Produced By:

CEO Mathew MacGregor (u0452663)

CEO Adam Bean (u1058288)

Produced For:
ACCTG-3600-005
Semester Project (Version 31)
Prof. Michael Lewis

Financial Reports as of December 31, 2019

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Company Overview
Introducing Printer Bytes

Printer Bytes, the portable and affordable 3D-Printer that sells for only $129. We created this company in

2016 with this innovative and cost effective product in order to penetrate the 3D-printing market and

introduce them to every home and family dwelling. On top of our home use product, we’ve extended our

services to provide on-site repairs for all of our products. Now consumers can imagine and create just

about anything and everything they want in the comfort of their own home.

Founded and Operated by

Mathew MacGregor U0452663 Co-President and CEO
Adam Bean U1058288 Co-President and CEO
Version 31

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Table of Contents
Title Sub-Section Page #

Company Overview 1
Financial Statements 3
Income Statement (2017-2019) 3
Balance Sheet (2017-2019) 4
Statement of Cash Flows 2018 5
Statement of Cash Flows 2019 6
Ratios 7
Earnings Per Share Ratio 7
Price-Earnings Ratio 8
Return on Equity 9
Working Captial 10
Current Ratio 11
Quick Ratio 12
Accounts Receivable Turnover Ratio 13
Inventory Turnover Ratio 14
Gross Profit 15
Gross Proft Ratio 16
Operating Income 17
Operating Margin 18
Debt-to-Equity Ratio 19
Book Value Per Share 20
Business Analysis 21
Projected Income Statement 25
Actual vs. Predicted Earnings Per Share 27
Supporting Documents 28
Journal Entries 28
T-Accounts 32
Vertical Income Statement 35
Vertical Balance Sheet 36
Inventory Schedule 37
Depreciation Schedule 38
Amortization Schedule 39

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Financial Statements
Income Statement

For The Year Ended 31-Dec-19 31-Dec-18 31-Dec-17

Total Revenue $ 4,236,225 $ 2,280,000 $ 2,500,000

Cost of Goods Sold $ (2,493,425) $ (850,000) $ (780,000)
Gross Profit $ 1,742,800 $ 1,430,000 $ 1,720,000

Operating Expenses
Wages Expense $ 1,025,000 $ 565,000 $ 785,000
Utility Expense $ 56,000 $ 37,050 $ 37,500
Insurance Expense $ 162,417 $ 23,905 $ 21,097
Rent Expense $ 52,967 $ 18,009 $ 17,080
Fuel Expense $ 9,400 $ 2,900 $ 1,400
Office Supplies Expense $ 16,400 $ 6,000 $ 5,000
Advertising Expense $ 38,958 $ 23,000 $ 25,000
Bad Debt Expense $ 259,752 $ 60,750 $ 45,000
Depreciation expense $ 600,800 $ 500,000 $ 500,000
Amortization Expense $ 3,292 $ - $ -
Total Operating Expenses $ 2,224,985 $ 1,236,614 $ 1,437,077

Operating Income $ (482,185) $ 193,386 $ 282,923

Income/Expenses from Non-Operating Items

Interest Income $ 66,675 $ 23,676 $ 21,574
Interest Expense $ (84,500) $ (56,250) $ (56,250)
Bond Int. Expense $ (18,485) $ - $ -
Gain on Sale $ 325,000 $ - $ 34,900
Loss on Sale $ (10,000) $ - $ (120,000)
Unrealized Gain $ 18,000 $ - $ -
Total Non-Operating Income $ 296,690 $ (32,574) $ (119,776)

Net Income $ (185,496) $ 160,812 $ 163,147

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Financial Statements
Balance Sheet

For The Year End 31-Dec-19 31-Dec-18 31-Dec-17

Assets
Current Assets
Cash $ 2,808,043 $ 525,710 $ 658,079
Marketable Securities $ 142,000 $ 75,000 $ 15,000
Accounts Receivable $ 1,918,768 $ 455,000 $ 525,000
(Allowance for Bad Debt) $ (230,252) $ (25,000) $ (105,000)
Interest Receivable $ 88,249 $ 23,676 $ 21,574
Prepaid Advertising $ 3,542 $ - $ -
Prepaid Insurance $ 342,419 $ 139,836 $ 148,945
Prepaid Rent $ 58,083 $ 29,050 $ 34,982
Office Supplies $ 14,120 $ 3,520 $ 5,400
Inventory $ 719,950 $ 975,000 $ 775,000
Total Current Assets $ 5,864,922 $ 2,201,792 $ 2,078,980

Non-Current Assets
Office Furniture $ 92,000 $ - $ -
(Accumulated Depreciation) $ (8,800)
Equipment $ 4,690,000 $ 5,000,000 $ 5,000,000
(Accumulated Depreciation) $ (2,522,000) $ (2,000,000) $ (1,500,000)
Long-Term Notes Receivable $ 285,000 $ 285,000 $ -
Land $ 1,280,000 $ 1,450,000 $ 1,450,000
Patent $ 75,708 $ - $ -
Total Non-Current Assets $ 3,891,908 $ 4,735,000 $ 4,950,000

Total Assets $ 9,756,830 $ 6,936,792 $ 7,028,980

Liabilities
Current liabilities
Accounts Payable $ 1,012,388 $ 450,000 $ 570,000
Wages Payable $ 41,000 $ 35,000 $ 33,000
Interest Payable $ 2,125 $ - $ -
Short-Term Notes Payable $ 510,000 $ - $ -
Deferred Revenue $ 560,625 $ - $ -
Dividends Payable $ 981,600 $ 155,000 $ 135,000
Bond Interest Payable $ 16,000 $ - $ -
Total Current Liabilities $ 3,123,738 $ 640,000 $ 738,000

Non-Current Liabilities
Long-Term Notes Payable $ 1,348,000 $ 1,250,000 $ 1,250,000
Bonds Payable $ 1,000,000 $ - $ -
Discount Bonds $ (24,604) $ - $ -
Total Non-Current Liabilities $ 2,323,396 $ 1,250,000 $ 1,250,000

Total Liabilities $ 5,447,134 $ 1,890,000 $ 1,988,000

Stockholders' Equity
Common Stock $ 1,062,500 $ 1,000,000 $ 1,000,000
Additional Paid-In Capital $ 2,711,906 $ 1,824,406 $ 1,824,406
Treasury Stock $ (520,000) $ - $ -
Contributed Capital $ 500,000 $ 500,000 $ 500,000
Retained Earnings $ 555,290 $ 1,722,386 $ 1,716,574
Total Stockholder's Equity $ 4,309,696 $ 5,046,792 $ 5,040,980

