Hello,

Can I please get help with evaluating the attached accounting assignment according to the ruberic provided. Also, please justify your answers of why you gave them a specific grade. I need to evaluate the horizontal and vertical analysis of this assignment. Thank you

Financial Statement Information Group5OLsection352016 Accounts payable Accounts receivable Amortization expense Cash Common stock Net Sales Notes payable Prepaid expenses Office Equipment Salaries & Commissions Office overhead expenses Supplies Subcontract fees Professional Fees Advertising Misc. Expense Direct Wages and Expenses Common Stock Dividends Accrued Liabilities Accumulated Amortization Income Tax Expense Opening Retained Earnings 2014 Other Information that may be useful for ratio analysis $ $ $ $ $ $ $ $ 2015 6,556 180,010 38,000 198,010 100,000 1,140,000 17,000 14,000 $ $ $ $ $ $ $ $ $ $ $ $ $ 255,500 216,000 8,001 22,800 21,103 9,111 27,420 26,871 456,000 50,000 8,667 159,000 78,674 $ $ $ $ $ $ $ $ 2014 6,556 87,000 38,000 105,000 100,000 885,000 55,000 14,000 $ $ $ $ $ $ $ $ $ $ $ $ $ $ 255,500 180,000 8,001 17,700 19,889 9,111 27,420 26,871 354,000 20,000 8,667 121,000 51,002 37,271 Other Info # of Common Stock 2015 250000 shares Market share price $ 2.90 per share Opening Accounts Receivable Income tax rate 2014 250000 shares 2.25 per share Industry ratios have been provided on ratio tab 76,000 25% 25% Other Information that may be useful for 2016 budgeting purposes General: Sales: Assume for budgeting purposes that the loan was approved your group took over the business January 1, 2016. Average revenue per placement is expected to stay the same for 2016 at $15,000 per placement. However the number of placements are expected to increase by 15% in 2016. The strongest months are September and March where 15% of the annual business is done each of those months. The slowest months are June, July and December where 4% of the annual business is done in each of those months. The rest of the business is spread out evenly over the rest of the months. Collections: Sales are all sold on account. 50% of sales are collected in the month after the sale, 25% in the second month after the sale and 25% in the 3rd month after the sale. Assume all sales are collected (no bad debts). For closing 2015 accounts receivable assume 50% will be collected in January and 50% in February. Direct Wages: Direct wages in 2016 are expected to continue to be 40% of sales. LFPA pays their employees semi-monthly such that 50% of the wages are paid in the month they are earned and 50% are paid in the month following the month in which they are earned. Other Expenses: The cost behaviour for all other expenses are expected to remain the same for 2016 as they were for 2015 and 2014. Note that some of these expenses are fixed in nature, some are variable and some are mixed. In addition assume that these expenses are paid in the month they are incurred. Fixed expenses should be allocated evenly over the 12 months, variable expenses will vary each month based on sales. Mixed expenses need to be separated into their fixed and variable components and then allocated accordingly. Dividends: Your group, once the purchase has been completed, expects to pay out dividends of $15,000 to each owner (5 group members=5 owners, 4 group members=4 owners). Dividends will be paid out in December 2016. Financing: For the purpose of the budget assume the interest rate negotiated on the $500,000 loan is 5% and is payable monthly. In addition there are no payments to pay down the loan in 2016. Loan principal payments are to start in 2017 at an amount of $8,500 per month. Assume that the note payable of $68,000 is paid off using money received from the loan (so no interest expense related to the note payable) Equipment: In September of 2016 LFPA is expecting to replace its computer equipment in the office. The expected cost is $75000. Assume it will be paid in cash when purchased. #REF! #N/A