The work that he does is cyclical in nature. In the fall, he is busy with pruning and gardening. The winters are relatively quiet and business is slow. In the spring, there is a lot of replanting and gardening, while the summer requires a lot of cutting grass.

Lando works 6 days a week in the summer to keep up with demand, but the fall and winter tend to be slower. He is considering advertising at his local high school to find some students to help him in the summer months. Hes planning to pay them about $16 per hour but he has heard that some in the industry hire students for under minimum wage and pay them cash. He wants your advice on how to proceed. Alternatively, Lando can work with his friend Carlos who is going through business school and has some free time in the summers. Carlos says he wants to be an equity partner and is willing to pay $8,000 to be in business together for the long term (50% ownership each). He says hell help Lando with the bookkeeping as well. Lando wants a detailed analysis on hiring Carlos as an employee or bringing him onboard as a partner. Lando would love an extra $8,000 in his bank account, but wants to do his due diligence.

Landos sister, Jenna, is taking accounting classes and has informed Lando that he has to record depreciation on his lawnmower and other equipment. Lando purchased all of his equipment in 2020 and expects it to last for around 8 years with the current level of use. One of the lawnmowers was acting up this year so he paid $500 in maintenance. The repairman said it should extend its life for another 2 years with the installation of a new power belt. Lando has classified this as an expense, but is unsure of its implications. Jenna also mentioned for a proper income statement, he has to record cost of goods sold and operating expenses and assign depreciation as overhead. Lando had a long day and didnt really understand what Jenna was asking of him. He is trying to decipher how can he apply depreciation as an overhead expense and why tracking cost really matter when hes making money.

When purchasing more fertilizer from his local garden shop he saw a motorized driveable lawn mower on sale for $3,000. With this he expects to increase capacity and his lawnmowing capabilities by 6 times. He would still charge $30 per job, but would be able to do it three times as fast and thus increase capacity. The added cost of fuel is estimated to be $200 per year. Lando is unsure whether its a good investment and wants to see what the net present value calculation returns. He is also curious what the cash payback period would be. If the investment makes sense, Lando can borrow the money on a 6.25% line-of-credit. Given that business is slow in the winters, Lando wants to do an Arborist certificate which will take two years and costs $6,000. He is wondering if he should first save up the money, borrow it as a student loan, or forgo it altogether. With this certificate, he is hoping to gain more fruitful employment with the city or a golf course and earn $35 per hour. He is uncertain in what decision to make. Lastly, Lando thinks that with an additional employee he will have some excess capacity which will help grow his customer base. He is wondering if it is worthwhile to put some more effort into marketing. Currently, he prints and distributes flyers around his neighbourhood. Some of his satisfied customers are happy to distribute flyers on his behalf. By spending $230 a month on newspaper advertisements, he believes the next two-year annual growth rate can be boosted to 4.75%. Otherwise, the growth will be similar to what it has been historically. Lando wants a detailed analysis of his business plan. He wants advice on ethics, business strategies, and other relevant matters. Lando welcomes any recommendations, as well as any questions to him which will help you better analyze his options. Please prepare a business memo to Lando, addressing all issues raised in this case.