Total Liabilities and SE $ 9,756,830 $ 6,936,792 $ 7,028,980

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Financial Statements
Statement of Cash Flows (Indirect Method)

For The Year Ended 31-Dec-18

Operating Activities
Net Income $ 160,812
Adjustments to Net Income
Depreciation Expense $ 500,000
Changes in Current Assets/Liabilities
Accounts Receivable $ (10,000)
Interest Receivable $ (2,102)
Prepaid Insurance $ 9,109
Prepaid Rent $ 5,932
Office Supplies $ 1,880
Inventory $ (200,000)
Accounts Payable $ (120,000)
Wages Payable $ 2,000
Net Cash From Operating Activities $ 347,631

Investing Activities
Marketable Securities $ (60,000)
Long-Term Notes Receivable $ (285,000)
Net Cash From Investing Activities $ (345,000)

Financing Activities
Dividends $ (135,000)
Net Cash From Financing Activities $ (135,000)

Total Cash Flow From Activities $ (132,369)

Net Change in Cash Flow $ (132,369)

Beginning Cash, 1-Jan-2018 $ 658,079
Ending Cash, 31-Dec-2018 $ 525,710

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Financial Statements
Statement of Cash Flows (Indirect Method)

For The Year Ended 31-Dec-19

Operating Activities
Net Income $ (185,496)
Adjustments to Net Income
Depreciation Expense $ 600,800
Amortization Expense $ 3,292
Bond Amortization $ 2,485
Gain on Sale $ (325,000)
Loss on Sale $ 10,000
Unrealized Gain $ (18,000)
Changes in Current Assets/Liabilities
Accounts Receivable $ (1,258,516)
Interest Receivable $ (64,573)
Prepaid Advertising $ (3,542)
Prepaid Insurance $ (202,583)
Prepaid Rent $ (29,033)
Office Supplies $ (10,600)
Inventory $ 255,050
Accounts Payable $ 562,388
Wages Payable $ 6,000
Interest Payable $ 2,125
Deferred Revenue $ 560,625
Bond Interest Payable $ 16,000
Net Cash From Operating Activities $ (78,578)

Investing Activities
Purchase of Furniture $ (92,000)
Purchase of Equipment $ (260,000)
Purchase of land $ (470,000)
Purchase of Patent $ (79,000)
Sold Land $ 1,475,000
Sold Equipment $ 490,000
Purchased Marketable Securities $ (49,000)
Net Cash From Investing Activities $ 1,015,000

Financing Activities
Issued Long Term Note Payable $ 145,000
Payment towards Long Term Note Payable $ (47,000)
Issued Bonds $ 972,911
Issued Common Stock $ 950,000
Purchase Treasury Stock $ (520,000)
Dividends Paid $ (155,000)
Net Cash From Financing Activities $ 1,345,911

Total Cash Flow From Activities $ 2,282,333

Net Change in Cash Flow $ 2,282,333

Beginning Cash, 1-Jan-2019 $ 525,710
Ending Cash, 31-Dec-2019 $ 2,808,043

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Ratio Analysis
Earnings Per Share Ratio

Definition: This tells how much profit per share of outstanding stock the company is
making for owners. A higher EPS means owners can expect higher profits.

Equation: (𝑁𝑁𝑁𝑁𝑁𝑁 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 − 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷)

𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝑃𝑃𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 =
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂

Year 2017 2018 2019

EPS $ 0.04 $ 0.04 $ (0.05)

EPS
$0.05
$0.04
$0.03
$0.02
$0.01
$-
$(0.01)
$(0.02)
$(0.03)
$(0.04)
$(0.05)
$(0.06)
2017 2018 2019

EPS

Analysis: Income available for owners plummeted to a negative EPS which would be a warning
signal to investors that the company may not be able to generate income or to create
value to draw investors towards our company.

Calculations:
2017 2018 2019

163,147 160,812 −185,496

4,000,000 4,000,000 4,045,000

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Ratio Analysis
Price Earnings Ratio

Definition: This shows how much investors would be willing to pay for a each dollar of our
company's earnings.

Equation: 𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀 𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉 𝑃𝑃𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆

𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 =
𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝑃𝑃𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆

Year 2017 2018 2019

P/E 71.10 94.52 -109.03

P/E
150.00

100.00

50.00

0.00

-50.00

-100.00

-150.00
2017 2018 2019

P/E

Analysis: The data for 2019 is uninterpretable due to the negative p/e ratio. We can't say
investors would be willing to invest in a piece of our earnings when we have no
earnings to speak of this year.

Calculations:
2017 2018 2019

2.9 3.8 5
0.0408 0.0402 −0.0459

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Ratio Analysis
Return on Equity

Definition: Return on equity shows how much income is being earned on each dollar of owner
investment

Equation: (𝑁𝑁𝑁𝑁𝑁𝑁 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 − 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷)

𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 𝑜𝑜𝑜𝑜 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 =
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸

Year 2017 2018 2019

ROE 0.03 0.03 -0.04

ROE
0.04
0.03
0.02
0.01
0.00
-0.01
-0.02
-0.03
-0.04
-0.05
2017 2018 2019

ROE

Analysis: Our company is no longer generating income for owners for the investments they have
made into our company.

Calculations:
2017 2018 2019

163,147 160,812 −185,496

5,040,980 5,040,980 + 5,046,792 5,046,792 + 4,309,696
( ) ( 2 )
2

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Ratio Analysis
Working Capital

Definition: Total current assets or capital we would have left after covering debts or other
obligations due within 12 months.

Equation: 𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 − 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿

Year 2017 2018 2019

Working Capital $ 1,340,980 $ 1,561,792 $ 2,741,184

Working Capital
$3,000,000

$2,500,000

$2,000,000

$1,500,000

$1,000,000

$500,000

$-
2017 2018 2019

Working Capital

Analysis: If we paid off all our current liabilities right now, we would still have a great deal of
assets to operate our company under. Over the three year period depicted, we are
ever increasing our assets.

Calculations:
2017 2018 2019

2,078,980 − 738,000 2,201,792 − 640,000 5,864,922 − 3,123,738

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Ratio Analysis
Current Ratio

Definition: The Current Ratio shows the ability of a company to pay their current liabilities through
liquifying (cashing out) their current assets.
𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴
Equation: 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 =
𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿

Year 2017 2018 2019

Current Ratio 2.82 3.44 1.88

Current Ratio
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
2017 2018 2019

Current Ratio

Analysis: Despite growing amounts of current assets recorded from our working capital, our
current liabilities are growing faster than the assets that are obligated to them. This
may be concerning for investors who would prefer a more efficient use of assets and
liabilities.