Income Statement'!B1 Leap Forward Placement Agency Income Statement For the Year Ended December 31st 2015 2014 $ 885,000 $ 885,000 2016 (projected) $ 1,311,000 $ 1,311,000 2017 (projected) $1,442,100 $1,442,100 Net Sales $ 1,140,000 $ 1,140,000 Amortization Expense Office Overhead Expenses Supplies Expense Advertising Misc. Expense Direct Wages and Expenses Subcontract fees Professional Fees Income Tax Expense Salaries & Commissions Total Expenses $ 38,000 $ 8,001 $ 22,800 $ 27,420 $ 26,871 $ 456,000 $ 21,103 $ 9,111 $ 78,674 $ 216,000 $ 903,980 ### ### 17,700 ### ### 354,000 19,889 ### 51,002 180,000 731,994 $ 38,000 $ 8,001 $ 43,920 $ 27,420 $ 26,871 $ 522,579 $ 21,103 $ 9,111 $ 93,466 $ 240,130 $ 1,030,601 $38,000 $8,001 $46,542 $27,420 $26,871 $576,840 $22,959 $9,111 $106,930 $258,636 $1,121,310 $ $ $ Net Income $ $ 153,006 Revenues Total Revenues Expenses 236,020 $ $ $ $ 280,399 $320,790 Statement of Retained Earnings'!C8 Leap Forward Placement Agency Statement of Retained Earnings For the Year Ended December 31st Opening Retained Earnings January 1 Less: Dividends Paid Add: Net Income Closing Retained Earnings December 31 $ $ 2015 $170,277 $ 50,000 $ 236,020 $ $356,297 2014 37,271 20,000 153,006 $170,277 Balance Sheet'!D20 Leap Forward Placement Agency Balance Sheet As At December 31st 2015 2014 Assets Current Assets Cash Accounts Receivable Office Equipment Prepaid Expenses Less: Accumulated Amortization $ $ $ Accounts Payable Notes Payable Accrued Liabilities Total Assets $ $ 198,010 180,010 255,500 $14,000 159,000 488,520 $ $ $ $ $ 105,000 87,000 255,500 $14,000 121,000 340,500 $ $ $ $ 6,556 17,000 8,667 32,223 $ $ $ $ 6,556 55,000 8,667 70,223 Liabilities Total Liabilities Shareholders' Equity Common Stock Retained Earnings Total Shareholders' Equity Total Liabilities + Total Shareholders Equity $100,000 $356,297 $456,297 $ 488,520 $100,000 $170,277 $270,277 $ 340,500 Group5OLsection352016 2015 2014 Industry 15.16 4.85 1.90 11.73 0.56 1.70 60% 60% 37.9% Net Income - Preferred Dividends Avg Common S/h Equity 65% 42% 27% Receivable Turnover Net Credit Sales Avg Gross Receivables 8.54 10.17 5.89 Average Collection Period 365 days Receivables Turnover 43 36 62.0 ### $0.61 $1.25 Current Ratio Quick Ratio Gross Margin Return on Shareholders Equity Earnings Per Share Current Assets Current Liabilities Cash + Marketable Securities + Receivables Current Liabilities Gross Margin Net Sales Net Income - Preferred Dividends Avg # of Common Shares Outsanding Dividend Yield Dividends per share Market Price per share 2.1% 2.7% 4.0% P/E Ratio Market Price per share Earnings per share 0.00 3.68 6.20 Debt to Equity Ratio Total Liabilities Total S/h Equity 0.07 0.26 1.30 56.94% 37% 12.3% Return on Assets Net Income + (Interest Expense x (1-tax rate)) Average Total Assets Group5OLsection352016 A) Leap Forward Placement Agency Breakeven and Target Profit Calculations 2016 Variable expenses per placement projected $ 2,488.00 Fixed Expenses in total $ Annual Breakeven in placements sold 814,395.00 56 Annual Breakeven in $ $ 951,653.82 # of Placements for target profit of $ 200,000 $ 400,000 92 # of Placements for target proift of $ 600,000 110 Fixed Cost 38,000 8,001 17,700 27,426 26,871 522,579 16,133 9,111 93,466 55,108 814,395 Variable Cost 300 Mixed Cost 43,920 71 2,117 2,488 21,103 240,130 305,153 Possible Mixed Costs 74 # of Placements for target profit of Expenses Amortization Expense Office Overhead Expenses Supplies Expense Advertising Misc. Expense Direct Wages and Expenses Subcontract fees Professional Fees Income Tax Expense Salaries & Commissions Total 10% increase in sales for 2017 will mean what increase in 2017 net income $ 320,790.00 Change in Cost Variable Cost = ________________ = Change in Activity 216000 - 180000 ______________ 76 -59 = = 2,117 per placement Variable supplies = 22,800 - 17,700 = 5,1000 = 76 59 17 Fixed Cost = Total Cost - Variable Cost = 216000 -76 x 2,117 = 55,108 Subcontract