Wednesday, February 27, 2019

Donahoo Western Furnishing Company Essay

1. What did Donahoos rest sheet look like at the outset of the firms life?According to the text, at the place of the business, all of the firms capital was held in cash. This is represented by the $1,500,000 in cash current assets, which we can expect are comprised of a $500,000 long-term loan and $1,000,000 in equity.2. What did the firms balance sheet look like after each transaction?In the sideline balance sheet, we see that cash has been reduced by $500,000 that went towards the new $1,000,000 in blood. The remaining $500,000 was financed by a short-term payable.In the abutting balance sheet, we can see that inventory decreased by $200,000 however that accounts payable increased by $250,000. Thus, retained earnings increased by $50,000.On Jan. 15, Donahoo increased inventory by $200,000 adding this value to short-term liabilitiesHere, we see inventory decrease $400,000 but other current assets increased $500,000 (with $50,000 going in to cash and $450,000 into A/R). Rath er than moving the $100,000 to retained earnings, the company apply $100,000 in cash to pay a dividend. The company then took an spare $250,000 from cash and paid down long-term debt3. Ignoring taxes, determine how much income Donahoo bring in during January. Prepare an income statement for the month. Recognize an interest expense of 1 portion for the month (12 percent annually) on the $500,000 long-term debt, which has not been paid but is owed.Unfortunately, the data that is provided does not include the operating expenses for January 2011 for the Donahoo Western Furnishings Company. Therefore, we can see what the Net Profit is before Operating Expenses. That is, this number is overstated and would likely be dramatically reduced once Operating Expenses were included. The graph on the right represents an illustration of what the furniture companys real next income might be (i.e. operating income was estimated, incorporating rent, utilities, salaries, etc.).

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