Calculations:
2017 2018 2019

2,078,980 2,201,792 5,864,922

738,000 640,000 3,123,738

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Ratio Analysis
Quick ratio

Definition: The quick ratio produces a more conservative view of the ability a company has to
cover their current liabilities with current assets. This is because current assets is
reduced by potentially problematic current assets that may be hard to turn in to cash
quickly.

Equation: (𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 + 𝑁𝑁𝑁𝑁𝑁𝑁 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅)

𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 =
𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿

Year 2017 2018 2019

Quick Ratio 1.48 1.61 1.48

Quick Ratio
1.65

1.60

1.55

1.50

1.45

1.40
2017 2018 2019

Quick Ratio

Analysis:
Our quick ratio has dropped despite growing assets due to large increases in assets that
are not easily converted to cash such as prepaid expenses and inventory. The increased
use of liabilities as noted from our current ratio is also in play here.

Calculations:
2017 2018 2019

1,093,079 1,030,710 4,638,559

738,000 640,000 3,123,738

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Ratio Analysis
Accounts Receivable Turnover Ratio

Definition: Time required to collect debt issued to those who owe us; for products or services we
have sold on credit to them. This is a representation of how many times we collect our
accounts receivable each year.

Equation: 𝑁𝑁𝑁𝑁𝑁𝑁 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆

𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 =
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑁𝑁𝑁𝑁𝑁𝑁 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅

Year 2017 2018 2019

A/R Turnover 5.95 5.36 4.00

A/R Turnover
10.00

8.00

6.00

4.00

2.00

0.00
2017 2018 2019

A/R Turnover

Analysis: We can see that over this three year period, we have been consistently becoming less
efficient at collecting credit sales owed to us. Investors would rather us collecting those
revenues sooner so that their value may be re-distributed back into the company, or to
the owners.

Calculation:
2017 2018 2019

2,500,000 2,280,000 4,236,225

420,000 420,000 + 430,000 430,000 + 1,688,516
( ) ( 2 )
2

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Ratio Analysis
Inventory Turnover Ratio

Definition: Time required to sell inventory and turn it into cost of goods sold. This is a measure of
how efficiently inventory is being utilized.

Equation: 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑜𝑜𝑜𝑜 𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆

𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 =
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼

Year 2017 2018 2019

Inventory Turnover 1.01 0.97 2.94

Inventory Turnover
3.50

3.00

2.50

2.00

1.50

1.00

0.50

0.00
2017 2018 2019

Inventory Turnover

Analysis: We became nearly three times more efficient at selling our inventory during 2019 than
previous years.

Calculations:
2017 2018 2019

780,000 850,000 2,493,425

775,000 975,000 + 775,000 719,500 + 975,000
( ) ( 2 )
2

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Ratio Analysis
Gross Profit

Definition: Difference between the sales revenue and cost of the product. This is the actual profit
the product is producing.

Equation: 𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 = 𝑁𝑁𝑁𝑁𝑁𝑁 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 − 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑜𝑜𝑜𝑜 𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆

Year 2017 2018 2019

Gross Profit $ 1,720,000.00 $ 1,430,000.00 $ 1,742,800.00

Gross Profit
$2,000,000.00
$1,800,000.00
$1,600,000.00
$1,400,000.00
$1,200,000.00
$1,000,000.00
$800,000.00
$600,000.00
$400,000.00
$200,000.00
$-
2017 2018 2019

Gross Profit

Analysis:
Our company has remained fairly consistent on gross profit. Because gross profit is not
growing each year, it's possible we are not as efficiently marketing our product at the
right price or we are not reducing the cost of goods sold through efficient channels.
Investors would want to see this number growing through more efficient marketing.

Calculations:
2017 2018 2019

2,500,000-780,000 2,280,000 − 850,000 4,236,225 − 2,493,425

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Ratio Analysis
Gross Profit Ratio

Definition:
How much we are making on the dollar of sales for other expenses and profit to
owners. It's also an indication of how effectively the product is being marketed.

Equation: 𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃

𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 =
𝑁𝑁𝑁𝑁𝑁𝑁 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆

Year 2017 2018 2019

Gross Profit Ratio 0.69 0.63 0.41

Gross Profit Ratio

0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
2017 2018 2019

Gross Profit Ratio

Analysis: This ratio presents evidence that although our company is selling more, we are not
making as much profit per dollar of sales as prevoius years depict. This would be due to
gross profit not increasing in relation to sales.

Calculations:
2017 2018 2019

1,720,000 1,430,000 1,742,800

2,500,000 2,280,000 4,236,225

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Ratio Analysis
Operating Income

Definition: Total profit or loss after costs and expenses associated with runnning the core of the
business.

Equation: 𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 = 𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 − 𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸

Year 2017 2018 2019

Operating Income $ 282,923.00 $ 193,386.00 $ (482,185.33)

Operating Income
$400,000.00
$300,000.00
$200,000.00
$100,000.00
$-
$(100,000.00)
$(200,000.00)
$(300,000.00)
$(400,000.00)
$(500,000.00)
$(600,000.00)
2017 2018 2019

Operating Income

Analysis: What we can see from our operating income is that the core functions of our business
operated at a loss this year, drastically different than the income generated in previous
years

Calculations:
2017 2018 2019

1,720,000 − 1,437,077 1,430,000 − 1,236,614 1,742,800 − 2,224,986

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Ratio Analysis
Operating Margin

Definition: How much we are making on the dollar of sales after costs and expenses associated
with the core operation of the business. It is a measure of the operating profit
compared to revenue generated by sales.

Equation: 𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼

𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀 =
𝑁𝑁𝑁𝑁𝑁𝑁 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆

Year 2017 2018 2019

Operating Margin 0.11 0.08 -0.11

Operating Margin
0.15

0.10

0.05

0.00

-0.05

-0.10

-0.15
2017 2018 2019

Operating Margin

Analysis:
This measure reflects the net loss our company operated at this year in terms of what
percentage of sales we are losing money on. And overall our operating income is
decreasing despite increased sales because of costs related to the core of our business.

Calculations:
2017 2018 2019

282,923 193,386 −482,185

2,500,000 2,280,000 4,236,225

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Ratio Analysis
Debt-to-Equity Ratio

Definition: Amount of debt financing compared to ownership investment financing.

