WSU Small Business Booster
Every year, Robin identifies a small business to invest her money in because she wants to support
companies that WSU students have started. Robin named the program “WSU Small Business Booster.”
Robin is a graduate of the Carson College of Business and is now a successful venture capitalist in Silicon
Valley. Different from her venture capital role of investing in high technology start-ups that require
significant funding, her focus on WSU students is to provide a little financial support and some advice so
students can learn about accounting and business from running their own small businesses.
Each year in July WSU students interested in the WSU Small Business Booster program submit a short
description of their small business along with an income statement and balance sheet for their business
over the last 12 months. Robin finds the financial statements valuable in making her decision on which
business to support. She compares the financial statements to get an understanding of each business
and also calculates and compares financial ratios.
Robin has already reviewed the 15 submissions for July 2021 and has narrowed her decision to two
business proposals: Catherine’s Canine Cookies and Bill’s Snack Truck. Below are descriptions of these
two finalists. The information presented below is for the 12 months ending June 30, 2021. Create an
income statement and balance sheet for each company.
Catherine’s Canine Cookies
Catherine Yang started baking fun, and healthy, dog treats at the end of last summer and sells them to
friends, family, and at the Moscow Farmer’s Market. Last July, Catherine had $50 of her own money she
could put into her business, but it wasn’t enough. She borrowed $150 from her dad so she could buy the
raw ingredients that went into making her cookies. Catherine also purchased two bowls, two baking
sheets, and a mixer. The bowls cost $5 each, the baking sheets cost $6 each, and the mixer cost $20. She
expected to use the bowls and baking sheets for two years and the mixer for five years.
Throughout the year, Catherine purchased raw ingredients three times. The first time was to make
cookies for the farmer’s market in the Fall, the second time was to make cookies for the farmer’s market
in the Spring, and the third time was to make cookies for the farmer’s market the following Fall. Her
receipts were as follows: Safeway for $23.45, Walmart for $18.75, and Safeway for $35.76. With all of
these ingredients throughout the year, she was able to produce 130 cookies. She did enlist the help of
two friends to help her make the cookies. Steve worked five hours throughout the year, and Asha
worked 10 hours. She paid them $9 an hour. By June 30, 2021, she had already paid Steve, but Asha
worked five hours on June 30, 2021 in preparation for the farmer’s market in Fall 2021. So Catherine has
not paid Asha for that time yet.

She did pretty well selling the cookies, especially at the Moscow Farmer’s market. Throughout the year,
Catherine sold 112 cookies for an average price of $3.56 each. Two customers returned one cookie each
because they didn’t realize they were for dogs. And one of her best friends didn’t have any cash on her
and promised she would pay Catherine back for the three cookies she bought. Catherine has yet to see
that money, but she plans on following up with her friend. Catherine had wanted to pay her dad back
but decided she had better keep some cash to make the next batch of cookies. So she only paid her dad
$25 of the money she owed him.
Overall, Catherine felt pretty good about her first year of business, especially since she only made three
batches of cookies throughout the year. With financial support through the WSU Small Business Booster
program, she could bake and sell many more batches of cookies next year.
Bill’s Snack Truck
Bill Goldmann started a business idea he had about two years ago when he began college at WSU. He
knew college students walked all over campus, so he decided to use his pickup truck to sell drinks and
snacks to students in the late afternoons and nights. Bill purchased drinks and snacks in bulk at Costco
and then sold them at a premium from his truck. His parents had already given him a truck for college,
so he just needed some cash to buy inventory. His brother thought Bill had a great idea, so he invested
$50 into Bill’s business. Bill’s brother didn’t need to be paid back but wanted to own a portion of Bill’s
business (and, therefore, earn a portion of Bill’s profits). Bill also needed to pitch in $50 to cover initial
expenses.
Two years ago, on July 1, 2019, Bill purchased some items to display food and drinks in the back of his
pickup truck. He purchased shelves for $33 from Pullman Building Supply. He also thought he could
attract customers by having some lights on his truck, so he bought some stringed lights from Walmart
for $15. At that time, he guessed that he could use both the shelves and lights for a total of three years.
On July 1, 2020, Bill had some inventory leftover from his previous purchase. He had $15 worth of sodas
and $10 worth of cookies and chips. Throughout the last year, Bill had spent an additional $133 on
drinks and snacks at Costco. One of his friends was moving back home and had an extra 12 sodas in his
refrigerator and gave them to Bill to sell. Bill told his friend he’d pay him $4 for the sodas, but he still
owes it to him. Bill also spent $33.54 on gas throughout the year.
Bill had a pretty good system of recording his purchases and sales in a spreadsheet. Bill sold 75 cans of
soda throughout the year at an average price of $2 per can and 64 bags of chips or cookies for an
average price of $2.50 per bag. There was a heatwave at the end of June, and three of Bill’s friends were
very thirsty but didn’t have any money but promised to pay him back if he gave them each a soda. Bill
gave them a total of three sodas and got an IOU from each of his friends. At the end of the year, on June
30, 2021, Bill had 15 cans of soda that cost an average of $0.23 per can and ten bags of chips that cost
an average of $0.15 per bag.
Bill was having a good time with his snack truck business. His main challenge was that he had limited
time because he had to study and couldn’t drive the snack truck around as often as he’d like. If he
receives funding from the WSU Small Business Booster program, he could hire a couple of people to
drive the snack truck, increasing sales significantly.
Robin thought about the two businesses and tried to decide which company was stronger financially.

INSTRUCTIONS
Help Robin analyze the financial performance of these two businesses by completing the following:
1. Create income statements and balance sheets for Catherine’s Canine Cookies and Bill’s Snack
Truck for the year ending June 30, 2021. What are some strengths of Catherine’s business over
Bill’s and vice versa?

HINT: For Bill’s Snack Truck, Bill purchased the shelves and lights two years ago on July 1, 2019.
The balance sheet you are creating is for the 12 months ending June 30, 2021. So when
calculating accumulated depreciation on the balance sheet, you need to consider that he has
used two years’ worth of these fixed assets.

2. Calculate financial ratios for Catherine’s Canine Cookies and Bill’s Snack Truck using the
spreadsheet provided and consider which business you would invest in and why. (Show ratios in
the format shown in Exhibit 15.6. For example, Return on Sales and Return on Equity should be
percentages, Earnings per Share should be in dollars, the other ratios should be decimals,
and all values should be rounded to 2 decimal places).

To do excel sheet

Ratios Bill
Profitability
Return on Sales Net income/net sales
Return on Equity Net income/total owners' equity
Earnings per Share NA Net income/average # of shares - No information on # of shares

Liquidity
Current Ratio Current assets/current liabilities
Quick Ratio (Current assets - inventory)/current liabilities

Activity
Inventory Turnover COGS/ending inventory
Accounts Receivable Turnover Net sales/average account receivable

Leverage
Debt: Equity Total liabilities/Total equity
Debt: Total Assets Total liabilities/Total assets

Ratios Catherine Bill

Profitability
Return on Sales - -
Return on Equity - -
Earnings per Share NA NA

Liquidity
Current Ratio - -
Quick Ratio - -

Activity
Inventory Turnover - -
Accounts Receivable Turnover - -