CASE STUDY 2 BAF/BAI - Mr. Eliasziw CASE STUDY SITUATION Sam Larkin started Sam's Janitorial Service two years ago. Because business has been exceptionally good, Larkin decided to expand operations by acquiring an additional truck and hiring two more assistants. To finance the expansion, the owner obtained a Note Payable from a venture capitalist for $25,000 on July 1, 2021. The note came with a significant interest rate of 10%, largely since Larkin had never borrowed money before and had self-financed the business. Of the amount loaned, $5,000 was due on July 1, 2022, with the remaining balance due over 4 years. The terms of the note require Larkin to maintain a Working Capital (of at least $15,000 as of December 31, 2021.) If these terms are not met, the entire amount of the note is payable immediately. On December 31, 2021, the following Balance Sheet was prepared. Sam's Janitorial Services Balance Sheet December 31, 2021 ASSETS Current Assets Cash Accounts Receivable Janitorial Supplies Prepaid Insurance Total Current Assets 6,500 9,000 5,200 4,800 25,500 Capital Assets Cleaning Equipment, net 22,000 Delivery Truck, net 34,000 56,000 Total Assets 81,500 LIABILITIES & OWNER'S EQUITY Current Liabilities Accounts Payable 2,500 Note Payable (due in 1 year) 5,000 Total Current Liabilities 12,500 Long Term Liabilities Note Payable (balance) 20,000 Total Liabilities 27,500 Owner's Equity S. Larkin, Capital 54,000 Total Liabilities and Owner's Equity 81,500