Equation: 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿

𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑡𝑡𝑡𝑡 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 =
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸

Year 2017 2018 2019

Debt-to-equity Ratio 0.39 0.37 1.26

Debt-to-equity Ratio
1.40

1.20

1.00

0.80

0.60

0.40

0.20

0.00
2017 2018 2019

Debt-to-equity Ratio

Analysis: We can see here that we greatly increased our funding through debt rather than
equity. This is possibly a riskier move but with the added tax benefit of deducting
interest expense from income.

Calculations:
2017 2018 2019

1,988,000 1,890,000 5,447,134

5,040,980 5,046,792 4,309,696

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Ratio Analysis
Book Value Per Share

Definition: Amount of individual ownership associated with each share as valued through the
reported equity on the balance sheet.

Equation: 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸

𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉 𝑃𝑃𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 =
𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁 𝑜𝑜𝑜𝑜 𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆

Year 2017 2018 2019

Book Value Per Share $ 1.26 $ 1.26 $ 1.05

Book Value Per Share

$1.30
$1.25
$1.20
$1.15
$1.10
$1.05
$1.00
$0.95
$0.90
2017 2018 2019

Book Value Per Share

Analysis: Declared dividends reduced retained earnings. Because we distributed a value to our
investors, their visible share of the company is reduced. Our market value being at
$5.00 per share indicates that our company could be viewed as overvalued compared
to our book value of $1.05, meaning investors may not receive as much value per share
as they might expect.

Calculations:
2017 2018 2019

5,040,980 5,046,792 4,309,696

4,000,000 4,000,000 4,090,000

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Business Analysis
Printer Bytes is a rapidly expanding company since its inception in 2016. Specifically, our

expansion exploded in 2019. However, not without some concerning financial happenings during that

year. We can see from three important financial statements: the income statement, balance sheet, and

statement of cash flows how efficiently our business is operating.

First we have the income statement; we can see that our sales revenue has drastically

increased compared to previous years which hint at an expanded market share for our product.

Evidence of this is shown by our sales nearly doubling. Unfortunately, our Cost of Goods Sold nearly

tripled due to rising product costs. The result of this is linked to a reduced gross profit ratio, meaning

we are earning less gross profit per dollar of sales. (See appendix item 1). In tune with our expansion,

our expenses associated with the core operations of our company have also grown at a faster rate than

our revenue. Reflecting our gross profit ratio is our operating margin, which also represents a

downturn in our profit per dollar of sales after operating expenses. Due to these growing costs, our

business operations resulted in a net loss for 2019.

In conjunction with out income statement, we performed a vertical analysis of our company’s

income statement. This analysis reinforces our point that cost of goods sold was a leading cost for our

company. The cost of goods sold increased as a percentage of our sales by approximately 21% from

previous years. In contrast, our total operation expenses for our company actually became more

efficient year over year as a percentage of our sales despite total operating expenses increasing.

Second, our balance sheet shows us where we have allocated our money, resources and other

assets, and how we were able to procure them whether it is through liabilities or equity. We can see as

part of our increased sales, we are allowing a greater percentage of customers to purchase on account.

This also means we are not as efficient at collecting the money owed to us. In contrast to that, we are

becoming more efficient at turning over inventory. Meaning, we are selling our average amount of

inventory multiple times per year and increasingly more than previous years. Although we operated at

a loss this year, we can see on the balance sheet that we have increased many of our assets, namely,

our current assets. Our quick ratio has been fairly consistent over previous years which means, despite

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poor performance this year, our company still maintains the ability to cover any current

obligations and to continue growing despite increasing costs (See appendix item 2).

The other side of the balance sheet is showing how we have managed to finance our company,

historically; we financed more through equity rather than debt and other obligations. However, in

2019 we increased our financing mostly through debt instead of equity (See appendix item 3). Our

retained earnings dropped in 2019 due to a large amount of declared dividends which also had a

negative effect on the book value per share; the drop in retained earnings was not entirely due to a net

loss from the income statement.

We performed a vertical analysis for the balance sheet to evaluate our company from this

viewpoint, too. From this statement, we are able to see how our assets accumulated or reduced

compared to total assets over previous years, as well as liabilities or equity compared to total liabilities

and equity. As a result of this analysis, we see that our cash balance increased by nearly 21%

compared to last year, and accounts receivable increased by 13%, again indicating our willingness to

give credit but inefficiency in collecting it. Inventory on the other hand dropped nearly in half due to

increased sales and better inventory turnover. And equipment shrunk by nearly 25%, potentially from

more efficient use of assets. We also reduced our holdings in land which could be an indicator that we

are willing and attempting to raise cash from other assets.

On the other end, Accounts payable increased allowing us to pay others later; which is an

efficient use of our resources and indicator that other institutions view us as financially stable enough

to issue us such credit. Short-term notes payable increased due to purchasing land. Deferred revenue

shows we basically have some guaranteed revenue later on as long as we perform our end of the

obligation. Dividends payable grew due to declared dividends for our investors. Long-term notes

payable decreased due to paying off debt. And bonds payable increased due to bonds issued. This is

additional supporting evidence that we increased financing through debt rather than equity. We could

perceive from these numbers that despite our expenses on the income statement, our company is
Third, our statement of cash flows shows us where we have lost and gained cash through different

business activities. We see that we lost money on operating activity this year. However, we did not lose as

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much as net income would have you believe from the income statement. Despite that positive note, inefficient

turnover of our accounts receivable has a detrimental effect to our operating cash flow, accounts receivable is

treated as cash going out instead of coming in because we have not required those customers to pay us yet for

revenue we have recorded. Although, since we are still losing money on operating activity because of

increased expenses, we can see that we have raised cash through investing and financing activities to sustain

our current business model. Again, we increased financing through liabilities rather than equity. This overall

increase of cash flow can put us in a position to become more efficient and control our expenses during our

company’s growth.

As we can see from the three financial statements, our company has been rapidly expanding its

operations. Our revenues and expenses have increased, along with our funding. And while the core of our

business is not currently operating at a profit, mainly due to increased costs of goods sold and accounts

receivable collection inefficiency. If we can get these under control, along with our rapidly expanding

company operations, we feel that our company will be highly profitable well into the future.

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Appendix

1.

2.

3.

