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TRANSCRIPT
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ColdFront
Zack Petersen - U0934588 Jaxon Whittaker - U0641824
Version I
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Table of Contents
Company Introduction and Overview…………………………..03 Income Statement………………………………………………………06 Balance Sheet…………………………………………………………….07 Statement of Cash Flows……………………………………………..09 Ratio Analysis…………………………………………………………….11 Business Analysis……………………………………………………….26 Projected Income Statement for 2020………………………….30 Actual vs Predicted Earnings per Share Evaluation……….33 Journal Entry List………………………………………………………36 Chart of T-Accounts……………………………………………………40 Depreciation Schedules……………………………………………...44 Inventory Tracking Schedule……………………………………...45 Patent Amortization Schedule……………………………………..44 Bond Amortization Schedule……………………………………….45 Vertical Analysis…………………………………………………………46
3
Company Overview
4
ColdFront was formed in Utah on January 1, 2016 to help the people here combat
the harsh winters with an array of different cold weather products. We specialize in
winter car accessories including: tire chain alternatives, windshield ice protectors,
battery warmers, snow scrapers, portable snow shovels for the car, and de-icing
formulas.
Over the past few years, we have become profitable, and have decided to expand
our business to the surrounding states of Colorado and Idaho. In this expansion, we
have set ourselves up to make much greater profits in the coming years.
On January 1, 2017, our company went public, and started trading on the NYSE.
This has helped us to become recognizable here in the Mountain West, and also has
helped to boost sales across the nation and even worldwide. Most of our business
comes from our brick and mortar stores set up strategically throughout the Mountain
West, but we also sell online through a variety of retailers. Our innovative formulas and
products have helped people who live in cold environments endure the harsh side
effects that come along with that lifestyle.
5
Company Financials
6
Income Statement
2019 2018 2017
Sales, Net $4,143,225 2,280,000 2,500,000 Cost of Goods Sold $2,493,425 850,000 780,000
Gross Profit $1,649,800 1,430,000 1,720,000 Wages Expense $1,025,000 565,000 785,000 Utility Expense $56,000 37,050 37,500 Insurance Expense $162,417 23,905 21,097 Rent Expense $23,917 18,009 17,080 Fuel Expense $9,400 2,900 1,400 Office Supplies Expense $16,400 6,000 5,000 Advertising Expense $38,958 23,000 25,000 Bad Debt Expense $254,964 60,750 45,000 Depreciation Expense $600,800 500,000 500,000 Amortization Expense $3,292 - - Bond Interest Expense $18,485 - -
Total Operating Expenses $2,209,633 1,236,614 1,437,077 Operating Income $(559,833) 193,386 282,923
Interest Income $82,945 23,676 21,574 Interest Expense $82,375 (56,250) (56,250) Gain on Sale $1,160,000 - 34,900 Loss on sale $- - (120,000) Unrealized Gain $18,000 - -
Total Other Income $1,178,570 (32,574) (119,776) Net Income $618,737 160,812 163,147
7
Balance Sheet
December 31, 2019 2018 2017 Assets
Cash $3,621,517 $525,710 $658,079 Marketable Securities $142,000 $75,000 $15,000 Accounts Receivable $1,878,868 $455,000 $525,000 Allowance For Bad Debt $(225,464) $(25,000) $(105,000) Interest Receivable $82,945 $23,676 $21,574 Prepaid Advertising $3,542 $- $- Prepaid Insurance $342,419 $139,836 $148,945 Prepaid Rent $87,133 $29,050 $34,982 Office Supplies $14,120 $3,520 $5,400 Inventory $719,950 $975,000 $775,000
Current Assets $6,667,029 $2,201,792 $2,078,980
Office Furniture $92,000 $- $- Equipment $4,690,000 $5,000,000 $5,000,000
Accum. Depreciation $(2,530,800) $(2,000,000)
$(1,500,000)
LT Notes Receivable $285,000 $285,000 $- Land $1,280,000 $1,450,000 $1,450,000 Patent $75,708 $- $-
Non-Current Assets $3,891,908 $4,735,000 $4,950,000
Total Assets $10,558,938 $6,936,792
$7,028,980
Liabilities Accounts Payable $1,012,388 $450,000 $570,000 Wages Payable $41,000 $35,000 $33,000 Interest Payable $- $- $- Short-Term Notes Payable $510,000 $- $- Deferred Revenue $560,625 $- $- Dividends Payable $981,600 $155,000 $135,000 Bond Interest Payable $18,485 $- $- Disc. on Bonds Payable $(27,089) $- $-
Current Liabilities $3,097,009 $640,000 $738,000 Long-Term Notes Payable $1,348,000 $1,250,000 $1,250,000 Bonds Payable $1,000,000 $- $-
Long-Term
Liabilities $2,348,000 $1,250,000 $1,250,000
Stockholders Equity
Common Stock $1,062,500 $1,000,000 $1,000,000 Additional Paid-In Capital $2,711,906 $1,824,406 $1,824,406
Treasury Stock $(520,000) $- $- Contributed Capital $500,000 $500,000 $500,000
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Retained Earnings $1,359,523 $1,722,385 $1,716,574
Stockholder's Equity $5,113,929 $5,046,791 $5,040,980
