Brynn Company (An exercise in deduction and sifting through useful and some usel

Question

Brynn Company (An exercise in deduction and sifting through useful and some useless, even spurious, information.) Brynn Company began operations on September 19,2016 (at 5:07 PM to be precise). They have come to you because they want to borrow money from the bank to expand. The bank has requested financial statements. They heard you were cheap, so they came on by! From the following information, record the transactions and prepare all financial statements for the period September 19- December 31, 2016, Per the checkbook Cash received for 700 shares of common stock- $70,000 Cash received from Brother on October 1, 2016, $50,000, repayable at $10,000 per year plus 5% interest. Cash received from customers- $160,000 Cash paid for inventory $100,000 Security deposit to landlord for store- $3,000 Cash paid for rent $12,000 Cash paid for equipment for store, $30,000. It is estimated that this equipment will last for six ars and then be worthless. (Calculate depreciation on a monthly basis for this problem.) The actual cost of the equipment was $60,000, the rest of the cost will be paid in equal annual payments of $ for five years. The payments include interest at 6% and the first payment is due Sept 1, 2017 Cash paid for wages, $12,000 Cash paid for two-year insurance policy (runs from 10/01/16-9/30/18), $2,400. Cash paid for other operating expenses, $3,000. Cash paid for dividend, $2,000 Other Information On November 1, Brynn hired Bill as an employee. They agreed his wages would be $2,000 per month payable on the first day following each month he worked. On September 1, Brynn signed a three-year lease for the store it was to use. The lease called for a security deposit and monthly payments of $2,000 due at the beginning of each month At the end of December, Brynn its inventory suppliers $10,000. Bryn also owed wages of $6,000 at December 31st. On December 31st, the company ordered $20,000 worth of merchandise which was received January and will be paid for in February At December 31, 2016, Brynn took a physical inventory and found they had inventory on hand that cost them $30,000. (This is their ending inventory.) Customers owed Brynn Company $20,000 at the end of December The tax rate is 30% Prepare all Financial Statements and calculate and analyze all ratios. think before you complain, especially about things that require some sacrifice. Complaining is the sign of a loser." -Lou Holtz, A Teen's Game Plan for Life

Explanation / Answer

Brynn Company

Income Statement for the period ended 31 December 2016 ($)

Sales (see working) 180000   

Cost of sales 70000

Gross Profit   110000

Operating expenses 27000

Net profit 83000

Dividends 2000

Net income carried forward 8100

Balance Sheet as at December 31,

2016

Assets:

Equipment

Original cost                       

60000

less depreciation

3333

56667

Calculation of depreciation

Original value

60000

Life

72

mths

Depreciation/mth

833

Dep for period (4 mths)

3333

less depreciation for period

3333

Book value

56667

Stock 30000  

Debtors 20000

Cash 127600

Total assets

Calculation of sales Cash received from customers 160000 Owing as at end 20000 Sales 180000

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