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Projected Income Statement
Income Statement

For The Year Ended 31-Dec-20 31-Dec-19 31-Dec-18

Revenue $ 3,500,000 $ 4,236,225 $ 2,280,000

Cost of Goods Sold $ (2,080,434) $ (2,493,425) $ (850,000)
Gross Profit $ 1,419,566 $ 1,742,800 $ 1,430,000

Operating Expenses
Wages Expense $ 926,667 $ 1,025,000 $ 565,000
Utility Expense $ 43,517 $ 56,000 $ 37,050
Insurance Expense $ 182,500 $ 162,417 $ 23,905
Rent Expense $ 41,000 $ 52,967 $ 18,009
Fuel Expense $ 4,567 $ 9,400 $ 2,900
Office Supplies Expense $ 9,133 $ 16,400 $ 6,000
Advertising Expense $ 32,528 $ 38,958 $ 23,000
Bad Debt Expense $ 135,032 $ 259,752 $ 60,750
Depreciation expense $ 557,550 $ 600,800 $ 500,000
Amortization Expense $ 7,900 $ 3,292 $ -
Total Operating Expenses $ 1,940,393 $ 2,224,985 $ 1,236,614

Operating Income $ (520,827) $ (482,185) $ 193,386

Income/Expenses from Non-Operating Items

Interest Income $ 53,224 $ 66,675 $ 23,676
Interest Expense $ (65,231) $ (84,500) $ (56,250)
Bond Int. Expense $ (37,113) $ (18,485) $ -
Gain on Sale $ - $ 325,000 $ -
Loss on Sale $ - $ (10,000) $ -
Unrealized Gain $ - $ 18,000 $ -
Total Non-Operating Income $ (49,120) $ 296,690 $ (32,574)

Net Income $ (569,947) $ (185,496) $ 160,812

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COGS: Since we know revenue, we know how many units we sold. Revenue divided by the price ($129 per-unit) of our
product gives us 27,132 units sold. We take that number and subtract the 2019 ending inventory (9,350), which costed $77
per-unit. After that we multiplied the remaining 17,782 units by the weighted average cost ($76.51 per-unit) of all purchases
and beginning balance for inventory in 2019. Altogether, the estimated COGS is the cost of the ending inventory, plus the
cost of the remaining inventory using the weighted average method.

Wages Expense: We took the average wage expense for the three years. Then we added the wage expense for the employe
we signed a contract with sometime in November of 2019. He did not start working until March of 2020. We are paying him
salary of $180,000 a year, although since he started in March of 2020, we are only paying him for 9 months out of the year.
So, we took 9 divided by 12 for how long he worked, and multiplied that by his yearly salary of $180,000.

Utility Expense: We took the average utility expense for the three years

Insurance Expense: We pre-paid $365,000 for 2-years of insurance on November 1st, 2019. And we only expensed $30,417
of that for 2019. So, for 2020 we will expense a full 12 months worth of pre-paid insurance. To get this number we divided
$365,000 by 24 to get the monthly expense, then multiplied the monthly expense by 12 to get the yearly expense. There wil
be $149,583 left over to expense for 2021.

Rent Expense: Since there was no value left in the previous contract, we used the contract made on June 1st, 2019 to figure
out our rent expense for 2020. We pre-paid $82,000 for a 2-year lease for additional warehouse space. And we expensed
$23,917 of that in 2019. So, for 2020 we will expense a full 12 months worth of pre-paid rent. To get this number we divided
$82,000 by 24 to get the monthly expense, then multiplied the monthly expense by 12 to get the yearly expense. There will
be $17,083 left over to be expensed for 2021.

Fuel Expense: Average fuel expense over three years

Office Supplies Expense: Average office supplies expense over three years

Advertising Expense: We took the average advertising expense over the three years. Then we added in the ending 2019
balance of pre-paid advertising of $3,542; this is because we consistently use several times more advertising expense than
this per year, and it will most likely be completely expensed in 2020 very quickly.

Bad Debt Expense: We took the average accounts receivable and divided that by the average net sales revenue. This gave u
a percentage of sales that end up in accounts receivable on average. We then took that percentage and multiplied it by our
2020 sales revenue. This gave us an estimated accounts receivable for 2020, and since the inception of our company we hav
not been able to collect 12% of the accounts receivable.

Depreciation Expense: The recurring depreciation of 500,000 along with the depreciation associated with the equipment
(truck) and office furniture for the year of 2020, shown on the depreciation schedule.

Amortization Expense: The amortization expense from the patent for the year of 2020, which is shown on the amortization
schedule.

Bond Int. Expense: Expensed the interest from the bond schedule plus the accrued amount that is due on Jan 1, 2021.

Interest Income: Average cash balance over three years multiplied by the average interest rate for 2019.

Interest Expense: We are taking our recurring interest expense 56250 and adding the interest expense associated with
the ST note payable that will be paid March 1 2020. Then we added the interest expense from the LT note payable which ha
its principal balance reduced by 47000 at an interest rate of approximately 4.8276%.

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Predicted vs. Actual Earnings Per Share Evaluation

Analyst predictions for our earnings per share in 2019 was $.015. We landed below investor

expectations, coming in at $(0.04). Over the span of our company’s existence, we have been able to

provide much better profits to owners so their faith in our company may be shaken as a result of this

negative report. It is not without good reason or possible solutions that this is the current circumstance.

Let us explain, the reason for decreased earnings per share this year is a result of a net loss.

However, this net loss is a result of the rising cost of goods, not due to a inability to operate efficiently as

a company. In fact, many facets of our company have increased in efficiency compared to prior years.

The evidence for this follows; it appears that investors expected us to become more efficient at providing

income per share of stock, their predictions were much higher than our performance in previous years. If

that was the case, then we would have had to increase the efficiency of all our operating activities. We

successfully increased the efficiency in our operating expenses relative to our income, however the

problem laid with per unit cost of goods sold and the efficiency associated in regards to sales. However,

this cost isn’t something entirely or directly within our control as even larger orders did not reduce our

costs sufficiently. At the time we could not predict the decrease in our gross profit ratio in order to

counteract it. Now, we can increase the selling price of our product to facilitate future increased earnings

per share as the rest of our operation increases in efficiency in other regards.

Additionally, our net income calculated in earnings per share is slightly misleading due to the

fact that our cash flow from operating activity is a more accurate representation of the ability of our

company to produce cash profits to our investors and our loss there is actually less than the earnings per

share calculation would have you believe.

Simply, our earnings per share for 2019 is not as bad as it appears when considering the effect of

cash flow and increase in efficiencies across the operations of our company.

