Hi, I need help answering the following questions (I have already tried some of the questions) Part 2 Analyzing the Financials Witness Fitness Centre Ted and Taryn Winslow decided to expand their fitness business to include selling merchandise (clothing, vitamins, etc) The Witness Fitness Centre has gone through some major business reformations over the past few years sole proprietorship, partnership, and now incorporated You have a bit of extra money floating around and have been considering investing it After all, it would be nice to be able to have some steady income over the next couple of years to help pay for school So you decide to do a bit of investigating PART A FINANCIAL STATEMENTS AT A GLANCE BALANCE SHEET Give specifics examples from the financial statements Identify a reason why Inventory has changed over time Is this a good or bad thing 2marks Explain the term of fixed asset Fixed Assets are long term assets that a company has purchased and is using in its operations to generate income Fixed assets are not expected to be converted into cash within a year Fixed assets are tangible assets that include plant, property and equipment assets 1 mark Explain why Current and Long term Liabilities are trending in the direction there are Which depreciation method does Witness Fitness use How can you tell 2 marks Declining method Double declining method Moving average cost Straight line FIFO Which inventory costing method would you recommend WitFit to use Why Declining method 2 marks Double declining method Moving average cost Straight line FIFO Identify 3 adjusting entries that need to be done at year end, EXCLUDING DEPRECIATION Show the accounts needed (No numbers) 3 marks Supplies Expense Supplies To record supplies expense for the year Insurance Expense Prepaid Insurance To record insurance expired for the year Bad Debt Expense Allowance for doubtful accounts To record estimated bad debts for the year INCOME STATEMENT Give specifics examples from the financial statements Calculate the Gross Profit from the last two years 2 marks Explain the MAIN reason why WitFit has continued to show a Net Loss 2 marks PART B COMPARING ORGANIZATIONAL TYPES Ted Winslow changed from one Organizational type to another Give a reason why he thought each one was a good reason What problem arose that made him switch yet again Give DIFFERENT and SPECIFIC reasons 6 marks 2010 Ted Winslow decides to open his very own proprietorship fitness Centre Benefits No one to share profits with, Absolute control over all business aspects, and thus you can respond more quickly to day to day changes and decisions and make all business operation calls Problems encountered With no one to help you make decisions quickly, you can make some mistakes like borrowing more than you need which puts your business and you as you are responsible for 100 percent of all business debts and obligations in more debt 2011 Why did Ted decide to form a Partnership with Taryn Benefit of Solution More capital Problems encountered 2012 Why did Ted Taryn decide to incorporate the business Benefit of Solution Easy for the corporation to acquire capital by issuing shares to the public and creditors have no legal claim over assets of the owners unless fraud occurred This is the most significant benefit because Witness Fitness owns many creditors, and if they went bankrupt, creditors wouldn't be able to claim the assets Problem encountered PART C RATIO ANALYSIS Choose 4 5 ratios ONE ratio MUST come from EACH area Use the ratios to help you evaluate the liquidity, borrowing power and profitability of the business and which best support your decision to invest or not to invest Liquidity (current ratio, acid test, receivables turnover, collection period, inventory turnover and day sales in inventory) Borrowing capacity (gross profit margin, debt ratio, equity ratio) (c) Profitability (return on sales, return on equity) PART D TO INVEST OR NOT TO INVESTTHAT IS THE QUESTION 6 marks Consider the main goal of any investor Afterall, why not just put the money in the bank What are you going to do Identify and explain how your chosen ratios or other financial data