Total Liabilities & SE $10,558,938 $6,936,791
$7,028,980
9
Statement of Cash Flows
Cash Flows from Operating Activities: 2019 Net Income $618,737
Depreciation Expense $600,800 Amortization Expense $3,292
Discount on bond $27,089 Unrealized Gain $(18,000) Gain on Sale $(1,160,000) Increase in accounts receivable $(1,223,404) Increase in interest receivable $(59,269) Increase in prepaid insurance $(202,583) Increase in prepaid ad $(3,542) Increase in prepaid rent $(58,083) Increase in office supplies $(10,600) Decrease in inventory $255,050 Increase/Decrease in accounts payable $562,388 Increase in wages payable $6,000 Increase in deferred revenue $560,625 Increase in bond interest payable $18,485 Net Cash from Operating Activities $(83,015) Cash Flows from Investing Activities: Purchase of a truck $(260,000) Cash received from sale of equipment $810,000 Purchase of land $(470,000) Cash received from sale of land $2,000,000
Purchase of Office Supplies $(27,000) Purchase of Office Furniture $(92,000)
Purchased Marketable Security $(49,000) Patent Purchase $(79,000) Net Cash Used for Investing Activities $1,833,000 Cash Flows from Financing Activities: Issued long-term note payable $145,000 Paid long-term note payable $(47,000) Cash received from issuing bond payable $972,911 Cash received from issuance of common stock $950,000 Treasury Stock $(520,000) Paid dividend $(155,000) Net Cash from Financing Activities $1,345,911 Net increase in cash $3,095,896 Cash, Beginning of year 1/1/2019 $525,710 Cash, End of year 12/31/2019 $3,621,517
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Net Cash from Operating Activities 2018 Net Income $160,812 Depreciation Expense $500,000 Decrease in accounts receivable $70,000 Increase in interest receivable $(2,102) Allowance for Bad Debt $(80,000) Decrease in prepaid insurance $9,109 Decrease in prepaid rent $5,932 Decrease in office supplies $1,880 Decrease in inventory $(200,000) Increase/Decrease in accounts payable $(120,000) Increase in wages payable $2,000 Net Cash from Operating Activities $347,631 Cash Flows from Investing Activities : Long-term Note Receivable $(285,000) Marketable Securities $(60,000) Net Cash Used for Investing Activities $(345,000) Cash Flows from Financing Activities: Dividends $(135,001) Net Cash from Financing Activities $(135,001) Net cash $(132,370) Cash, Beginning of year $658,079 Cash, End of year $525,710
11
Financial Ratios/Analysis
12
Earnings Per Share:
Net Income - Preferred Dividends Average Common Shares Outstanding
= $0.15
EPS gives you the dollar amount that we could distribute for each common stock share that is outstanding each year. This calculation also shows how profitable we are to our shareholders. Based on our 2019 net income, we had an EPS of $ 0.15, which is significantly higher than both of the previous years. This means that we would be able to distribute $0.15 for each one of our outstanding stocks.
Year EarningsPerShare2017 0.042018 0.042019 0.15
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
2017 2018 2019
EarningsPerShare
EarningsPerShare
618,737 - 0 ((4000000+4090000)/2)
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Price-earnings Ratio:
Market Value per Share
Earnings per Share
= $32.69
The Price-earnings Ratio tells investors how many dollars they should expect to put into a company to receive 1 dollar of our earnings each year. The P/E Ratio for 2019 is $32.69, which is significantly lower than the previous years. This could show potential investors that our growth is slowing down from what it was at in the past.
Year Price Earnings Ratio
2017 $71.10 2018 $94.52 2019 $32.69
$-$10.00$20.00$30.00$40.00$50.00$60.00$70.00$80.00$90.00$100.00
2017 2018
PriceEarningsRatio
PriceEarningsRatio
5 0.15
14
Return on Equity:
Net Income
Average Equity
= 0.12
ROE measures how much money we can make as a company with the money that shareholders have given to us. Our 2019 ROE is 0.12, which means that for every dollar invested into our company, there is a return of $0.12 in excess of the dollar invested. Our 2019 ROE is 4 times larger than our 2017 and 2018 ROEs, which indicates that we have quadrupled our investor’s returns this year.
Year Return on Equity 2017 0.03 2018 0.03 2019 0.12
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
2017 2018
ReturnonEquity
ReturnonEquity
618,737 (5,113,929 + 5,046,791)/2
15
Working Capital:
Current Assets - Current Liabilities
6,667,029 – 3,097,009 = 3,570,020
Working capital indicates whether a company has enough liquid assets to cover their debts that are due within the next year. Our 2019 working capital was $3,570,020. This means that we have $3,570,020 in excess of what we owe other people within the next year. This money can then be put to use in many other facets.
