Senior Accountant Scenario

Use the two word docs attached to complete the assignment

ATTACHMENT 1 INSTRUCTIONS: Contains scenario and instructions for completing the assignemnt

ATTACHMENT 2 FINANCIAL STATEMENTS: Contains 3 financial statements that will be used to complete the assignment

DISCUSSION:

Large discount retailers like Target and Walmart employ large teams of Finance and Accounting professionals to help measure and understand the financial health of the business. Financial and accounting information helps these businesses make educated financial decisions, such as whether or not to continue partnering with a retail supplier. While often smaller businesses, it is equally important for these retail suppliers to use financial and accounting data to make educated decisions, such as the best approach to gaining additional funding.

In this assignment, you will assume the role of Senior Accountant with fictional company “SunsTruck Sunglasses”.

What Is a SENIOR ACCOUNTANT? Senior accountants take ownership of reporting costs, profitability, margins and expenditures for a given business. They use the principles of accounting to analyze sales information, create financial reports, make recommendations about the financial health of the company, and more. They are also responsible for training junior accounting staff.

For the last six months, SunsTruck has partnered with the discount retail store to run a pop-up sunglasses stand in their stores for a big summer promotion. Due to the high customer purchase rate, the store has requested stock for five additional stores. SunsTruck needs to increase its capacity to meet the additional demand. In order to do so, SunsTruck needs additional money.

In this assignment, you will need to help determine which type of financing option is best for your company and train your junior accountants on the accounting cycle and financial statements.

ASSIGNMENT Instructions:

First, read the following email from SunsTruck owner Shaun:

Hi Team,

I wanted to provide you some guidelines as you determine how we’ll finance our expansion. Please give this careful consideration, as we need to get this right.

1. I estimate we’ll need $150,000 to increase capacity in order to stock the five additional pop-up stands 2. We’ll need to make sure we have additional funds available to increase our marketing efforts to stimulate demand

3. I’d like to maintain or increase our profit margins

4. If we’re successful over the next two years, we’ll likely seek additional capital to expand into more stores, so I’d like to do all we can now to enhance our credibility

We need to move on this quickly, so I’d like an answer by the end of the week.

-Shaun

After you read the email, write a four to six page paper in which you discuss the following for the company:

PART 1: FINANCING

The junior accounting team has assembled a Financing Report that (a) offers three options for securing the additional funds required to meet the new order; and (b) details the criteria Shaun, the owner of SunsTruck, would like you to consider when choosing one of the three options.

Based on this report, identify and discuss which financing option you think is the best option for SunsTruck to pursue given Shaun’s constraints. Your options are as follows:

Option 1: Equity (Raise $150,000 from a venture capital firm in exchange for 30% of the company)

Option 2: Debt – (Secure a loan of $150,000 at a 10% annual interest rate, to be repaid over 7 years)

Option 3: Debt + Self-Financing – (Secure a loan of $100,000 at a 7% annual interest rate, to be repaid over 7 years, and selffinance the remaining $50,000)

PART 2: ACCOUNTING CYCLE

A junior accountant is working to get everything in order for the new financing and has sent you the following email:

Hi,

I’m working on expenses from the last quarter for the revised income statement, but I’m unsure of what to do next. I grouped similar transactions to compile the following list:

· Inventory purchases – Automotive maintenance cost

· Marketing expenses – Travel expenses

· Payroll expenses – training and development costs

· Interest expenses – office rent

· Technology purchases – raw material purchases

· Office supplies expenses

How would you like me to proceed given where we are in the process? Thanks in advance for your guidance.

Best,

Jenna S.

After reading the email, discuss the best next step to take in the accounting cycle. Explain your reasoning.

PART 3: FINANCIAL STATEMENTS

A potential investor has been identified, but before it is willing to commit, it has requested information about SunsTruck’s current debt from the junior accountants.

From the three financial statements identified in “ATTACHMENT 2 FINANCIAL STATEMENTS” Identify the correct financial statement for your junior accountants that will provide the investor with the information it has requested. Explain your reasoning:

Income Statement

Balance Sheet

Cash Flow Statement

Explain to your junior accountants why you are giving them this financial statement and where the debt information is located.

*******THERE ARE THREE FINANCIAL STATEMENTS CONTAINED IN ATTACHMENT 2

PART 4: FINANCIAL ANALYSIS

If you were the type of financier selected in Step 1, would you invest in SunsTruck? Explain the rationale for your decision

INSTRUCTIONS:

PAPER SHOULD FOLLOW APA GUIDELINES!!!!

Your essay should be typed, double-spaced on standard-sized paper (8.5″ x 11″) with 1″ margins on all sides. You should use 12 pt. Times New Roman font.

Include a page header  (also known as the “running head”) at the top of every page. To create a page header/running head, insert page numbers flush right. Then type “TITLE OF YOUR PAPER” in the header flush left using all capital letters. The running head is a shortened version of your paper’s title and cannot exceed 50 characters including spacing and punctuation.

SUNSTRUCK SUNGLASSES INCOME STATEMENT For Year Ended September 30, 2016
REVENUES
Sales revenues	$778,590
Other revenue	$11,000
Total revenue	$789,590
COST OF GOODS SOLD (COGS)	($428,225)
GROSS PROFIT	$361,365
EXPENSES
Depreciation and amortization	($18,820)
Selling, general and administrative expenses	($78,959)
Marketing and advertising expenses	($55,271)
Total expenses	($153,050)
INCOME FROM OPERATIONS	$208,314
OTHER EXPENSES
Interest expense	($51,000)
PRETAX INCOME	$157,315
Income tax expense	($55,060)
NET INCOME	$102,255$22,500

SUNSTRUCK SUNGLASSES

BALANCE SHEET

At September 30, 2016

ASSETS

CURRENT ASSETS

Cash

$28,000

Accounts receivable

$55,220

Merchandise inventories

$62,280

Total current assets

$145,500

LONG-TERM ASSETS

Property, truck and equipment

$468,000

TOTAL ASSETS

$613,500

LIABILITIES

CURRENT LIABILITIES

Accounts Payable

$37,500

LONG-TERM LIABILITIES

Truck loan

$40,000

B+M loan

$360,000

Operating loan

$42,000

Total long-term liabilities

$442,000

TOTAL LIABILITIES

$479,500

SHAREHOLDERS’ EQUITY

CONTRIBUTED CAPITAL

$12,000

RETAINED EARNINGS

$122,000

TOTAL SHAREHOLDERS’ EQUITY

$134,000

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$613,500

SUNSTRUCK SUNGLASSES

STATEMENT OF CASH FLOWS

For Year Ended September 30, 2016

CASH FLOWS FROM OPERATING ACTIVITIES

Cash collected from customers

$733,780

Cash paid to suppliers and employees

($529,580)

Cash paid for interest

($50,000)

Cash paid for taxes

($55,060)

Net cash provided by operating activities

$99,140

CASH FLOWS FROM INVESTING ACTIVITIES

Cash paid on truck loans

($20,000)

Cash paid on B+M loans

($40,000)

Net cash used for investing activities

($60,000)

CASH FLOWS FROM FINANCING ACTIVITIES

Cash received from operating cash loan

$12,000

Net cash provided by financing activities

$12,000

NET INCREASE IN CASH DURING YEAR

$51,140

$75,000 CASH AT BEGINNING OF YEAR

($23,255)

CASH AT THE END OF YEAR TO DATE

$27,885

STRAYER UNIVERSITY | COPYRIGHT © 2016. ALL RIGHTS RESERVED.
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STRAYER UNIVERSITY | COPYRIGHT © 2016. ALL RIGHTS RESERVED.
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