support your decision to become a potential investor Here are the financial statements Thank you ASSET 14,998 50 100 00 15,098 50 Current Assets Bank Bank Petty Cash Bank Net Accounts Receivable Allowance for Doubtful Accounts Net Accounts Receivable Prepaid Insurance Supplies Total Current Assets 8,920 68 916 00 LIABILITY 8,004 68 3,870 00 816 21 27,789 39 Current Liabilities Accounts Payable Bank Loan Payable C P P Payable E I Payable Employees' Income Tax Payable HST Payable Total Current Liabilities 20,292 78 95,000 00 1,385 58 653 79 2,030 27 192 83 119,169 59 Inventory Assets Merchandise Inventory Total Inventory Assets 25,099 23 25,099 23 TOTAL LIABILITY 119,169 59 107,393 68 10,600 00 EQUITY 96,793 68 Capital Assets Fitness Equipment Acc Dep Fitness Equipment Net Fitness Equipment Furniture and Equipment Acc Dep Furn Equipment Net Furniture and Equipment Store Equipment Acc Dep Store Equipment Net Store Equipment Total Capital Assets 14,720 88 2 700 00 12 020 88 Equities Common Stock Retained Earnings Current Earnings Total Equities 75,000 00 9,490 05 12,655 63 52,854 32 12,570 73 2 250 00 10,320 73 119 135 29 TOTAL EQUITY 52,854 32 TOTAL ASSET 172 023 91 LIABILITIES AND EQUITY 172,023 91 REVENUE EXPENSE 5,218 04 3 721 00 Operating Revenue Discounts Earned Drop in Fees Membership Fees Retail Sales Wholesale Sales Total Operating Revenue 43 15 15,324 00 3 240 00 3,763 01 5,576 68 27,946 84 0 00 TOTAL REVENUE 27,946 84 Operating Expenses Cost of Goods Sold Advertising and Promotion Bad Debts Expense Bank Charges Bookkeepiing Expense Cash Short and Over Choreography Expense C P P Expense Depreciation Expense Discounts Allowed E I Expense Freight and Shipping Costs Insurance Expense Interest Expense Inventory Shrinkage Miscellaneous Expense Office Expense Renovations Expense Rent Expense Repairs and Maintenance Supplies Expense Telephone Expense Utilities Expense Wages Expense Total Operating Expenses 12 95 0 00 0 00 375 00 692 79 0 00 22 41 381 38 138 95 0 00 301 50 0 00 367 50 0 00 2,800 00 10,000 00 123 95 0 00 289 00 412 00 15,746 00 40,602 47 NET INCOME 12,655 63 TOTAL EXPENSE 40,602 47 ASSET 14,998 50 100 00 15,098 50 Current Assets Bank Bank Petty Cash Bank Net Accounts Receivable Allowance for Doubtful Accounts Net Accounts Receivable Prepaid Insurance Supplies Total Current Assets 8,920 68 916 00 LIABILITY 8,004 68 3,870 00 816 21 27,789 39 Current Liabilities Accounts Payable Bank Loan Payable C P P Payable E I Payable Employees' Income Tax Payable HST Payable Total Current Liabilities 20,292 78 95,000 00 1,385 58 653 79 2,030 27 192 83 119,169 59 Inventory Assets Merchandise Inventory Total Inventory Assets 25,099 23 25,099 23 TOTAL LIABILITY 119,169 59 107,393 68 10,600 00 EQUITY 96,793 68 Capital Assets Fitness Equipment Acc Dep Fitness Equipment Net Fitness Equipment Furniture and Equipment Acc Dep Furn Equipment Net Furniture and Equipment Store Equipment Acc Dep Store Equipment Net Store Equipment Total Capital Assets 14,720 88 2 700 00 12 020 88 Equities Common Stock Retained Earnings Current Earnings Total Equities 75,000 00 9,490 05 12,655 63 52,854 32 12,570 73 2 250 00 10,320 73 119 135 29 TOTAL EQUITY 52,854 32 TOTAL ASSET 172 023 91 LIABILITIES AND EQUITY 172,023 91 REVENUE EXPENSE 5,218 04 3 721 00 Operating Revenue Discounts Earned Drop in Fees Membership Fees Retail Sales Wholesale Sales Total Operating Revenue 43 15 15,324 00 3 240 00 3,763 01 5,576 68 27,946 84 0 00 TOTAL REVENUE 27,946 84 Operating Expenses Cost of Goods Sold Advertising and Promotion Bad Debts Expense Bank Charges Bookkeepiing Expense Cash Short and Over Choreography Expense C P P Expense Depreciation Expense Discounts Allowed E I Expense Freight and Shipping Costs Insurance Expense Interest Expense Inventory Shrinkage Miscellaneous Expense Office Expense Renovations Expense Rent Expense Repairs and Maintenance Supplies Expense Telephone Expense Utilities Expense Wages Expense Total Operating Expenses 12 95 0 00 0 00 375 00 692 79 0 00 22 41 381 38 138 95 0 00 301 50 0 00 367 50 0 00 2,800 00 10,000 00 123 95 0 00 289 00 412 00 15,746 00 40,602 47 NET INCOME 12,655 63 TOTAL EXPENSE 40,602 47