Year Working Capital 2017 $1,340,980.00 2018 $1,561,792.00 2019 $3,570,020.56
$0.00
$500,000.00
$1,000,000.00
$1,500,000.00
$2,000,000.00
$2,500,000.00
$3,000,000.00
$3,500,000.00
$4,000,000.00
2017 2018 2019
WorkingCapital
WorkingCapital
16
Current Ratio:
Current Assets Current Liabilities
= 2.15
The Current Ratio displays how many times a company would be able to pay off its debt under one year, with the assets that they have on hand, which they are quickly able to liquefy. Our Current Ratio for 2019 was 2.14, which indicates that we would be able to cover all of our debt which is under one year 2.14 times with what we currently have and are able to liquefy quickly.
Year Current Ratio 2017 2.82 2018 3.44 2019 2.15
0
0.5
1
1.5
2
2.5
3
3.5
4
2017 2018 2019
CurrentRatio
CurrentRatio
6,667,029 3,097,009
17
Quick Ratio:
Cash + Short Term Investments + Receivables Current Liabilities
= 1.82
The Quick Ratio measures how many times over a company is able to cover its short term debt, with the assets that they are able to sell off quickly. This is why with the inventory is left out of the ratio, because a company possibly wouldn’t be able to get rid of inventory quickly. For this reason, the Quick Ratio may be more accurate than the Current Ratio. Our 2019 Quick Ratio is 1.82. This means that for every dollar of short term liabilities that we have, we have $1.82 of liquid assets that we are able to cover it with.
Year Quick Ratio 2017 1.62 2018 1.65 2019 1.82
1.5
1.55
1.6
1.65
1.7
1.75
1.8
1.85
2017 2018 2019
QuickRatio
QuickRatio
3,621,517 + 142,000 + 1,878,868 3,097,009
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AR Turnover:
Net sales Average Accounts Receivable
= 3.55
The A/R Turnover Ratio determines how effective our company is at collecting the debt that is owed to us. The ratio determines how many times per year Accounts Receivable is collected. By looking at this, we are able to see if we are efficient in receiving the money that we have earned, but not yet collected from customers. Our 2019 ratio is 3.55, which means that we collected A/R 3.55 times last year, or just under once per quarter. This is down from the previous two years, which indicates that we were less efficient at collecting A/R in a timely manner than the other two years.
Year AR Turnover 2017 4.76 2018 4.65 2019 3.55
00.51
1.52
2.53
3.54
4.55
2017 2018 2019
ARTurnover
ARTurnover
4,143,225 (455000 + 1,878,868)/2
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Inventory Turnover:
Cost of Goods Sold Average Inventory
= 2.94
Inventory Turnover determines the company’s ability to sell inventory that we have, and how efficiently we are able to do it. Our 2019 Inventory Turnover for 2019 was 2.94, which indicates that we turned over the inventory that we had, and replaced it 2.94 times last year. This is a fairly low number, but is almost 3 times higher than what it was in the past, which shows that we have become more efficient in selling our product.
Year Inventory Turnover 2017 1.01 2018 0.97 2019 2.94
0
0.5
1
1.5
2
2.5
3
3.5
2017 2018 2019
InventoryTurnover
InventoryTurnover
2,493,425 (975,000 + 719,950)/2
20
Gross Profit:
Net Sales - COGS
4,143,225- 2,493,425 = 1,649,800 Gross Profit evaluates how efficient our company is at producing our product. If the Net Sales are greater than the COGS, then that means that we are selling our product at a higher price than it costs to make it. Our 2019 Gross Profit
Year Gross Profit 2017 $1,720,000.00 2018 $1,430,000.00 2019 $1,649,800.00
$0.00$200,000.00$400,000.00$600,000.00$800,000.00
$1,000,000.00$1,200,000.00$1,400,000.00$1,600,000.00$1,800,000.00$2,000,000.00
2017 2018 2019
GrossPro?it
GrossProMit
21
Gross Profit Ratio:
Gross Profit Net Sales
= .40 The Gross Profit Ratio calculates what percentage of revenues is left over after the production costs are taken out. Our 2019 Gross Profit Ratio shows that we have 40% of revenues left over to cover other activities.
Year Gross Profit Ratio 2017 0.69 2018 0.63 2019 0.4
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
2017 2018 2019
GrossPro?itRatio
GrossProMitRatio
1,649,800 4,143,225
22
Operating Income:
Gross Profit – Total Operating Expenses
1,649,800 – 2,209,633 = (559,833)
Our negative Operating Income demonstrates that as a company, we had more expenses than we had income coming in in 2019. The way to fix this would be to cut down on expenses, increase sales, or both. By doing this, we would be able to turn a profit in the upcoming years.
