Hi, I really need an input as regards to this case. I have all the answers on the guide questions. I badly need fresh ideas on alternative courses of action , areas of consideration, recommendation.

I will type herein what I have started please guide me.

Diane Maynard was grateful for the balance sheets/Statement of Financial Position (per Case 2, Maynard Company A) that her friend prepared. In going over the numbers, she remarked, its sort of surprising that cash increased by P31,677, but net income was only P19,635. Why was that?

Her friend replied, A partial answer to that question is to look at an income statement for June. I think I can find the data I need to prepare one for you.

In addition to the data given in Case 2 (Maynard Company A), her friend found a record of cash receipts and disbursements, which is summarized in Exhibit 1. She also learned that all accounts payable were to vendors for purchase of merchandise inventory and that cost of sales was P39,345 in June.

Questions (Note: I have answered this one)

1. Prepare an income statement for June in proper format. Explain the derivation of each item on this statement, including cost of sales.

2. Explain why the change in the cash balance was greater than the net income.

3. Explain why the following amounts are incorrect cost of sales amounts for June: (a) P14,715 and (b) P36,030. Under what circumstances would these amounts be correct cost of sales amounts?

I. Viewpoint

Accountant / Company Accountant of Maynard Company

II. Statement of the problem

1. How to prepare an Income Statement in a proper form for June and explain the derivation of each item including Cost of Sales?

2. Why is the change in cash balance greater than the net income?

3. Why the following amounts are incorrect cost of sales?

a. P 14,715

b. P 36,030

III. Objectives

To be able to present in proper form the income statement for June and explain the derivation of each item including cost of sales

To be able to know why changes in cash balance greater than the net income

To be able to determine when P 14,715 and P 36,030 be a correct and incorrect amounts for Cost of Sales

IV. Areas of Consideration

Cash increased by P31, 677 but Net Income was only P 19, 635.

Balance sheets were prepared in Case 3 Maynard Company (A) as of June 01 and June 30, and Statement of Cash flow

Record of cash receipt and cash disbursements summarized in Exhibit 1.

All accounts payable were to vendors for purchase of merchandise of inventory; cost of sales equal P39,345 for June.

V. Alternative Courses of Action

ACA1: Prepare in proper form Income Statement for June, Statement of Cash flow, and Statement of Cost of Sales

ACA2: Employ Ratio Analysis to further see the status of the company.

VI. Conclusion and Recommendation

The group will take ACA1. Since, the gross margin is 48.75% indicates reasonably good margin on the business, but Diane Maynard, must gather information on the average gross margin within her industry to gauge how well her company performs against its competitors.

The profit margin of 11% is also reasonably good; Diane needs to know how much margin in the standard within her industry. This means that the company has a net income of P 0.11 for each Peso of sales.

The cash increases by 48%, so much cash-on-hand must be invested either to purchase more merchandise; if not pay-off debts with interest bearing.

Exhibit 1 Cash Receipts and Disbursements Cash Receipts and Disbursements Month of June Cash Receipts Cash Disbursements Cash Sales P44,420 Equipment purchased 21,798 Other assets purchased Credit Customers Diane Maynard 11.700 Payments on accounts payable loan 20,865 Cash purchases of merchandise Bank pos IS3 cash purchase of supplies Total Dividends Wages Paid Utilities paid Miscellaneous payments Reconciliation. P34,983 Cash balance, June 1 Receipts 08.783 Sub-total P133,766 67100 Disbursements P66.660 Cash balance, June 30 P23,400 408 8,517 14,715 1,671 11.700 5.660 000 135 PAT,106