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Journal Entries for 2019
Q # JE # Date Accounts Debit Credit Description Calculations
January
1 001 1/1/2019 Cash $ 950,000.00 3.8 x 250,000 = 950,0000
Issued 250,000 additional
Common Stock $ 62,500.00 0.25 x 250,000 = 62,500
shares
APIC-CS $ 887,500.00 3.55 x 250,000 = 887,500

2 002 1/1/2019 Equipment $ 260,000.00

Purchased a truck
Cash $ 260,000.00

3 003 1/1/2019 Office Furniture $ 92,000.00 Purchased new office

Cash $ 92,000.00 equipment

4 004 1/1/2019 Cash $ 145,000.00 Took out a 5 year note from

LT Note Payable $ 145,000.00 local bank

5 005 1/5/2019 Cash $ 2,102.00 23,676 - 21,574 = 2,102

Received payment; interest
Interest Receivable $ 2,102.00
earned and accruded in 2018

6 006 1/22/2019 Inventory $ 646,000.00 8,500 x 76 = 646,000

Purchased 8500 units of
Cash $ 290,700.00 646,000 x 0.45 = 290,700
inventory at $76 per-unit;
A/P $ 355,300.00 646,000 x 0.55 = 355,300
with 45% cash

7 007 1/25/2019 A/P $ 255,000.00

Paid cash towards A/P
Cash $ 255,000.00

February
8 008 2/1/2019 Prepaid Advertising $ 42,500.00 Paid for 1 year worth of
Cash $ 42,500.00 advertising

9 009 2/13/2019 Cash $ 369,000.00 Collected payments from

A/R $ 369,000.00 customers

March
10 010 3/1/2019 Land $ 980,000.00 Purchased a parcel of land
Cash $ 470,000.00 with cash and 5% quarterly
ST Note Payable $ 510,000.00 ST-note

11 011 3/19/2019 Office Supplies $ 27,000.00 Purchased office supplies

Cash $ 27,000.00 with cash

12 012 3/20/2019 Cash $ 39,000.00

Received payment for 200-
Deferred revenue $ 39,000.00
hr's of future service

April
13 013 4/21/2019 Cash $ 1,161,000.00 1,935,000 x 0.60 = 1,161,000
A/R $ 774,000.00 Sold 15000 units of 1,935,000 x 0.40 = 774,000
COGS $ 1,127,000.00 inventory at $129 per-unit; (13,000 x 75) + (2,000 x 76) =
Inventory $ 1,127,000.00 with 60% cash 1,127,000
Revenue $ 1,935,000.00 15,000 x 129 = 1,935,000

14 014 4/27/2019 Inventory $ 726,125.00 Purchased 9250 units of 9,250 x 78.50 = 726,125
Cash $ 508,287.50 inventory at $78.50 per unit; 726,125 x 0.70 = 508,287.50
A/P $ 217,837.50 with 70% cash 726,125 x 0.30 = 217,837.50

15 015 4/29/2019 A/P $ 527,000.00

Paid cash towards A/P
Cash $ 527,000.00

May
16 016 5/1/2019 Dividends Payable $ 155,000.00 Paid all dividends owed to
Cash $ 155,000.00 owners

17 017 5/31/2019 Rent Expense $ 29,050.00 Used up all the prepaid rent
Prepaid Rent $ 29,050.00 in 2018 contract

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June
10-adj 018 6/1/2019 Interest Expense $ 6,375.00 (510,000 x 0.05)/4 = 6,375
Adjusting entry for "JE-010"
Cash $ 6,375.00
for interest expense

17 019 6/1/2019 Prepaid Rent $ 82,000.00

Leased additional warehouse
Cash $ 82,000.00
space for 2 years

19 020 6/19/2019 Insurance Expense $ 132,000.00 Used up some pre-paid

Prepaid Insurance $ 132,000.00 insurance

20 021 6/26/2019 ADA $ 54,500.00 Writing off un-collectable

A/R $ 54,500.00 account

18 022 6/30/2019 Wages Expense $ 487,000.00 Paid 6 months of wage

Wages Payable $ 35,000.00 expenses, and beg wages
Cash $ 522,000.00 payable

July
21 023 7/1/2019 Cash $ 972,911.00 1,000,000 x 0.972911 = 972,911
Issued 1000, 3.2% bonds at
Discount Bonds $ 27,089.00 1,000,000 - 972,911 = 27,089
97.2911; due semi-annually
Bonds Payable $ 1,000,000.00 1,000 x 1,000 = 1,000,000

August
22 024 8/1/2019 Patent $ 79,000.00 Purchased a patent.
Cash $ 79,000.00 Amortized on a 10-year
straight-line basis

23 025 8/6/2019 Cash $ 1,475,000.00

Land $ 1,150,000.00 Sold a piece of land for cash
Gain on Sale $ 325,000.00

24 026 8/15/2019 Cash $ 522,450.00 1,161,000 x 0.45 = 522,450

A/R $ 638,550.00 1,161,000 x 0.55 = 638,550
Sold 9000 units of inventory
COGS $ 690,250.00 (6,500 x 76) + (2,500 x 78.50) =
for $129 per-unit; with 45%
Inventory $ 690,250.00 690,250
cash
Revenue $ 1,161,000.00 9,000 x 129 = 1,161,000

25 027 8/25/2019 Cash $ 139,000.00 Received a payment from a

A/R $ 139,000.00 customer

September
10-adj 028 9/1/2019 Interest Expense $ 6,375.00 (510,000 x 0.05)/4 = 6,375
Adjusting entry for "JE-010"
Cash $ 6,375.00
for interest expense

26 029 9/3/2019 Marketable Securities $ 49,000.00

Invested in a companies
Cash $ 49,000.00
marketable securities

27 030 9/12/2019 Cash $ 490,000.00

Loss on Sale $ 10,000.00 Sold a piece of equipment
Accumulated Depreciation $ 70,000.00 for cash
Equipment $ 570,000.00

28 031 9/18/2019 Fuel Expense $ 9,400.00 Purchased and used fuel for
Cash $ 9,400.00 delivery truck

October
30 032 10/1/2019 Inventory $ 866,250.00 Purchased 11250 units of 11,2500 x 77 = 866,250
A/P $ 866,250.00 inventory at $77 per-unit;
with 100% on account

31 033 10/10/2019 A/P $ 95,000.00

Paid supplier for inventory
Cash $ 95,000.00
purchased on account

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November
32 034 11/1/2019 Treasury Stock $ 520,000.00 Repurchased 160000 shares 160,000 x 3.25 = 520,000
Cash $ 520,000.00 at $3.25 per-share

33 035 11/1/2019 Prepaid Insurance $ 365,000.00 Purchased a 2 year insurance

Cash $ 365,000.00 policy

34 036 11/17/2019 Cash $ 546,000.00 Customer paid for future

Deferred Revenue $ 546,000.00 work

35 037 11/19/2019 Cash $ 502,132.50 1,115,850 x 0.45 = 502,132.50

A/R $ 613,717.50 Sold 8650 units of inventory 1,115,850 x 0.55 = 613,717.50
COGS $ 676,175.00 at $129 per-unit; with 45% (6,750 x 78.50) + (1,900 x 77) =
Inventory $ 676,175.00 cash 676,175
Revenue $ 1,115,850.00 8,650 x 129 = 1,115,850