Year Operating Income 2017 $282,923.00 2018 $193,386.00 2019 $(559,832.65)
$(700,000.00)$(600,000.00)$(500,000.00)$(400,000.00)$(300,000.00)$(200,000.00)$(100,000.00)
$-$100,000.00$200,000.00$300,000.00$400,000.00
2017 2018 2019
OperatingIncome
OperatingIncome
23
Operating Margin:
Income From Operations Net Sales
= -0.14 The Operating Margin shows the percent of money that we made from selling our product after taking out the expenses incurred. Like the Operating Income, this percent is a way to reflect how profitable our company is. Our 2019 Operating Margin is -14%, which reflects our Operating Income, which was also unprofitable.
Year Operating Margin 2017 0.11 2018 0.08 2019 -0.14
-0.2
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
2017 2018 2019
OperatingMargin
OperatingMargin
-559,833 4,143,225
24
Debt-to-equity Ratio:
Total Liabilities Total Equity
= 1.06
The Debt-to-equity Ratio evaluates how much debt we took on versus how much equity we raised to finance our company. Our 2019 ratio was 1.06, which indicates that we took on 6% more debt than we raised through means of equity. Our large increase in ratio from the past two years shows that we have taken on a lot more debt this year than in previous years.
Year Debt-to-equity Ratio 2017 0.39 2018 0.37 2019 1.06
0
0.2
0.4
0.6
0.8
1
1.2
2017 2018 2019
Debt-to-equityRatio
Debt-to-equityRatio
5,445,009 5,113,929
25
Book Value Per Share:
= 1.25
The Book Value Per Share indicates how much our company is worth per share to our shareholders if we were to liquidate the company today. It is a way to measure what the company is worth per share of stock outstanding. Our value per share for 2019 is 1.25, which shows that our company is worth $1.25 per share.
Year Book Value Per Share
2017 1.26 2018 1.26 2019 1.25
1.2441.2461.2481.251.2521.2541.2561.2581.261.262
2017 2018 2019
BookValuePerShare
BookValuePerShare
Total Equity - Preferred Equity
Total Outstanding Shares
5,113,929 - 0
4,090,000
26
Business Analysis
27
Income: In 2019, we were able to double our sales from 2018. We did, however, also increase our Cost of Goods Sold by 30 %. This was a weak point for us this year, because even though we had higher sales, our end Operating Income was negative, when it was positive in the previous years. Also, even though our Net Income was vastly higher than previous years, this is because we had a massive gain on sale, which contributed $1.16 million that we didn’t have in 2017 and 2018. This was reflected in our Earnings Per Share and Return on Equity. EPS was 3 times higher, and ROE was 4 times higher than previous years. Overall, I feel like we are on the right track by increasing sales, but in 2020, we need to figure out a way to cut costs so that we are more profitable for our shareholders.
Sales,Net,76.67%
InterestIncome,1.53%
GainonSale,21.46%
UnrealizedGain,0.33%
28
Expenses: This year, we saw a large $1 million increase in expenses. This is, however, proportionate to the growth that we saw this year. Most of our expenses are right on par with what they were at last year as a percentage of income. We had a large increase in Bad Debt Expense this year, which was 3% higher than last year. We could increase our sales a bit more if we can become more efficient in collecting what customers owe us. Naturally, our Wages Expense was by far our highest expense coming in at $1,025,000, and making up almost half of our total expenses. As an expanding company, this makes sense, because we need to have the adequate number of employees to keep up with our huge increase in sales from the previous years. As the company keeps growing, I expect this number to keep rising until we reach an economy of scale within our company.
CostofGoodsSold52.10%
WagesExpense21.42%
UtilityExpense1.17%
InsuranceExpense3.39%
RentExpense0.50%
FuelExpense0.20%
OfMiceSuppliesExpense0.34%
AdvertisingExpense0.81%
BadDebtExpense5.33%
DepreciationExpense12.55%
AmortizationExpense0.07%
BondInterestExpense0.39%
InterestExpense1.72%
29
Profit: In 2019, our Gross Profit went up by 229,800, but our Gross Profit Margin went down by 23%. This is also tied to the problem that we highlighted above when talking about our Cost of Goods Sold. We have been steadily declining over the past three years when it comes to Profit Margin, and this is worrisome to our shareholders. We need to take the steps necessary to become more efficient in 2020 to cut down our COGS, so that we can become more profitable in the future. Debt and Equity: As a company in 2019, according to the Debt-to-equity Ratio, we were leveraged with 6% more debt than equity. We took on a lot more debt this year than in previous years, and this should help us receive a higher tax break. At first glance, it may seem like a mistake to take on a 70% increase in a one-year period, but we are able to pay off all of our current liabilities that we have incurred. We have a Current Ratio of 2.15, which shows that we are able to pay off those liabilities 2.15 times with the assets that we have on hand. This could, however, become a problem in the future if we have a year when a large portion of our long-term debt is due, and we continue to have such high COGS mixed with low sales for the year.
