Question
The donahoo western furnishings company was formed on December 31 2014 with $1,000,000 in equity plus $500,000 in long term debt. On January 1 2015
The donahoo western furnishings company was formed on December 31 2014 with $1,000,000 in equity plus $500,000 in long term debt. On January 1 2015 all of the firms capital was held in cash. The following transactions occurred during January 2015.
*jan 2: donahoo purchased $1,000,000 worth of furniture for resale. It paid $500,000 in cash and financed the balance using trade credit that required payment in 60 days.
*Jan 3: donahoo sold $250,000 worth of furniture that it had paid $200,000 to acquire the entire sale was on credit terms of net 90 days
*jan 15: donahoo purchased more furniture for $200,000 this time it used trade credit for the entire purchase with credit terms of net 60 days
*jan 31: donahoo sold $500,000 worth of furniture for which it had paid $400,000 the furniture was sold for 10% cash down with the remainder payable in 90 days. In addition the firm paid a cash dividend of $100,000 to its stockholders and paid off $250,000 of its long term debt.
Question 1: what did donahoos balance sheet look like at the outset of the firms life?
Question 2: what did the firms balance sheet look like after each transaction ?
Question 3: ignoring taxes determine how much income donahoo earned during January? Prepare an income statement for the month. Recognize an interest expense of 1% for the month (12% annually) on the 500,000 long term debt which has not been paid but is owed.
Question 4: what was donahoos cash flow for the month of January?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started