The Project gives students
the opportunity to work on a real-world scenario related to decision making for
financial managers.
Scenario: Your team has been hired to provide financial
analysis for a start-up company, Bobble in Style, which produces customized
bobble heads. The bobble heads are made out of less rigid materials and are
more true to life than those of competitors. The company inventors, Mr. and
Mrs. Lee, are going to pitch their idea to Shark Tank in a few months, but
first they need to have a better understanding of the business financials. The
Lee’s are already creating and selling their product from their home-based
office and work area. They know what costs are involved with making the bobble
heads on a small scale, but they don’t have an understanding of financial
figures beyond basic costs. They need you to make sense of various financial
figures for them.
1.
Financial Statements: Develop an Income Statement for 2024, Cash
Flow Statement for 20XX, and Balance Sheet as
of the end of 20XX based on the data provided below for year 20XX. All
sales are collected when the sale is made and all expenses are paid when the
expense is incurred. Explain the purpose of each financial statement.
a.
Income Statement Data for 2024:
·
Units produced and sold = 420
·
Sales
($80 per unit selling price) = $33600
·
Cost of goods sold ($30 per unit, all variable
costs) = $12600
·
Labor = $0 (Mr. and Mr. Lee were the only ones
working and did not pay themselves)
·
Advertising fees =$2000
·
Bank fees = $150
·
Phone/internet = $1200
·
Shipping ($3 per unit) = $1260
·
Utilities = $900
·
Office supplies = $800
·
Interest expense on note payable = $350
·
Depreciation expense (straight line) = $800
·
Income tax rate = 26 %
b.
Other Financial Data for 2024:
·
Proceeds from sale of equipment = $3000. The equipment originally cost $1000 and had
accumulated depreciation of $200.
·
Purchase of equipment = $1600 (The machine is
purchased on the last day of 2024 so no depreciation expense is recorded.)
·
Repayment of note payable = $5000
·
Consider any data relevant from the income
statement.
c.
Balance Sheet Data for Beginning of 2024:
·
Cash and cash equivalents = $10000
·
Accounts receivable = $0 (Cash is received at
time of sale)
·
Raw materials inventory = $10500
·
Equipment = $5000 (This includes the $1000 cost
of the equipment sold in 20XX).
·
Accumulated depreciation = $1,000 (This includes
the accumulated depreciation of 200 for the equipment sold in 2024.
·
Accounts payable = $0 (Cash is paid at the time
of purchase.)
·
Note payable = $5000 (This is the note payable
which is repaid in 20XX)
·
Common stock = $15000
·
Retained earnings = $4500
