Review financial information and perform a finanical analysis to look for any un

Question

Review financial information and perform a finanical analysis to look for any unusual expenses. This financial information is included in the Files Directory. You may respond inline or using attachments.

Please submit a listing of the unusual expenses per year, the amount that should be adjusted and an explanation of why they were unusual expenses.

Chesapeake Auto Repair, Inc. Historic Balance Sheets As of 6/30/17 Current Assets Cash 35,140 27,504 256,931 23,699 1,317 11,975 401 K Receivable 3,181 1000 1000 0 167,861 135,131 2,000 15,000 Due From Related Party Total Cash 39,185 306,931 25,699 170,178 148,106 87.365 75.128 70,154 66,429 68,442 62,367 Total Current Assets 137505 114,313377.08592,128 238,620 210.473 Fixed Assets-Net Fixed Assets-Cost 148,974 113,722 68,346 43,337 37.231 37,231 37,231 37,231 157,275 133,922 128,224 324,240 324,240 324,240 342,199 268,492 118,293 71,584 71,584 71,584 716,794 559,473 283,748 433055 433,056 433,055 Funiture & Fixtures Machinery & Equipment Total Fixed Assets-Cost (35,198) (44,305) T(20,645) (38,103) (37,231) (37,231) (37,231) (37,231) (38,145) (31,465)(26,526) (27,103) (22,350) (17,597) (270,168) (203,612) (111,377) (61,422) (55,258) (50.379) 364,156) (317485) (175,134) (125,756) (114,839) (105.207) 352638 241.988 108,614 307 299 318.216 327.848 Funiture & Futures Machinery & Equipment Total Accumulated Depreciatior Total Fxed Assets - Net Intangible Assets Cost Covenant Not To Compete Customer List 97.348 97.34897.34897.34897.34897,348 24,36024,360 24,360 24,36024,36024,360 9,7449,7449,7449,7449,7449,744 24.3087.348 1,895 Total Intangible Assets-Cost 133,347133.347133.347133,347 133,347 133.347 Accumulated Amortization Covenant Not To Compete (97,348)(97,348)(97,348) (97,348)(97,348) (97,348) 24,360)(24,360)(24.360)(24.360 (24,360) (24,360) (9.744)(9.744)(9.744) (9.744) (9.744) (9,744) Total Accumulated Amortization Total Intangible Assets Net Loans to Shareholders Total Other Non-Current Assets 132454)(132 425) (132.36 2.334) (132 273)(132 210) 1,137 893 922 1,074 Other Non-Current Assets 115,000 87,437 115,89388,35960,1601.0131,0741.137 606,036444,660 545,859400,440 557,910539,458 Total Other Assets Total Assets: Liablities and Equity: 55,17845,889 42,875 40,983 38,46140,114 25,46335,733 Due To Related Party Loan Payable- Shareholder Sales Tax Payable 046,605 79,85444,755 2,8272,709 0100,000 0 11.665 12,475 Total Current Liabilitios 111,139 Long Term-Notes Payable 255,127282,172 244,349 269,706 297,152 322,716 Loan To Shareholders 81,04929,23927,279 210,935 305,912 315,334 1,628 480,641 603,064 638,050 447315 373,033 431.387 571,492 76,903 726,836 Total Long-Term Notes Payable 271,628 480,641 603,064 336,176 291411 336,176 291411 Total Long-Term Liabilities Total Liabilities Add'l Paid-In Capital Retained Eamings Total Equity 1,0001,0001,0001,000 1,000 1,000 93)(188,878) 400,440 557,910 539,458 500 157,221 70,127 112,972 (172,552) (212,4 158,721 606,036 444,660 545,859 114.472 (171052) Total Liabilities and Equity

Explanation / Answer

The cash balance in year end 2015 is unusually high. Where the company maintains an average cash balance of 20,000 to 30,000, the cash balance at year end 2015 is above 200,000 The account balance in automobiles has increased from year end 2016 to 30-Jun-17 which means that there is an overall addition to fixed assets, however there is no corresponding increase in the accumalated depriciation amount for Automobiles The account balance in Improvements - Fixed assets has decreased considerably from year end 2014 to 2015 however the corresponding effect on accumalated depriciation cannot be seen. The intagible asses - covenant not to complete is depriciated at 100% in all the years mentioned above, which means that 100% has been debited to the profit and loss account. Such treatement is not in line with the accounting standards which states that the intangible assets should be amortized over it's useful life. The customer list has been capatalized as an Intangible assets in the above statements. It should be reviewed whether this customer list is bought from some other party or generated internally. The internally generated fixed assets cannot be capatalized in the financial statements as the cost for the same cannot be ascertained. Same treatement goes for Good will, if internally generated - it cannot be capatalized in books of accounts The loan costs have been capatalized as an Intangible assets. Such treatement is not permitted by the accounting standards The ratio for purchases to sales is not in line for the year 2017 as compared to the other financial years The amount for payroll taxes - shop and sub let cost is included as a part of cost of goods sold instead of indirect costs leading to incorrect gross profit calculation. There also may have been a duplication of payroll taxes in COGS and operating expenses - Other taxes The rent amount is fluctuating in every year which usually remains constant in all years subject to annual increase. Hence the rent amount needs to checked into. Payment of income tax is not considered for the calculation of net income in the year 2017.

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