30
Projected Income Statement 2020
31
2020 2019 2018 2017 Sales, Net $3,500,000 $4,143,225 $2,280,000 $2,500,000 Cost of Goods Sold $1,501,051 $2,493,425 $850,000 $780,000 Gross Profit $1,998,949 $1,649,800 $1,430,000 $1,720,000 Wages Expense $944,065 $1,025,000 $565,000 $785,000 Utility Expense $56,000 $56,000 $37,050 $37,500 Insurance Expense $182,500 $162,417 $23,905 $21,097 Rent Expense $41,000 $23,917 $18,009 $17,080 Fuel Expense $4,784 $9,400 $2,900 $1,400 Office Supplies Expense $10,021 $16,400 $6,000 $5,000 Advertising Expense $46,042 $38,958 $23,000 $25,000 Bad Debt Expense $215,381 $254,964 $60,750 $45,000 Depreciation Expense $658,350 $600,800 $500,000 $500,000 Amortization Expense $7,900 $3,292 $- $- Bond Interest Expense $18,485 $18,485 $- $- Total Operating Expenses $2,184,529 $2,209,633 $1,236,614 $1,437,077 Operating Income $(185,580) $(559,833) $193,386 $282,923 Interest Income $70,068 $82,945 $23,676 $21,574 Interest Expense $69,586 $82,375 $(56,250) $(56,250) Gain on Sale $- $1,160,000 $- $34,900 Loss on sale $- $- $- $(120,000) Unrealized Gain $- $18,000 $- $- Total Other Income $139,654 $1,178,570 $(32,574) $(119,776) Net Income $(45,926) $618,737 $137,136 $163,147
Cost of Goods Sold We found a 42% correlation between net sales and cost of goods sold averaged over 2017, 2018, and 2019. We then applied the percentage to the projected 2020 sales. Wage Expense We calculated wage expenses in a similar manner to cost of goods sold. We found a 27% correlation between wage expense and net sales. We then multiplied the percentage to our projected 2020 sales.
Utility Expense Our utility expense stays the same, as we just purchased new land in 2019 and do not want to engage in any real estate investments in 2020.
Insurance Expense On November 1, 2019, we purchased insurance for two years building insurance for $365,000. We did not have any other insurance engagements, so we calculated the 2020 projected insurance expense by dividing the $365,000 by the two years. This equates to $182,500 for 2020 insurance expense.
Rent Expense
32
On June 1, 2019, we paid $82,000 for the next two years of rent. This equates to $41,000 for 2020 rent expenses.
Fuel Expense We found a 0.14% correlation between sales and fuel costs. We calculated this by finding the average sales of 2018 and 2019, divided by the average fuel expense of 2018 and 2019.
Office Supplies Expense We found a 0.29% correlation between office supplies and sales. We calculated this by finding the average of the past three years sales and office supplies, multiplying this by our projected sales.
Advertising Expense On February 1, 2019, we prepaid $42,500 for 1 year of radio advertising. This contract went into January of 2020, for the amount of $3,542. We plan to renew our contract for radio advertisement in 2020 the same amount, resulting in $46,042.
Bad Debt Expense We calculated this by dividing the allowance of bad debt by sales in 2019. We expect to collect the same percent of accounts receivable as 2019.
Depreciation Expense On December 31, 2019 our depreciation expense was $600,800, we then added our double declining depreciation of the truck purchased in 2019 and furniture.
Amortization Expense On August 1, 2019, we obtained a patent and decided to use straight-line amortization. This results in an amortization expense of $7,900.
Bond Interest Expense We do not need to issue bonds in 2020, thus our bond interest expense will be the same as 2019, $18485.
Interest Expense Interest expense for 2019 was 2%, we took that and applied it for 2020. Since previous years were counted against net income, we did not take them into consideration.
Interest Income We calculated this by dividing the 2019 interest income by the net sales resulting in a 2% relationship.
33
Actual vs. Predicted Earnings Per Share
Evaluation
34
= $0.15
For 2016, our predicted annual EPS was supposed to be $0.15. Our actual EPS ended up being right on the spot at %0.15. We met the goal that was set forth, so our shareholders should be happy about that. We feel as though we were able to meet this goal, because we were able to increase our sales by a large amount this year. We weren’t, however, able to pass our goal, because our Cost of Goods Sold was also increased by a large amount, which set us back. Looking onward towards 2020, we need to be able to increase Net Sales, while cutting down on Cost of Goods Sold to be able to raise the EPS for our shareholders.
