Jane provides you with copies of documents showing that she paid $369,400 for her property which you see that the land was listed at $109,300, the building and equipment was listed at $232,600 on the document. Drawing from your knowledge of Goodwill (Goodwill is recorded in a situation in which the purchase price is higher than the sum of the fair value of all identifiable assets purchased in the acquisition), you realize this difference will be recorded on the balance sheet, listed below the fixed assets, and will be combined with both the current and fixed assets to determine total assets.

The owner states that she does allow some of her business customers to get items on credit, causing current, end of year accounts receivables of $59,501.

She lets you know during the course of your meeting that her business had a gross profit of $251,060, salary expense of $125,970 and other operating expenses of $5,550. At the beginning of the current year, accumulated depreciation on the building and equipment was $104,100.

Lastly, she shows you the previous retained earnings statement and you see her business has previously retained $61,000 of past earnings to help fund the business.

With all the information presented, she requests you create independent financial statements so she can compare them to the information her current employees have provided. Below are the details she is requesting.

CASE ANALYSIS 1. In an Excel spreadsheet, prepare the financial statements. Create an income statement, statement of retained earnings and balance sheet. Be sure to use your own formulas whenever there is a calculation. Do your own work. Show each financial statement in a separate sheet within your excel spreadsheet. Be sure to clearly identify (rename) each sheet so the sheet corresponds to the statements.

2. Determine how much cash the company has on hand.

3. Perform ratio analysis on ABC Company. Calculate current ratio, quick ratio, debt ratio, debt to net worth ratio, times interest earned, average inventory turnover ratio, average age of inventory, receivables turnover ratio, average collection period ratio, payables turnover ratio, average payable period ratio, total asset turnover ratio, gross profit on sales ratio, operating profit on sales ratio, net profit on sales ratio, net profit to assets ratio and net profit to equity ratio.

Be sure to review previous lesson (lesson 4) for content on how to calculate ratios.

4. ABC is considering building another storeroom and needs $1 million in external financing, list in detail 3 likely sources of debt and 3 likely sources of equity (justify why these would be likely for Jane's particular situation).

5. After considering these sources, what would be your recommendation in terms of how the business should fund the new storeroom? You must justify your answers and be as quantitative as possible.