Fees Change in Cost Variable Cost = ______________ Change in Activity = 36000 _______ 17 300 Fixed cost = 22,800-(300 x 17) = 17,700 21,103-19889 _____________ 76-59 = 1214 _____________ 17 = 71 # of Placements for target profit of 600,000 = = = Fixed Cost = 21103 - (71*70) = 16,133 B) Break Even Analysis B) Break Even Analysis Sales = Variable expenses + Fixed expenses + Profits 17250Q=2488Q+814,395+0 14762Q=814,395 Q=55.2 600,000/(1-0.25) 800,000 (814,395+800,000)/14,762 = = = = = = = # of Placements for target profit of 200,000 (814,395+266,667)/14,762 = = = 1,081,062/14,762 = 200,000/(1-0.25) 266,667 73.23 C) Variable expense per unit will increase with increase in the number of placements 15000 ( average variable per placement in 2015) + 15 % (increase in 2016) = $17,250 = 1,614,395/14,762 109.4 # of Placements for target profit of 400,000 400,000/(1-0.25) 533,333 (814,395+533,333)/14,762 1,347,728/14,762 91.3 50% Month 25% 25% January 8% February 8% Opening Cash Balance Inflows Total Sales Collections Current month Collections First month Collections Second month Accounts Receivable Total Inflows 104,880 52,440 104,880 54,407 26,220 590,005 642,445 90,005 170,632 Outflows Payment current payment 1st month Payment 2nd month Direct Wages Loan Interest Notes Interest Office Overhead Supplies Advertising Misc Taxes Salaries and commissions Dividends Equipment Total Outflows Net Cash Flow Cash Balance 29,643 667 3,573 2,285 2,239 7,789 19,394 65,590 576,855 $576,855 March 16% April 8% May 8% Leap Forward Placement Agency June July August Sept 4% 4% 8% 16% Oct 8% Nov 8% Dec 4% 209,760 104,880 26,220 26,220 104,880 52,440 52,440 26,220 104,880 52,440 26,220 52,440 52,440 26,220 26,220 26,220 52,440 26,220 13,110 26,220 104,880 52,440 13,110 13,110 209,760 104,880 26,220 13,110 104,880 52,440 52,440 26,220 104,880 52,440 26,220 52,440 52,440 26,220 26,220 26,220 157,320 131,100 131,100 78,660 65,550 78,660 144,210 131,100 131,100 78,660 ### ### ### 41,952 62,928 62,928 41,952 31,464 ### ### 667 667 667 667 667 3,573 5,670 3,573 3,573 2,524 2,285 2,285 2,285 2,285 2,285 2,239 2,239 2,239 2,239 2,239 7,789 7,789 7,789 7,789 7,789 19,394 34,196 19,394 19,394 11,993 ### ### 77,899 115,774 98,875 77,899 58,961 92,733 41,546 32,225 53,201 19,699 ### $711,135 $743,360 $796,562 $816,261 20,976 667 2,524 2,285 2,239 7,789 11,993 48,473 17,077 $833,338 ### ### ### 31,464 62,928 ### ### 667 667 3,573 5,670 2,285 2,285 2,239 2,239 7,789 7,789 19,394 34,196 ### ### 75,000 67,411 190,774 11,249 46,564 $844,588 $798,024 62,928 667 3,573 2,285 2,239 7,789 19,394 98,875 32,225 $830,249 Total 100% 41,952 31,464 667 667 3,573 2,524 2,285 2,285 2,239 2,239 7,789 7,789 19,394 11,993 75,000 77,899 133,961 53,201 55,301 $883,451 $828,150 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1,311,000 657,467 314,640 288,420 680,010 1,940,537 522,579 8,001 43,920 27,420 26,871 93,466 240,130 75,000 75,000 1,112,387 828,150 $872,551 Group 5 Executive Summary Elyse Johnston, Memory Nkomo, Katherine Kerr, Jessalyn Whytock & Sarah Perreault Professor Henry Otten FINA 6014 - OL Section Friday April 1, 2016 Objective: Group 5 is seeking to establish a credit line of $500,000 to finance the acquisition of Leap Forward Placement Agency (LFPA). Summary: Attached is a workbook that includes a balance sheet, income statement and statement of retained earnings as well as a financial statement analysis with appropriate financial statement ratios for LFPA. Additionally, a cash budget and projected income statement for 2016 has been created to illustrate the expected sales, expenses and cost volume profit analysis for the organization. We have recently purchased the LFPA and are seeking a loan. Prior to our acquisition of LFPA the organization was quite profitable and our projected earnings demonstrate that we will continue to grow and become even more profitable. As a company we have a great amount of growth as shown in our net income, each year