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
2017 2018 2019
EarningsPerShare
EarningsPerShare
618,737 - 0 ((4000000+4090000)/2)
35
Supporting Documentation
36
Journal Entries
Date Account Debit Credit Calculations 1/1/19 Cash $950,000 250,000 * 3.8 1/1/19 Common Stock $62,500 250,000 * .25 1/1/19 APIC $887,500 250000 * 3.55
1/1/19 Truck $260,000 1/1/19 Cash $260,000
1/1/19 Office Furniture $92,000 1/1/19 Cash $92,000
1/1/19 Cash $145,000 1/1/19 LT Note Payable $145,000
1/5/19 Cash $23,676 1/5/19 Interest Receivable $23,676
1/22/19 Inventory $646,000 1/22/19 Cash $290,700 646,000 * .45 1/22/19 Accounts Payable $355,300 646,000 * .55
1/25/19 Accounts Payable $255,000 1/25/19 Cash $255,000
2/1/19 Prepaid Advertising $42,500 2/1/19 Cash $42,500
2/13/19 Cash $369,000 2/13/19 Accounts Receivable $369,000
3/1/19 Land $980,000 3/1/19 Cash $470,000 3/1/19 ST Note Payable $510,000
3/19/19 Office Supplies $27,000 3/19/19 Cash $27,000
3/20/19 Cash $39,000 3/20/19 Deferred Revenue $39,000
4/21/19 Cash $1,116,000 1860000 *0.6 4/21/19 Accounts Receivable $744,000 1860000 * 0.4
4/21/19 COGS $1,127,000 (13000 * 75) + (2000 *
76) 4/21/19 Revenue $1,860,000 15000 * 124
4/21/19 Inventory $1,127,000 (13000 * 75) + (2000 * 76)
37
4/27/19 Inventory $726,125 9250*78.5 4/27/19 Cash $508,288 726125 * 78.5 4/27/19 Accounts Payable $217,838 726,125 - 508,288
4/29/19 Accounts Payable $527,000 4/29/19 Cash $527,000
5/1/19 Dividends Payable $155,000 5/1/19 Cash $155,000
6/1/19 Prepaid Rent $82,000 6/1/19 Cash $82,000
6/1/19 Interest Expense $6,375 6/1/19 Cash $6,375
6/19/19 Insurance Expense $132,000 6/19/19 Prepaid Insurance $132,000
6/26/19 ADA $54,500 6/26/19 Accounts Receivable $54,500
6/30/19 Wages Expense $487,000 6/30/19 Wages Payable $35,000 6/30/19 Cash $522,000
7/1/19 Cash $972,911 (0.972911*1000)*1000 7/1/19 Discount on Bonds Payable $27,089 1,000,000 - 972,911 7/1/19 Bond Payable $1,000,000
8/1/19 Patent $79,000 8/1/19 Cash $79,000
8/6/19 Cash $2,000,000
8/6/19 Land $1,150,000 8/6/19 Gain on Land $850,000 2,000,000 - 1,150,000
8/15/19 Cash $514,350 1,143,000 * .45 8/15/19 Accounts Receivable $628,650 1,143,000 - 514,350 8/15/19 COGS $690,250 (6500*76)+(2500*78.5) 8/15/19 Revenue $1,143,000 9000*127
8/15/19 Inventory $690,250 (6500*76)+(2500*78.5)
8/25/19 Cash $139,000 8/25/19 Accounts Receivable $139,000
9/1/19 Interest Expense $6,375 9/1/19 Cash $6,375
38
9/3/19 Marketable Security $49,000 9/3/19 Cash $49,000
9/12/19 Cash $810,000
9/12/15 Accumulated Depreciation (Equipment) $70,000
9/12/15 Equipment $570,000 9/12/15 Gain on Asset $310,000
9/18/19 Fuel Expense $9,400 9/18/19 Cash $9,400
10/1/19 Inventory $866,250 11250*77 10/1/19 Accounts Payable $866,250
10/10/19 Accounts Payable $95,000 10/10/19 Cash $95,000
11/1/19 Treasury Stock $520,000 160000*3.25 11/1/19 Cash $520,000
11/1/19 Prepaid Insurance (Building) $365,000 11/1/19 Cash $365,000
11/17/19 Cash $546,000 11/17/19 Deferred Revenue $546,000
11/19/19 Cash $502,133 1,115,850 * 0.45 11/19/19 Accounts Receivable $613,718 1115850 * 0.55 11/19/19 COGS $676,175 (6750*78.5)+(1900*77) 11/19/19 Revenue $1,115,850 8650*129 11/19/19 Inventory $676,175 (6750*78.5)+(1900*77)
12/1/19 Interest Expense $6,375 12/1/19 Cash $6,375
12/15/19 Wages Expense $538,000 12/15/19 Wages Payable $41,000 12/15/19 Cash $497,000
12/31/19 LT Notes Payable $47,000 12/31/19 Interest Expense $7,000 12/31/19 Cash $54,000