December
10-adj 038 12/1/2019 Interest Expense $ 6,375.00 Adjusting entry for "JE-010" (510,000 x 0.05)/4 = 6,375
Cash $ 6,375.00 for interest expense

37 039 12/31/2019 Wages Expense $ 538,000.00

Paid wages expense; wages
Cash $ 497,000.00
after Dec 14th were accrued
Wages Payable $ 41,000.00

38 040 12/31/2019 LT Note Payable $ 47,000.00 Paid cash towards LT-note

Interest Expense $ 7,000.00 and accumulated interest
Cash $ 54,000.00 expense

39 041 12/31/2019 Marketable Securities $ 18,000.00 An un-realized gain on 67,000 - 49,000 = 18,000
Unrealized Gain $ 18,000.00 marketable securities from
"JE-029"

40 042 12/31/2019 Depreciation Expense $ 527,000.00 Depreciation expense for

Accumulated Depreciation $ 527,000.00 equipment

41 043 12/31/2019 Retained Earnings $ 981,600.00 (4,000,000 + 250,000 - 160,000) x

Declared dividends
Dividends Payable $ 981,600.00 0.24 = 981,600

42 044 12/31/2019 Utility Expense $ 56,000.00

Paid utility bill for the year
Cash $ 56,000.00

43 045 12/31/2019 Interest Expense $ 56,250.00 Paid interest expense on LT-

Cash $ 56,250.00 note

44 046 12/31/2019 Interest Receivable $ 66,675.06 Interest earned on avaerage ((525,710 + 2,808,043)/2) x 0.04 =
Interest Income $ 66,675.06 cash balance 66,675.06

45 047 12/31/2019 Deferred Revenue $ 24,375.00 Earned revenue for 39,000/200 = 195
Revenue $ 24,375.00 completed service hours 195 x 125 = 24,375
from "JE-012"

46 048 12/31/2019 Office Supplies Expense $ 16,400.00 Used up some office supplies
Office Supplies $ 16,400.00 over the year

47 049 12/31/2019 Bad Debt Expense $ 259,752.00 Adjusting allowance for 1,918,768 x 0.12 = 230,252.16
ADA $ 259,752.00 doubtful accounts

2-adj 050 12/31/2019 Depreciation Expense $ 65,000.00 Adjusting entry for "JE-002"; (1/8) x 2 = 0.25
Accumulated Depreciation $ 65,000.00 depreciation 0.25 x 260,000 = 65,000

3-adj 051 12/31/2019 Depreciation Expense $ 8,800.00 Adjusting entry for "JE-003"; 92,000 - 4,000 = 88,000
Accumulated Depreciation $ 8,800.00 depreciation 88,000/10 = 8,800

8-adj 052 12/31/2019 Advertising Expense $ 38,958.33 Adjusting entry for "JE-008"; (42,500/12) x 11 = 38,958.33
Prepaid Advertising $ 38,958.33 used Advertising

10-adj 053 12/31/2019 Interest Expense $ 2,125.00 (510,000 x 0.05)/4 = 6,375

Adjusting entry for "JE-010";
Interest Payable $ 2,125.00 (6,375/12) x 4 = 2,125
accrued interest expense

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17-adj 054 12/31/2019 Rent Expense $ 23,916.67 Adjusting entry for "JE-019"; (82,000/24) x 7 = 23,916.67
Prepaid Rent $ 23,916.67 used pre-paid rent

21-adj 055 12/31/2019 Bond Interest Expense $ 18,485.31 Adjusting entry for "JE-023"; 972,911 x 0.019 = 18,485.31
Bond Interest Payable $ 16,000.00 accrued interest expense for 1,000,000 x 0.016 = 16,000
Discount Bonds $ 2,485.31 bond 18,485.31 - 16,000 = 2,485.31

22-adj 056 12/31/2019 Amortization Expense $ 3,291.67 79,000/10 = 7,900

Adjusting entry for "JE-024";
Patent $ 3,291.67 (7,900/12) x 5 = 3,291.67
amortization expense

33-adj 057 12/31/2019 Insurance Expense $ 30,416.67 Adjusting entry for "JE-035"; (365,000/24) x 2 = 30,416.67
Prepaid Insurance $ 30,416.67 used insurance

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Balance Sheet
Assets
Cash Marketable Sec A/R ADA
+ - + - + - - +
525,710 75,000 455,000 25,000
950,000 260,000 49,000 774,000 369,000 $ 54,500 $ 259,752
145,000 92,000 18,000 638,550 54,500
2,102 290,700 613,718 139,000
369,000 255,000
39,000 42,500
1,161,000 470,000
972,911 27,000
1,475,000 508,288
522,450 527,000
139,000 155,000
490,000 6,375
546,000 82,000
502,133 522,000
79,000
6,375
49,000
9,400
95,000
520,000
365,000
6,375
497,000
54,000
56,000
56,250

2,808,043 142,000 1,918,768 230,252

Inventory Equipment Accum Depreciation LT Notes Receivable

+ - + - - + + -
975,000 5,000,000 2,000,000 285,000
646,000 1,127,000 260,000 570,000 70,000 527,000
726,125 690,250 65,000
866,250 676,175

719,950 4,690,000 2,522,000 285,000

Land Office Supplies Office Furniture Accum Depreciation

+ - + - + - - +
1,450,000 3,520 -
980,000 1,150,000 27,000 16,400 92,000 8,800

1,280,000 14,120 92,000 8,800

Prepaid Rent Patent Prepaid Insurance Prepaid Advertising

+ - + - + - + -
29,050 - 139,836 -
82,000 29,050 79,000 3,292 365,000 132,000 42,500 38,958
23,917 30,417

58,083 75,708 342,419 3,542

Interest Receivable
+ -
23,676
66,675 2,102

88,249

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Liabilities
A/P Wages Payable Dividends Payable LT Notes Payable
- + - + - + - +
450,000 35,000 155,000 1,250,000
255,000 355,300 35,000 41,000 155,000 981,600 47,000 145,000
527,000 217,838
95,000 866,250

1,012,388 41,000 981,600 1,348,000

Deferred Revenue ST Note Payable Interest Payable

- + - + - +
- - -
24,375 39,000 510,000 2,125
546,000

560,625 510,000 2,125

Bonds Payable Disc. on Bonds Pay. Prem. on Bonds Pay. Bond Int. Payable
- + + - - + - +
- - - -
1,000,000 27,089 2,485 16,000

