Complete the following requirements:

a. Create and format the following statements for the first month of operations.

i. an income statement

ii. balance sheet,

iii. statement of cash flows

b. Compute the following ratios:

i. Net Profit Margin

ii. Current ratio

iii. Asset turnover ratio (use ending total assets balance, not average assets)

c. Provide a qualitative evaluation of these three ratios. Include in your analysis these items: What does each illustrate, specifically, to the company's performance? What is

the impact of having just one month of business on any/all of the ratios? Based on the given information, what is the reliability of these values, and what would strength the

signal provided by the ratios?

Transactions:

SoftBrook is a new company started by B. Martin. Record the following transactions which occurred during the first month of business:

1. Owner invests $77,500 into the business, allocating into the following assets: $45,000 cash, office equipment costing $4,500, and an additional $28,000 of computer equipment.

2. Owner buys a plot of land for $24,000 for a future office paying $4,800 in cash and signing a long term note for $19,200.

3. Owner purchases a portable office/trailer for $21,000 cash and secures trailer on the new land. The trailer has a useful life of 2 years, w/ $3,000 estimated salvage value.

4. Pays $6,600 insurance premium for a 2 year insurance policy on the office trailer.

5. Provides and bills $3,200 of services to client and is paid in cash.

6. Purchases an additional $3,500 of computer equipment for $700 in cash and a long term note for $2,800.

7. Provides $3,750 of services to client, payment to be received within 30 days.

8. Purchases on credit additional office equipment for $750.

9. Provides $9,200 of client services on credit.

10. Received a rent bill of $320 for testing device used on one of the completed jobs, to be paid within 30 days.

11. Collects $4,600 cash from client services on transaction #9.

12. Pays $1,600 wages to employee.

13. Pays $750 cash for the office equipment, #8.

14. Pays $450 cash for repairs to computer equipment.

15. Withdraws $3,875 cash for personal use.

16. Pays $1,600 wages to employee.

17. Pays $800 cash for advertising for the first month.

18. Records insurance expense for one month.

19. Records one month's depreciation on office trailer (hint: record $750 of depreciation).