Two Accounting Questions Assignment 2015

| June 4, 2016

Question
Question 1 (30 marks)

Fleese Ltd. has been in the bookkeeping business for several years. It plans to expand but needs a loan from the bank to do so. Fleese has pulled together a rough draft of its financial statements and has presented it below:

20X1

20X0

Cash

852

563

Short-term investments

938

1687

Accounts receivable

21,247

21,173

Prepaid expenses

288

315

Long-term investments

318

318

Land

24,000

24,000

Building and equipment

162,000

154,516

209,643

202,572

Accounts payable

15,067

10,785

Short-term notes

6,563

9,563

Salaries payable

1,480

1,822

Income tax payable

2,348

1,538

Long-term bonds payable

60,000

60,000

Common shares

75,000

75,000

Retained earnings

49,185

43,864

209,643

202,572

Professional fees

416,063

Sales expense

-344,738

General and administrative expense

-49,335

Loss on sale of investment

-165

Interest expense

-6,956

Income tax expense

-9,548

Net income

5,321

A recent survey revealed the following industry averages for bookkeeping/accounting businesses in Fleese’s city:

Current ratio

1.25

Quick ratio

.80

Accounts receivable turnover

18 times

Debt/equity ratio

.55

Times interest earned

8.5 times

Return on revenue

6.75%

Asset turnover

2 times

Return on assets

14%

Return on equity

18%

Required

Calculate comparable ratios for Fleese. Be sure to show your work. (9 marks)

Evaluate Fleese’s ratios compared to the industry averages. Identify items that can explain the differences between Fleese’s ratios and the industry average. Explain your answer fully. (14 marks)

Identify areas where Fleese could improve and explain how it might do so. (5 marks)

If you were the bank, would you grant a $100,000 loan to Fleese? Explain why or why not. (2 marks)
Question 2 (20 marks)

It has been your dream to start a not-for-profit organization to help others. You have been working on this project in your spare time and have managed to raise $100,000 over the last 10 years. You are planning to semi-retire in the next year or two and will be able to devote more time to your pet project. You are ready to take it to take it to the next level and apply for some grants.

You currently have a handful of volunteers helping you with fundraising and distributing the funds. Almost every grant application asks you to provide a business plan. You have not thought much about what you really want to accomplish with this organization. but you secretly want it to be your legacy.

Required:

Prepare some background information to support a business plan for your organization. For this question, you can use any cause that you are passionate about or have a personal interest in, as long as it fits the criteria of a not-for-profit helping others. Be creative, but realistic as well.

Your background information should include the following:

Organization—identify the name of your organization and describe the type of people that you want to sit on its Board of Directors.
External environment—Provide a scan of the external environment in which your organization operates.
Mission statement—identify the organization’s purpose and provide some strategy statements.
Operations —explain how you plan to make the organization successful. How do you plan to raise funds for the organization? (You might also identify sources of funding.) How do you plan to use the funds?

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