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Hi, I need help answering the following questions (I have already tried some of the questions) Part 2: Analyzing the Financials ~ Witness Fitness Centre

Hi, I need help answering the following questions (I have already tried some of the questions)

Part 2: Analyzing the Financials

~ Witness Fitness Centre ~

Ted and Taryn Winslow decided to expand their fitness business to include selling merchandise (clothing, vitamins, etc) . The Witness Fitness Centre has gone through some major business reformations over the past few years sole-proprietorship, partnership, and now incorporated. You have a bit of extra money floating around and have been considering investing it. After all, it would be nice to be able to have some steady income over the next couple of years to help pay for school. So you decide to do a bit of investigating.

PART A: FINANCIAL STATEMENTS AT A GLANCE

BALANCE SHEET. Give specifics examples from the financial statements.

Identify a reason why Inventory has changed over time? Is this a good or bad thing?

[2marks]

Explain the term of fixed asset.

Fixed Assets are long term assets that a company has purchased and is using in its operations to generate income. Fixed assets are not expected to be converted into cash within a year. Fixed assets are tangible assets that include plant, property and equipment assets. [1 mark]

Explain why Current and Long-term Liabilities are trending in the direction there are.
Which depreciation method does Witness Fitness use? How can you tell? [2 marks]
Declining method

Double declining method

Moving average cost

Straight line

FIFO
Which inventory costing method would you recommend WitFit to use? Why?
Declining method [2 marks]

Double declining method

Moving average cost

Straight line

FIFO
Identify 3 adjusting entries that need to be done at year-end, EXCLUDING DEPRECIATION. Show the accounts needed. (No numbers)

[3 marks]

Supplies Expense

Supplies

To record supplies expense for the year

Insurance Expense

Prepaid Insurance

To record insurance expired for the year

Bad Debt Expense

Allowance for doubtful accounts

To record estimated bad debts for the year

INCOME STATEMENT. Give specifics examples from the financial statements.
Calculate the Gross Profit from the last two years. [2 marks]
Explain the MAIN reason why WitFit has continued to show a Net Loss. [2 marks]

PART B: COMPARING ORGANIZATIONAL TYPES

Ted Winslow changed from one Organizational type to another. Give a reason why he thought each one was a good reason. What problem arose that made him switch yet again? Give DIFFERENT and SPECIFIC reasons. [6 marks]

2010

Ted Winslow decides to open his very own proprietorship fitness Centre.

Benefits:

No one to share profits with, Absolute control over all business aspects, and thus you can respond more quickly to day-to-day changes and decisions and make all business operation calls.

Problems encountered:

With no one to help you make decisions quickly, you can make some mistakes like borrowing more than you need which puts your business and you as you are responsible for 100 percent of all business debts and obligations in more debt.

2011

Why did Ted decide to form a Partnership with Taryn?

Benefit of Solution:

More capital

Problems encountered:

2012

Why did Ted & Taryn decide to incorporate the business?

Benefit of Solution:

Easy for the corporation to acquire capital by issuing shares to the public and creditors have no legal claim over assets of the owners unless fraud occurred. This is the most significant benefit because Witness Fitness owns many creditors, and if they went bankrupt, creditors wouldn't be able to claim the assets.

Problem encountered:

PART C: RATIO ANALYSIS:

Choose 4-5 ratios. ONE ratio MUST come from EACH area. Use the ratios to help you evaluate the liquidity, borrowing power and profitability of the business and which best support your decision to invest or not to invest

Liquidity (current ratio, acid test, receivables turnover, collection period, inventory turnover and day sales in inventory)

Borrowing capacity (gross profit margin, debt ratio, equity ratio)

PART D: TO INVEST...OR NOT TO INVESTTHAT IS THE QUESTION! [6 marks]

Consider the main goal of any investor. Afterall, why not just put the money in the bank?
What are you going to do? Identify and explain how your chosen ratios or other financial data support your decision to become a potential investor.

Here are the financial statements

image text in transcribed

Thank you!