12/31/19 Deprecation Expense (Equipment) $527,000
12/31/19 Accumulated Depreciation (Equipment) $527,000
12/31/19 Utilities Expense $56,000
39
12/31/19 Cash $56,000
12/31/19 Interest Expense $56,250 12/31/19 Cash $56,250
12/31/19 Interest Receivable $82,945 2073613.5*0.04 12/31/19 Interest Income $82,945
12/31/19 Deferred Revenue $24,375 (39000/200)*125 12/31/19 Revenue $24,375
12/31/19 Office Supplies Expense $16,400 12/31/19 Office Supplies $16,400
12/31/19 Bad Debt Expense $254,964 0.12*1878868 12/31/19 ADA $254,964
12/31/19 Depreciation Expense (TRUCK) $65,000 260,000 * 0.25 12/31/19 Accumulated Depreciation (TRUCK) $65,000
12/31/29 Depreciation Expense (Office Furniture) $8,800 (92,000 - 4000) /10
12/31/29 Accumulated Depreciation (Office Furniture) $8,800
12/31/29 Advertising Expense $38,958 (42,500/12) * 11 12/31/29 Prepaid Advertising $38,958
12/31/19 Rent Expense $23,917 (82000/24)*7 12/31/19 Prepaid Rent $23,917
12/31/19 Amortization Expense $3,292 (79000/120)*5 12/31/19 Patent $3,292
12/31/19 Insurance Expense (Building) $30,417 (365000/24)*2 12/31/19 Prepaid Insurance (Building) $30,417
12/31/19 Bond Interest Expense $18,485 12/31/19 Bond Interest Payable $18,485
12/31/19 Marketable Security $18,000 12/31/19 Unreal Hold Gain $18,000
12/31/19 Retained Earnings $981,600 ((4250000-
160000)*0.24) 12/31/19 Dividends Payable $981,600
40
T – Accounts Assets
Cash
Marketable Sec
A/R 525710 260000
75,000
455,000 369,000
950000 92000
49,000
744,000 54,500 145000 290700
18,000
628,650 139,000
23676 255000
613,718 369000 42500
39000 470000
1116000 27000
2000000 508288
514350 527000
139000 82000
810000 522000
546000 79000
502133 49000
972911 9400
95000
365000
54000
497000
56000
56250
19125
155000
520000
3,621,517
142,000
1,878,868
ADA
Equipment
Accum Depreciation 54,500 25,000
5,000,000 570,000
70,000 2,000,000
254,964
260,000
527,000
65,000
225,464
4,690,000
2,522,000
LT Notes Receivable
Land
Office Supplies 285,000
1,450,000 1,150,000
3,520 16,400
980,000
27,000
285,000
1,280,000
14,120
41
Office Furniture
Accum Depreciation
Prepaid Rent
-
-
29,050 23,917 92,000
8,800
82,000
92,000
8,800
87,133
Patent
Prepaid Insurance
Prepaid Advertising - 3,292
139,836 132,000
- 38,958
79,000
365,000 30,417
42,500
75,708
342,419
3,542
Interest Receivable
23,676 23,676 82945
82,945
Liabilities
A/P
Wages Payable
Dividends Payable 255,000 450,000
35,000 35,000
155,000 155,000
527,000 355,300
41,000
981,600 95,000 217,838
866,250
1,012,388
41,000
981,600
42
LT Notes Payable
Deferred Revenue
ST Note Payable
47,000 1,250,000
24,375 -
- 145,000
39,000
510,000
546,000
1,348,000
560,625
510,000
Bonds Payable
Disc. on Bonds Pay.
Bond Int. Payable 0
0
-
1000000
27089
18,485
1,000,000
27,089
18,485
Stockholders Equity
Contributed Cap
Retained Earnings
Common Stock
500,000
981,600 1,722,386
1,000,000
-
62,500
500,000
740,786
1,062,500
APIC
Treasury Stock 1,824,406
-
887,500
520,000
2,711,906
520,000
Revenue
COGS
Wage Expense
1,860,000
1,127,000
487,000
1,143,000
690,250
538,000 1,115,850
676,175
24,375
4,143,225
2,493,425
1,025,000
43
Interest Income
Interest Expense
Bad Debt Expense
82945
7,000
254,964
56,250
19,125
82,945
82,375
254,964
Depreciation Expense
Gain on Sale
Loss on Sale
527,000
850,000
65,000
310,000
8,800
600,800
1,160,000
-
Advertising Expense
Utility Expense
Office Supplies Exp.
