What needs to be done/established for Strategic Strategies #2 & #3 as done for Strategic Strategy #1 below.

• Present journal entries, balance sheet information, and future financial expectations for the strategic decision
• Journal Entries needed for this decision
• Description of how this impacts the company's Accounting Equation
• Adjusted Balance Sheet

The CFO is involved in all record keeping transactions for the business and advising the CEO about the current financial health of the business and the forecasts of future profits. The CFO should understand how to value the business, the importance of raising capital (i.e. acquiring cash flows from external parties), and be able to assess whether transactions with external parties would be beneficial or harmful to the business.

Course of Business:

Wahoo! Has a premier online search engine for customers browsing the internet. The company makes revenues by selling advertisements on its web pages and key search results.

Forecasted Revenues:

Tomorrow, Wahoo! Will be signing contracts with customers totaling $47,000 that are set to earn the company revenues of $35,000 in fiscal year 2021. On those revenues, the company's expected to earn $12,000 in net income and $13,000 in operating cash flows.

Current Business Outlook:

Wahoo! Operates in a highly competitive industry and so the board of directors' primary focus is on increasing the use base, which can in turn allow the company to charger higher revenues for each advertisement on its websites.

Current Balance Sheet:

Assets	Liabilities
Cash	$10,000	Accounts Payable	$1,000
Accounts Receivable	$1,000	Owners Equity
		Capital Stock	$10,000
Total Assets	$11,000	Total L & OE	$11,000

What needs to be done/established?

• Present journal entries, balance sheet information, and future financial expectations for the strategic decision
• Journal Entries needed for this decision
• Description of how this impacts the company's Accounting Equation
• Adjusted Balance Sheet

Strategic Decision #1

1. Asset Purchase - Pay an independent contractor $6,000 to build/update your company's website (The amount billed by the contractor will be classified as an asset.)

The CFO should prepare all journal entries necessary to record the strategic decisions of the business and describe how this transaction impacts the company's Accounting Equation. The CFO should then prepare an adjusted Balance Sheet for the company immediately following the transaction as well as a year over year trend for future revenues and net incomes for the following two years (be sure to include why).

Journal Entries needed for this decision

	Debit	Credit
Website Development	$ 6,000.00
Cash		$ 6,000.00

Description of how this impacts the company's Accounting Equation

Zero net effect to the accounting equation

Adjusted Balance Sheet

Assets	Liabilities
Cash	$4,000	Accounts Payable	$1,000
Accounts Receivable	$1,000	Owners Equity
Website Development	6000	Capital Stock	$10,000
Total Assets	$11,000	Total L & OE	$11,000

Income Statement

	Year 2021	Year 2022
Sales	$ 35,000	$ 12,000
Less: Cost and expenses	$ 26,064	$ 8,936
Net income	$ 8,936	$ 3,064

Explanation:

Journal Entry:

The website build/update cost is capitalized as an asset since in effect the build or update activity is necessary so the website can generate future economic benefit to the company. To capitalize the website cost which is an asset, you have to enter it as a debit to increase the amount. The cash paid decreases the cash amount which is also an asset account, therefore it should be credited. Any increase in asset account should be debited, and any decrease should be credited.

Description of how this impacts the company's Accounting Equation

Website Development is an asset account, a debit to asset account increases the asset value. Cash is also an asset account, a credit entry to cash decreases the amount of cash therefore asset will also decrease. The journal entry doesn't affect the accounting equation since the accounts used are both asset, a decrease and increase of the same amount.

Adjusted Balance Sheet

The only part of the balance sheet that is affected by the transaction is the asset part of which two accounts are affected, cash and a new account, Website development.

Cash has a beginning balance of $10,000 minus the payment for the website of $6,000, therefore adjusted balance = $4,000

Website development has no beginning amount since this is just a new account, the amount debited $6,000 will be the balance.

Income Statement

	Year 2021	Year 2022
Sales	$ 35,000	$ 12,000
Less: Cost and expenses	$ 26,064	$ 8,936
Net income	$ 8,936	$ 3,064

• The total contract price is $47,000, therefore this is the expected revenue to be generated from the contract.
• $35,000 is to be earned in year 2021, therefore the remaining $12,000 is to be earned in year 2022
• Of the total contract of $47,000, $12,000 net income will be generated.
• Apportion the $12,000 net income in 2 years based on the sales generated.
• Computation of net income distribution:

Year 2021:	$12,000 x $35,000/$47,000 = $8,936
Year 2022:	$12,000 x $12,000/$47,000 = $3,064

• There is a need to prepare for the adjusted balance sheet to determine whether additional capital is needed so the company will do necessary actions if this is the case.
• Income Statement should also be prepared to determine if transactions with external parties generate value to the business.

Strategic Decision #2 (NEEDS TO BE ANSWERED)

2. Assume Liability -Take out a $50,000 loan from potential creditor B with $50,000 due in 4 years and $2,000 in interest payments due each year until the loan is fully paid.

The CFO should prepare all journal entries necessary to record the strategic decisions of the business and describe how this transaction impacts the company's Accounting Equation. The CFO should then prepare an adjusted Balance Sheet for the company immediately following the transaction as well as a year over year trend for future revenues and net incomes for the following two years (be sure to include why).

CFO Advice:

Journal Entry(ies):

Dr.

Cr.

Impact to Accounting Equation:

CFO Income Statement Projections:

Strategic Decision #3 (NEEDS TO BE ANSWERED)

3. Equity Transaction - sell 25% of business for $40,000 as mentioned in the first decision this would help us pay off our loan and get our company a higher valuation.

The CFO should prepare all journal entries necessary to record the strategic decisions of the business and describe how this transaction impacts the company's Accounting Equation. The CFO should then prepare an adjusted Balance Sheet for the company immediately following the transaction as well as a year over year trend for future revenues and net incomes for the following two years (be sure to include why).

CFO Advice:

Journal Entry(ies):

Dr.

Cr.

Impact to Accounting Equation:

CFO Income Statement Projections: