Cardinal Bear has come to you for advice regarding a potential investment. He is willing to spend $500,000 to purchase a basketball equipment manufacturer and is hoping to generate $50,000 a year from the investment. The owners have been looking to sell the company since 2017. Mr. Bear doesn’t have all of the information, but he does have the financial statements for the last two years. Based on the information, prepare a one-page report to Mr. Bear. 20192018Assets20192018Sales$ 1,000,000 $600,000Cash30,00060,000Cost of Goods Sold722,500 $250,000Accounts Receivable$120,00030,000Gross Profit277,500 $350,000Supplies10,00010,000$$485,000 $ 250,000Inventory325,000150,000ExpensesTotal Current AssetsDE: Equipment25,00050,000200,000 $ 200,000175,000 -$ 150,000-$DE: Warehouse10,00010,000EquipmentInterest ExpenseBad Debt Expense3,7503,750AD: Equipment10,000NBV: Equipment25,000 $50,000Write-down of Inventory30,00050.000$100,000 -$ 90,000150,000 $ 160,000$250,000 $ 250,000Other ExpensesTotal Expenses38,750Warehouse$77,500 $153,750AD: WarehouseNBV: Warehouse$Net Income200,000 $196,250Total Fixed Assets175,000 $ 210,000Total Assets$660,000 $ 460,000LiabilitiesAccounts Payable10,00010,000Long Term Bank LoanTotal Liabilities25,00025.000$35,000 $ 35,000Equity$425,000 $ 228,750200,000 $ 196,250$BeginningNet Income$Ending EquityTotal Liabilities and Equity $625,000 $ 425,000660,000 $ 460,000

While analyzing the financial statement it is noticed that both years company generate the huge net…

Answered: Cardinal Bear has come to you for…

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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Cardinal Bear has come to you for advice regarding a potential investment. He is willing to spend $500,000 to purchase a basketball equipment manufacturer and is hoping to generate $50,000 a year from the investment. The owners have been looking to sell the company since 2017.

Mr. Bear doesn’t have all of the information, but he does have the financial statements for the last two years. Based on the information, prepare a one-page report to Mr. Bear.

2019
2018
Assets
2019
2018
Sales
$ 1,000,000 $
600,000
Cash
30,000
60,000
Cost of Goods Sold
722,500 $
250,000
Accounts Receivable
$
120,000
30,000
Gross Profit
277,500 $
350,000
Supplies
10,000
10,000
$
$
485,000 $ 250,000
Inventory
325,000
150,000
Expenses
Total Current Assets
DE: Equipment
25,000
50,000
200,000 $ 200,000
175,000 -$ 150,000
-$
DE: Warehouse
10,000
10,000
Equipment
Interest Expense
Bad Debt Expense
3,750
3,750
AD: Equipment
10,000
NBV: Equipment
25,000 $
50,000
Write-down of Inventory
30,000
50.000
$
100,000 -$ 90,000
150,000 $ 160,000
$
250,000 $ 250,000
Other Expenses
Total Expenses
38,750
Warehouse
$
77,500 $
153,750
AD: Warehouse
NBV: Warehouse
$
Net Income
200,000 $
196,250
Total Fixed Assets
175,000 $ 210,000
Total Assets
$
660,000 $ 460,000
Liabilities
Accounts Payable
10,000
10,000
Long Term Bank Loan
Total Liabilities
25,000
25.000
$
35,000 $ 35,000
Equity
$
425,000 $ 228,750
200,000 $ 196,250
$
Beginning
Net Income
$
Ending Equity
Total Liabilities and Equity $
625,000 $ 425,000
660,000 $ 460,000

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