Comprehensive case study


Michael mcBryan the owner invested $ 80000 cash in the business -1


Cash $80000
McBryan capital $80000
2- Purchased land for business site
Land $52000
Cash $52000
3- Purchased building from MTA paid part cash –balance payables within 3 menthes
Building $36000
Cash $6000
Notes payables $ 30000
4-Purchased tools & equipment on credit due in 60 day form snap-on co
Tools & equipment $ 13800
Accounts payables $13800


5- Sold unused tools at cost due within 60 days
Accounts receivable $1800
Tools & equipment $ 1800


6-collect apart of accounts receivables
Cash $ 600
Accounts Receivable $600
7-made partial payment to snap-on
Accounts payable $6800
$6800 Cash
land receivable
cash
52000 1800 80000
600 52000
6000 600
6800






Notes payable Tools &equipment building


30000 13800
1800 36000






Capital
Accounts payable
80000
13800
6800















Trial balance November 2000
Credit Debit Account name








30000
7000
80000


117000 15800
1200
52000
36000
12000








117000 Cash
Accounts receivable
Land
Building
Tools & equipment
Notes payable
Accounts payable
McBryan capital


Total









McBryan balance sheet November 2000
assets
cash 15800
Accounts receivable 1200
Land 52000
tools & equipment 12000
Building 36000
total assets 117000
liabilities & owners equity
liabilties
Notes payable 30000
Accounts payable 7000
total liabilities 37000
owners equity
McBryan capital 31/12.2000 80000
total liabilities & owners equity 117000




At December 2000 the following transaction


1- Purchased newspaper advertising to run in December
Advertising expense $ 360
Cash $ 360
2- Purchased radio advertising on account payment due in 30 days
Advertising expense $ 470
Accounts payable $ 470
3-purchased shop supplies on account payment due in 30 days
$1400 Shop supplies
Accounts payable $ 1400
4-repair serviced rendered to airport shuttle
Cash $ 4980
Repair service revenue $ 4980
5- Owner withdraw cash from business
3100 $ McBryan capital
$3100 Cash
6- Owner invested cash in business
$ 1000 cash
3100 $ McBryan capital
7- Billed harbor cap for service rendered in December
Accounts receivable $ 5400
$ 5400 Repair service revenue
8- Paid all wages for December
$ 4900 wages expense
Cash $ 4900


Unadjusted Trial balance 31 dec.
Credit Debit Accounts












30000
8870
81000
10380




130250
13420
6600
1400
52000
36000
12000






3100


830
4900


130250 Cash
Accounts receivable
Shop supplies
Land
Building
Tools & equipment
Notes payable
Accounts payable
McBryan capital
McBryan drawing
Repair service revenue
Advertising expense
Wages expense




Total






Adjusting entries:


1- To recognize as expense the cost of shop supplies used in December.
Supplies expense $ 400
Shop supplies $ 400
2- to record one month depreciation on building –estimated useful life 20 year.


Depreciation expense $ 150
Accumulated depreciation $ 150
3- to record one month depreciation on tools & equipment-estimated useful life 5 year.


Depreciation expense $ 200
Accumulated depreciation $ 200


















work sheet 31 December 2000 trial balance adjustment adjusted trial balance
accounts Dr Cr Dr Cr Dr Cr
cash 13420 13420
Accounts receivable 6600 6600
Shop supplies 1400 400 1000
Land 52000 52000
Building 36000 36000
Tools & equipment 12000 12000
Notes payable 30000 30000
Accounts payable 8870 8870
McBryan capital 81000 81000
McBryan drawing 3100 3100
Repair service revenue 10380 10380
Advertising expense 830 830
Wages expense 4900 4900
supplies expense 400 400
depreciation expense building 150 150
depreciation expense tools 200 200
accumulated depreciation building 150 150
accumulated depreciation tools 200 200
total 130250 130250 750 750 130600 130600








Preparing financial statements:






McBryan income statement 31/12/2000
revenue:
repair service revenue 10380
expenses:
Advertising expense 830
Wages expense 4900
supplies expense 400
depreciation expense building 150
depreciation expense tools 200 6480
net income 3900





McBryan statement of owners equity 31/12/2000
McBryan capital nov.2000 80000
add: net income for December 3900
additional investment by owner 1000
subtotal 84900
less: withdrawals by owner 3100
McBryan capital 31/12.2000 81800



31/12/2000 balance sheet McBryan
assets
cash 13420
Accounts receivable 6600
Shop supplies 1000
Land 52000
Building 36000
less: accumulated depreciation 150 35850
tools & equipment 12000
less: accumulated depreciation 200 11800
total assets 120670
liabilities & owners equity
liabilities
Notes payable 30000
Accounts payable 8870
total liabilities 38870
owners equity
McBryan capital 31/12/2000 81800
total liabilities & owners equity 120670



31/12/2000 cash flow McBryan

cash flow from operating activities:
net income 3900
depreciation expense 350
increase in account receivables -5400
increase in accounts payable 1870
supplies expense -1000
net cash flow from operating activities -280
cash flow from financing activities:
investment by owner 1000
withdrawals by owner -3100
net cash flow from financing activities: -2100
net cash flow -2380
beginning balance nov.2000 15800
balance 31/12/2000 13420








Closing entries:
1-to close the repair service revenue account.
Repair service revenue $ 10380
Income summary $ 10380
2- To close the expense accounts.
Income summary $ 6480
Advertising expense $ 830
Wages expense $ 4900
Supplies expense $ 400
Depreciation expense building $ 150
Depreciation expense tools $ 200
3-to close income summary (transfer net income to owner's capital account).
Income summary $ 3900
McBryan capital $ 3900
4- To close the owners drawing account .
McBryan capital $ 3100
McBryan drawing $ 3100
After closing trial balance:


Credit Debit Account name








30000
8708
81800
350


121020 13420
6600
52000
36000
12000










121020 Cash
Accounts receivable
Land
Building
Tools & equipment
Notes payable
Accounts payable
McBryan capital
Accumulated depreciation


Total


Ratio analysis:
54. 13400+6600+1000
38870
Current assets
Current liabilities 1. Current ratio
51. 13400+6600
38870 Cash, marketable securities
and receivables (net)
Current liabilities 2. Quick or acid-test ratio
2.66 10380
3900
Net sales
Average trade receivables . Receivable turnover 3
137 365
2.66
365 days
Receivable turnover
4- days sales in receivables
10. 10380
99650 Sales
Net fixed assets 5- fixed assets turnover


09. 10380
120670 Net sales
Average total assets 6.total Asset turnover
32. 38870
120670 Total debt
Total assets 7. Debt to total assets
48. 38870
81800 Total debt
Total equity 8. Debit to total equity
38. 3900
10380 Net income
Net sales 9. Profit margin on sales
03. 3900
120670 Net income
Average total assets 10. Rate of return on assets


05. 3900
81800 Net income
total equity 11. Return on equity