38,958
56,000
16,400
38,958
56,000
16,400
Fuel Expense
Insurance Expense
Rent Expense
9,400
132,000
23,917
30,417
9,400
162,417
23,917
Amortization Expense
Bond Int. Expense
Unreal Hold Gain
3,292
18485
18,000.00
3,292
18,485
18,000
44
Depreciation Schedule for Truck
Year Dep. Expense Accumulated
Dep. Book Value 2019 $65,000.00 $65,000.00 $195,000.00 2020 $48,750.00 $113,750.00 $146,250.00 2021 $36,562.50 $150,312.50 $109,687.50 2022 $27,421.88 $177,734.38 $82,265.63 2023 $20,566.41 $198,300.78 $61,699.22 2024 $15,424.80 $213,725.59 $46,274.41 2025 $11,568.60 $225,294.19 $34,705.81 2026 $9,705.81 $235,000.00 $25,000.00
Depreciation Schedule for Office Equipment
Year Dep. Expense
Accumulated Dep. Book Value
2019 $8,800.00 $8,800.00 $83,200.00 2020 $8,800.00 $17,600.00 $74,400.00 2021 $8,800.00 $26,400.00 $65,600.00 2022 $8,800.00 $35,200.00 $56,800.00 2023 $8,800.00 $44,000.00 $48,000.00 2024 $8,800.00 $52,800.00 $39,200.00 2025 $8,800.00 $61,600.00 $30,400.00 2026 $8,800.00 $70,400.00 $21,600.00 2027 $8,800.00 $79,200.00 $12,800.00 2028 $8,800.00 $88,000.00 $4,000.00
Patent Amortization
Year Dep. Expense
Accumulated Dep. Book Value
2019 $3,291.67 $3,291.67 $75,708.33 2020 $7,900.00 $11,191.67 $90,191.67 2021 $7,900.00 $19,091.67 $59,908.33 2022 $7,900.00 $26,991.67 $52,008.33 2023 $7,900.00 $34,891.67 $44,108.33 2024 $7,900.00 $42,791.67 $36,208.33 2025 $7,900.00 $50,691.67 $28,308.33 2026 $7,900.00 $58,591.67 $20,408.33 2027 $7,900.00 $66,491.67 $12,508.33 2028 $7,900.00 $74,391.67 $4,608.33 2029 $4,608.33 $79,000.00 $-
45
Inventory Schedule
Column1 Units Price/Unit Total Inv. Sold COGS Beginning Balance 13000 $75.00 $975,000.00
Purchase 1 8500 $76.00 $646,000.00
Sale 1 15000 $124.00
$1,860,000.00 13000@75 +
2000@76
$1,127,000.00 Ending Inventory 6500 $76.00 $494,000.00
Purchase 2 9250 $78.50 $726,125.00
Sale 2 9000 $127.00 $1,143,000.00 6500@76 + [email protected] $690,250.00
Ending Inventory 6750 $78.50 $529,875.00
Purchase 3 11250 $77.00 $866,250.00
Sale 3 8650 $129.00 $1,115,850.00 [email protected] +
1900@77 $676,175.00 Ending Inventory 9350 $77.00 $719,950.00
Bond Amortization Schedule
Bonds 1000
Price 97.2911 Face Value 1000 Maturity/Years 5 Market Rate 0.038 Stated Rate 0.032 Frequency(Semi-
Annual) 2 Original NBV 972911
Payment Bond Int.
Exp. Disc.
Amortization Disc. Bonds Payable
Balance Net Book
Value $16,000.00 $18,485.31 $(2,485.31) $24,604.05 $975,396.31 $16,000.00 $18,532.53 $(2,532.53) $22,071.52 $977,928.84 $16,000.00 $18,580.65 $(2,580.65) $19,490.87 $980,509.49 $16,000.00 $18,629.68 $(2,629.68) $16,861.19 $983,139.17 $16,000.00 $18,679.64 $(2,679.64) $14,181.54 $985,818.81 $16,000.00 $18,730.56 $(2,730.56) $11,450.99 $988,549.37 $16,000.00 $18,782.44 $(2,782.44) $8,668.55 $991,331.81 $16,000.00 $18,835.30 $(2,835.30) $5,833.24 $994,167.11 $16,000.00 $18,889.18 $(2,889.18) $2,944.07 $997,056.29 $16,000.00 $18,944.07 $(2,944.07) $- $1,000,000.36
46
Vertical Analysis Income Statement
2019 2018 2017 Sales, Net $4,143,225 100.00% $2,280,000 100.00% $2,500,000 100.00% Cost of Goods Sold $2,493,425 60.18% $850,000 37.28% $780,000 31.20% Wages Expense $1,025,000 24.74% $565,000 24.78% $785,000 31.40% Utility Expense $56,000 1.35% $37,050 1.63% $37,500 1.50% Insurance Expense $162,417 3.92% $23,905 1.05% $21,097 0.84% Rent Expense $23,917 0.58% $18,009 0.79% $17,080 0.68% Fuel Expense $9,400 0.23% $2,900 0.13% $1,400 0.06% Office Supplies Expense $16,400 0.40% $6,000 0.26% $5,000 0.20% Advertising Expense $38,958 0.94% $23,000 1.01% $25,000 1.00% Bad Debt Expense $254,964 6.15% $60,750 2.66% $45,000 1.80% Depreciation Expense $600,800 14.50% $500,000 21.93% $500,000 20.00% Amortization Expense $3,292 0.08% $- 0.00% $- 0.00% Bond Interest Expense $18,485 0.45% $- 0.00% $- 0.00% Interest Income $82,945 2.00% $23,676 1.04% $21,574 0.86% Interest Expense $82,375 1.99% $56,250 2.47% $56,250 2.25% Gain on Sale $1,160,000 28.00% $- 0.00% $34,900 1.40% Loss on sale $- 0.00% $- 0.00% $120,000 4.80% Unrealized Gain $18,000 0.43% $- 0.00% $- 0.00% Net Income $618,737 14.93% $160,812 7.05% $163,147 6.53%