Dispensers of California case analysis

Equity Cash Patent Incorporation costs Equipment Outofpocket costs Purchases Shortterm loan Interest Payroll

120000 80000 120000 2500 85000 25000 212100 30000 500 145000

Other Manu.costs Selling and Admn Costs Sales Depreciation Acc. Depreciation Patent Amortization Acc. Amortization on patent Dividends Incometax expenses Incometax Payable

62000 63000 598500 8500 8500 20000 20000 5000 22500 22500

80000 -2500

-85000

-25000

-30000

INCOME STATEMENT SALES LESS: COST OF GOODS SO

598500 412500

GROSS PROFIT OPERATING EXPENSES: SELLING AND ADMIN PATENT AMORTIZATION OUTOFPACKET EXPENSES INCORPORATION COSTS TOTAL OPERTING EXPENSES

OPERATING PROFIT LESS: INTERET PROFIT BEFORE TAX LESS: TAX NET INCOME EAIT DIVIDEND PAID

RETAINED EARNINGS

186000 63000 20000 25000 2500 110500

75500 500 75000 22500 52500 5000

47500

-212100

30000

-500

-145000

BALANCE SHEET SOURCES OF FUNDS EQUITY CAPITAL RETAINED EARNINGS

200000 47500

SHAREHOLDER FUNDS LOAN FUNDS

TOTAL LIABILITIES AND EQUITY APPLICATION OF FUNDS FIXED ASSETS PAYTENTS(120000-20000) EQUIPMENT (85000-8500) CURRENT ASSETS INVENTORY CASH CURRENT LIBILITIES TAXES PAYABLE SHORT TERM LOAN NET CURRENT ASSETS (CA-CL)

TOTAL ASSETS

100000 76500

15100 78400

22500 0

CASH FLOW STATEMENT PROFIT BEFORE TAX ADD: NON CASH EXP AND NON OP.EXP AMORTIZATION DEPRECIATION INTEREST LESS:NONCASH AND NON OP.INC OPERATING PROFIT BEF.WC CHANGES ADD:INCREASE IN CL AND DECREASE IN CA LESS:DECREASE IN CL AND INCREASE IN CA INVENTORY

NET CASH GENE. FROM OP. ACT. CASH FLOWS FROM INVESTING ACT. EQUIPMENT PURCHASE

NET CASH USED IN INVEST. ACT CASH FLOWS FROM FINANCING ACT. PROCEEDS FROM CAPITAL INTEREST PAID DIVIDEND PAID

NET CASH GENE. FROM FINANCING ACT.

NET INCREASE IN CASH

20000 8500 500

200000 -62000

-63000

598500

-5000

-30000

78400 120000 2500 85000 25000 212100 0 500 145000 62000 63000 598500 8500 8500 20000 20000 5000 22500 22500

849500 849500

247500 0

247500

176500

93500

22500 71000

247500

0

75000

29000 0 104000 0 -15100

88900

-85000

-85000

80000 -500 -5000

74500

78400

COST OF GOODS SOLD Opening Inventory ADD: Purchases ADD: Direct Expenses Payroll Manufacturing cost Depreciation LESS:Closing Inventory

Cost of goods sold

0

0 212100 212100 145000 62000 8500 427600 15100

412500

q1

How might Hynes and the investors use the profit plan in managing business? Profit plans are used for a variety of purposes. These incluce: to force short range planning as a basis for evaluating performance and determining compensation to encourage corodination and communication between different organisation units and lev as a challenge to improve performance as a means for training managers as an early warning system as a guide to spending

q2

How might the projected transactions impact the company's balance sheet? please check transaction analysis sheet

q3

Prepare the profit plan in the form of income statement for the first year of operations please check the prepared income statement

q4

Prepare the balance sheet as of the end of the first year of operations please check the prepared balance sheet

q5

Hynes made a number of accounting decisions. Do you agree with these decisions? there are three accounting decisions that require Hynes to exercise judgment. They are PATENT VALUATION PATENT AMORTIZATION PERIOD EQUIPMENT DEPRECIATION PERIOD

hopefully, the patent amortization and depreciation periods represent Hyne's best estimate

g business?

organisation units and levels

ce sheet?

t year of operations

these decisions? e judgment. They are

ent Hyne's best estimate of the related assets' useful life.