ASSET 14,998.50 100.00 15,098.50 Current Assets Bank Bank:Petty Cash Bank:Net Accounts Receivable Allowance for Doubtful Accounts Net Accounts Receivable Prepaid Insurance Supplies Total Current Assets 8,920.68 -916.00 LIABILITY 8,004.68 3,870.00 816.21 27,789.39 Current Liabilities Accounts Payable Bank Loan Payable C.P.P. Payable E.I. Payable Employees' Income Tax Payable HST Payable Total Current Liabilities 20,292.78 95,000.00 1,385.58 653.79 2,030.27 - 192.83 119,169.59 Inventory Assets Merchandise Inventory Total Inventory Assets 25,099.23 25,099.23 TOTAL LIABILITY 119,169.59 107,393.68 -10,600.00 EQUITY 96,793.68 Capital Assets Fitness Equipment Acc. Dep./Fitness Equipment Net Fitness Equipment Furniture and Equipment Acc. Dep./Furn. & Equipment Net Furniture and Equipment Store Equipment Acc. Dep./Store Equipment Net Store Equipment Total Capital Assets 14,720.88 -2.700.00 12.020.88 Equities Common Stock Retained Earnings Current Earnings Total Equities 75,000.00 -9,490.05 - 12,655.63 52,854.32 12,570.73 -2.250.00 10,320.73 119.135.29 TOTAL EQUITY 52,854.32 TOTAL ASSET 172.023.91 LIABILITIES AND EQUITY 172,023.91 REVENUE EXPENSE 5,218.04 3.721.00 Operating Revenue Discounts Earned Drop-in Fees Membership Fees Retail Sales Wholesale Sales Total Operating Revenue 43.15 15,324.00 3.240.00 3,763.01 5,576.68 27,946.84 0.00 TOTAL REVENUE 27,946.84 Operating Expenses Cost of Goods Sold Advertising and Promotion Bad Debts Expense Bank Charges Bookkeepiing Expense Cash Short and Over Choreography Expense C.P.P. Expense Depreciation Expense Discounts Allowed E.I. Expense Freight and Shipping Costs Insurance Expense Interest Expense Inventory Shrinkage Miscellaneous Expense Office Expense Renovations Expense Rent Expense Repairs and Maintenance Supplies Expense Telephone Expense Utilities Expense Wages Expense Total Operating Expenses 12.95 0.00 0.00 375.00 692.79 0.00 22.41 381.38 138.95 0.00 301.50 0.00 367.50 0.00 2,800.00 10,000.00 123.95 0.00 289.00 412.00 15,746.00 40,602.47 NET INCOME -12,655.63 TOTAL EXPENSE 40,602.47 ASSET 14,998.50 100.00 15,098.50 Current Assets Bank Bank:Petty Cash Bank:Net Accounts Receivable Allowance for Doubtful Accounts Net Accounts Receivable Prepaid Insurance Supplies Total Current Assets 8,920.68 -916.00 LIABILITY 8,004.68 3,870.00 816.21 27,789.39 Current Liabilities Accounts Payable Bank Loan Payable C.P.P. Payable E.I. Payable Employees' Income Tax Payable HST Payable Total Current Liabilities 20,292.78 95,000.00 1,385.58 653.79 2,030.27 - 192.83 119,169.59 Inventory Assets Merchandise Inventory Total Inventory Assets 25,099.23 25,099.23 TOTAL LIABILITY 119,169.59 107,393.68 -10,600.00 EQUITY 96,793.68 Capital Assets Fitness Equipment Acc. Dep./Fitness Equipment Net Fitness Equipment Furniture and Equipment Acc. Dep./Furn. & Equipment Net Furniture and Equipment Store Equipment Acc. Dep./Store Equipment Net Store Equipment Total Capital Assets 14,720.88 -2.700.00 12.020.88 Equities Common Stock Retained Earnings Current Earnings Total Equities 75,000.00 -9,490.05 - 12,655.63 52,854.32 12,570.73 -2.250.00 10,320.73 119.135.29 TOTAL EQUITY 52,854.32 TOTAL ASSET 172.023.91 LIABILITIES AND EQUITY 172,023.91 REVENUE EXPENSE 5,218.04 3.721.00 Operating Revenue Discounts Earned Drop-in Fees Membership Fees Retail Sales Wholesale Sales Total Operating Revenue 43.15 15,324.00 3.240.00 3,763.01 5,576.68 27,946.84 0.00 TOTAL REVENUE 27,946.84 Operating Expenses Cost of Goods Sold Advertising and Promotion Bad Debts Expense Bank Charges Bookkeepiing Expense Cash Short and Over Choreography Expense C.P.P. Expense Depreciation Expense Discounts Allowed E.I. Expense Freight and Shipping Costs Insurance Expense Interest Expense Inventory Shrinkage Miscellaneous Expense Office Expense Renovations Expense Rent Expense Repairs and Maintenance Supplies Expense Telephone Expense Utilities Expense Wages Expense Total Operating Expenses 12.95 0.00 0.00 375.00 692.79 0.00 22.41 381.38 138.95 0.00 301.50 0.00 367.50 0.00 2,800.00 10,000.00 123.95 0.00 289.00 412.00 15,746.00 40,602.47 NET INCOME -12,655.63 TOTAL EXPENSE 40,602.47