from 2014 to 2016 we have increased by a significant amount. A net income of 2014 was $236,020 and LFPA is projected to have a net income of $280,399 during the 2016 year. We expect that we will continue to grow over the next several years as our sales continue to grow. In 2014, net sales of $885,000 were achieved, followed by $1,140,000 in 2015. We are expected to see this growth in net sales and believe that by 2016 our projected net sales will be $1,311,000. We can also say that our company is expected to break even for the second year in a row as evidenced in our CVP analysis, which is a promising sign for the future. The financial statement ratios demonstrate that LFPA is 20% higher than industry standard on the gross margin. The average gross margin for 2014 and 2015 is 60% compared to the industry average of 37.9%. This high gross margin demonstrates that we at LFPA will have enough money leftover to cover our expenses and our monthly loan payments. Additionally, our current ratio is well above industry standards. While the industry standard is a ratio of 1.9, during the 2015 year the ratio for LFPA was 15.16. Conclusion: The year of 2017 is looking to be another promising year. If we increase sales by 10%, then our 2017 net income is expected to be $320,790. We have demonstrated this in our income statement sheet in the attached workbook. Please review the enclosed financial statements, and of course feel free to ask for any additional information or explanations. Sincerely, Group 5 OL Section Leap Forward Placement Agency Evaluation CriteriaFails to Meet ExpectationsAlmost Meets ExpectationsMeets ExpectationsExceeds ExpectationsOrganization, Style and Mechanics /10Very little order and flow and many spelling and grammar issues, little use of title page, table of contents, reference to exhibits and/or explanations of tables -0-3 marksSome order and flow issues and grammatical and spelling issues. Missing one or more of the key documents and very little referencing and explanations of exhibits - 4-6 marksWell-ordered with logical flow and few grammatical and/or spelling issues. Missing some referencing to the exhibits and explanations of exhibits 7-8 marksWell ordered, logical flow with no grammatical or spelling issues and good referencing of exhibits and good explanation of exhibits - 9-10 marksExecutive Summary /15Missing most of the key information about financing proposal (0-5 marks)Missing some key information (6-8 marks)Minimal shortcomings. (9-12 marks)Includes Identification of what was required, summary of work done and conclusions reached (why your company should get the loan) 1315 marks Financial Statement Preparation /10Major errors and missing information in the financial statements. (0-3 marks)Some minor errors in the financial statements. (4-6 marks)Some minor formatting issues (7-8 marks)No errors, proper formatting (9-10 marks)Financial Ratios /15Poorly done. (0-4 marks)Improper ratio selection, some improper calculations and missing some interpretation (5-8 marks)Good analysis. Missing some interpretation. (9-12 marks)Good analysis. Good interpretation of results and impact of loan on ratios going forward (13-15 marks)Budget Preparation /10 Poorly done. 0-3 marksSome errors and formatting issues and limited connection to the Projected Income Statement and limited qualitative overview of results. (4-6 marks)Good analysis with connections. Missing some interpretation of results (7-8 marks)Complete budget with connection to Projected Income Statement and good qualitative overview of results. (9-10 marks)Cost-Volume-Profit Analysis /10Poorly done (0-3 marks)Some errors and limited connection to the income statements and limited commentary on results (4-6 marks)Good analysis with connection to income statements. Missing some interpretation of results (7-8 marks)Complete analysis with connection to Income Statements and good qualitative overview of results. (9-10 marks) /70 Project Total