Suppose you are the only owner of a chain of coffee shops near universities. Your current cafés are doing well, but you are interested in starting afine-dining restaurant. You decide to use the cash generated from your existing business to enter into a new business. Your accountant provides youwith the following data on your current financial performance:Financial update as of June 15• Your existing business generates $75,000 in EBIT.• The corporate tax rate applicable to your business is 25%.• The depreciation expense reported in the financial statements is $14,286.• You don't need to spend any money for new equipment in your existing cafés; however, you do need $11,250 of additional cash.• You also need to purchase $6,000 in additional supplies-such as tableclothes and napkins, and more formal tableware-on credit.• It is also estimated that your accruals, including taxes and wages payable, will increase by $3,750.Based on your evaluation you havein free cash flow.

The cash generated by a company after accounting for cash outflows to support operations and…

Answered: Financial update as of June 15 • Your…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Suppose you are the only owner of a chain of coffee shops near universities. Your current cafés are doing well, but you are interested in starting a fine-dining restaurant. You decide to use the cash generated from your existing business to enter into a new business. Your accountant provides you with the following data on your current financial performance: Financial update as of June 15 • Your existing business generates $87,000 in EBIT. • The corporate tax rate applicable to your business is 25%. • The depreciation expense reported in the financial statements is $16,571. • You don’t need to spend any money for new equipment in your existing cafés; however, you do need $13,050 of additional cash. • You also need to purchase $6,960 in additional supplies—such as tableclothes and napkins, and more formal tableware—on credit. • It is also estimated that your accruals, including taxes and wages payable, will increase by $4,350. Based on your evaluation you have…
Suppose you are the only owner of a chain of coffee shops near universities. Your current cafés are doing well, but you are interested in starting a fine-dining restaurant. You decide to use the cash generated from your existing business to enter into a new business. Your accountant provides you with the following data on your current financial performance: Financial update as of June 15 • Your existing business generates $123,000 in EBIT. • The corporate tax rate applicable to your business is 25%. • The depreciation expense reported in the financial statements is $23,429. • You don’t need to spend any money for new equipment in your existing cafés; however, you do need $18,450 of additional cash. • You also need to purchase $9,840 in additional supplies—such as tableclothes and napkins, and more formal tableware—on credit. • It is also estimated that your accruals, including taxes and wages…
I need this information created on a balance sheet. You make a personal investment in your company of $5,000 in exchange for 1,000 shares of stock. You purchase a fixed asset, whatever makes sense for your company, (for example, a new laptop for a service business or a bicycle for a bike messenger business) for $1,000. You borrow $10,000 from a local bank for operating expenses.You sell your product or service on account for $250 to a customer.Your customer pays $125 towards the amount that you billed above. You purchase office supplies on account for $300.
Determine whether the following business objectives are FINANCIAL or NONFINANCIAL 1. To have a 5% increase in the number of bank clients acquiring a credit card 2. To have 30% of the viewers as subscribers to the entity’s YouTube channel 3. To have all regular tax associates attend at least 15 CPD units sponsored by the accounting firm during the current year. 4. To have lower write-offs by 20% compared to the previous year. 5. To have a times interest earned of 8.
Instructions: 1. Analyze the given scenario and choose what type of investment is best for Mr. Santos. Explain your answer. (include your analysis through computations) Scenario: Mr. Santos is a government employee, His time deposit account of P 500,000 with 4% interest p.a. maintained with BDO generates a monthly interest of P 1,334.00 (net of 20% withholding tax). He is not satisfied with the earnings that he was receiving. One day, he talked to a BDO financial adviser to seek advice on where to place his money with a higher interest rate. The financial adviser explained to him the following options: 1. Treasury-Bills -placement 30 days 6% one year 2. Bonds issued by San Miguel Corporation Face Value per bond P 100,000, 6% yield, quarterly coupon rate, term 10 years. 3. PLDT preferred 12 % Shares of stocks par value, P 100 per share with Market value P 150 per share. If you are Mr. Santos, what option are you going to choose?
You acquired the following capitals for your own business. $100,000 comes from your family, which is interest free. $200,000 comes from your best friend. He charges you 4% APR for the loan. $300,000 comes from a bank as a 10 year note. The bank charges you 7.5% APR for the loan. Assume there is no tax, what is your WACC? (Please round up your answers to two decimals and write in percentage points. e.g. If your answer is 8.7896%, type 8.79 without the percentage sign)
How is income defined by the IRC? For example, suppose you decided to hold a garage sale one fine summer weekend. The proceeds of such came out to $40. Do you report this? Why or why not?
You are finalizing a bank loan for $180,000 for your small business and the closing fees payable to the bank are 1.7% of the loan. After paying the fees, what will be the net amount of funds from the loan available to your business?
Assume that you started a new business last year with RM30,000 of your own money to purchase equipment. You are seeking a RM100,000 loan to finance the inventory needed to reach this year’s sales target. You have agreed to pledge your venture’s delivery truck and your personal car as a security for the loan. Your family member has agreed to become the guarantor. During your initial year of operation, you paid your supplier in 30-day credit. (a) Use the five Cs of credit to analyse your loan request from the viewpoint of a lender in deciding whether you should make the loan. (b)Assume that you are currently carrying an accounts receivable balance of RM10,000. Analyze how you might use accounts receivables to obtain an additional bank loan.
Assume that you started a new business last year with RM30,000 of your own money to purchase equipment. You are seeking a RM100,000 loan to finance the inventory needed to reach this year’s sales target. You have agreed to pledge your venture’s delivery truck and your personal car as a security for the loan. Your family member has agreed to become the guarantor. During your initial year of operation, you paid your supplier in 30-day credit. (a) Assume that at the end of next year you will have an accounts receivable balance of RM15,000 and an inventory balance of RM30,000. If a bank lends an amount equal to 80% of accounts receivable and 50% of inventories pledged as collateral, estimate the amount that the bank might consider for a bank loan a year from now.
Upon graduating with an accounting degree, you open your own accounting firm of which you are the sole employee. To start the firm you passed on a job offer with a large accounting firm that offered you a salary of RM60,000 annually. Last year you earned a total revenue of RM100,000. Rent and supplies last year were RM50,000. Based on the above information, describe the condition of your firm.
Use the four-step method in problem solving to solve the problem. 33) An accountant receives a salary of $265,775 per year. During the year, he plans to spend $98,000 on 33) his mortgage, $59,000 on food, $33,000 on clothing, $42,000 on household expenses, and $25,000 on other expenses. With the money that is left, he expects to buy as many shares of stock at $225 per share as possible. How many shares will he be able to buy? A) 39 shares B) 38 shares C) 41 shares D) 36 shares

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