1,000,000 24,604 - 16,000

Stockholders Equity
Contributed Cap Retained Earnings Common Stock APIC
- + - + - + - +
500,000 1,722,386 1,000,000 1,824,406
981,600 62,500 887,500

500,000 740,786 1,062,500 2,711,906

Treasury Stock
+ -
-
520,000

520,000

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Income Statement
Revenue COGS Wage Expense
- + + - + -

1,935,000 1,127,000 487,000

1,161,000 690,250 538,000
1,115,850 676,175
24,375
4,236,225 2,493,425 1,025,000

Utility Expense Insurance Expense Rent Expense

+ - + - + -

56,000 132,000 29,050

30,417 23,917

56,000 162,417 52,967

Fuel Expense Office Supplies Exp Advertising Expense

+ - + - + -

9,400 16,400 38,958

9,400 16,400 38,958

Bad Debt Expense Amortization Expense Depreciation Expense

+ - + - + -

259,752 3,292 527,000

65,000
8,800

259,752 3,292 600,800

Bond Int. Expense Interest Expense Interest Income

+ - + - - +

18,485 6,375 66,675

6,375
6,375
7,000
56,250
2,125

18,485 84,500 66,675

Gain on Sale Loss on Sale Unrealized Gain

- + + - - +

325,000 10,000 18,000

325,000 10,000 18,000

Unealized Loss
+ -

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Vertial Analysis Income Statement
Income Statement

For The Year Ended 31-Dec-19 31-Dec-18 31-Dec-17

Revenue 100% 100% 100%

Cost of goods sold -58.86% -37.28% -31.20%
Gross Profit 41.14% 62.72% 68.80%

Operating Expenses
Wages Expense 24.20% 24.78% 31.40%
Utility Expense 1.32% 1.63% 1.50%
Insurance Expense 3.83% 1.05% 0.84%
Rent Expense 1.25% 0.79% 0.68%
Fuel Expense 0.22% 0.13% 0.06%
Office Supplies expense 0.39% 0.26% 0.20%
Advertising expense 0.92% 1.01% 1.00%
Bad Debt Expense 6.13% 2.66% 1.80%
Depreciation expense 14.18% 21.93% 20.00%
Amortization Expense 0.08% 0.00% 0.00%
Total Operating Expenses 52.52% 54.24% 57.48%

Operating Income -11.38% 8.48% 11.32%

Income/Expenses from Non-Operating Items

Interest Income 1.57% 1.04% 0.86%
Interest Expense -1.99% -2.47% -2.25%
Bond Int. Expense -0.44% 0.00% 0.00%
Gain on Sale 7.67% 0.00% 1.40%
Loss on Sale -0.24% 0.00% -4.80%
Unrealized Gain 0.42% 0.00% 0.00%
Total Non-operating Income 7.00% -1.43% -4.79%

Net Income -4.38% 7.05% 6.53%

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Vertical Analysis Balance Sheet
Balance Sheet

For The Year End 31-Dec-19 31-Dec-18 31-Dec-17

Assets
Current Assets
Cash 28.78% 7.58% 9.36%
Marketable Securities 1.46% 1.08% 0.21%
Accounts Receivable 19.67% 6.56% 7.47%
(Allowance for Bad Debt) -2.36% -0.36% -1.49%
Interest Receivable 0.90% 0.34% 0.31%
Prepaid Advertising 0.04% 0.00% 0.00%
Prepaid Insurance 3.51% 2.02% 2.12%
Prepaid Rent 0.60% 0.42% 0.50%
Office Supplies 0.14% 0.05% 0.08%
Inventory 7.38% 14.06% 11.03%
Total Current Assets 60.11% 31.74% 29.58%

Non-Current Assets
Office Furniture 0.94% 0.00% 0.00%
(Accumulated Depreciation) -0.09% 0.00% 0.00%
Equipment 48.07% 72.08% 71.13%
(Accumulated Depreciation) -25.85% -28.83% -21.34%
Long-Term Notes Receivable 2.92% 4.11% 0.00%
Land 13.12% 20.90% 20.63%
Patent 0.78% 0.00% 0.00%
Total Non-Current Assets 39.89% 68.26% 70.42%

Total Assets 100.00% 100.00% 100.00%

Liabilities
Current liabilities
Accounts Payable 10.38% 6.49% 8.11%
Wages Payable 0.42% 0.50% 0.47%
Interest Payable 0.02% 0.00% 0.00%
Short-Term Notes Payable 5.23% 0.00% 0.00%
Deferred Revenue 5.75% 0.00% 0.00%
Dividends Payable 10.06% 2.23% 1.92%
Bond Interest Payable 0.16% 0.00% 0.00%
Total Current Liabilities 32.02% 9.23% 10.50%

Non-Current Liabilities
Long-Term Notes Payable 13.82% 18.02% 17.78%
Bonds Payable 10.25% 0.00% 0.00%
Discount Bonds -0.25% 0.00% 0.00%
Total Non-Current Liabilities 23.81% 18.02% 17.78%

Total Liabilities 55.83% 27.25% 28.28%

Stockholders' Equity
Common Stock 10.89% 14.42% 14.23%
Additional Paid-In Capital 27.79% 26.30% 25.96%
Treasury Stock -5.33% 0.00% 0.00%
Contributed Capital 5.12% 7.21% 7.11%
Retained Earnings 5.69% 24.83% 24.42%
Total Stockholder's Equity 44.17% 72.75% 71.72%

Total Liabilities and SE 100.00% 100.00% 100.00%

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Inventory Tracking Schedule

Method: FIFO
Entry # Date Activity Units Cost (P/U) Total
1/1/2019 Beginning Inventory 13000 $ 75.00 $ 975,000
6 1/22/2019 Purchase 8500 $ 76.00 $ 646,000
13 4/21/2019 Sale 13000 $ 75.00 $ (975,000)
13 Sale 2000 $ 76.00 $ (152,000)
14 4/27/2019 Purchase 9250 $ 78.50 $ 726,125
24 8/15/2019 Sale 6500 $ 76.00 $ (494,000)
24 Sale 2500 $ 78.50 $ (196,250)
30 10/1/2019 Purchase 11250 $ 77.00 $ 866,250
35 11/19/2019 Sale 6750 $ 78.50 $ (529,875)
35 Sale 1900 $ 77.00 $ (146,300)
31-Dec-19 Ending Inventory 9350 $ 77.00 $ 719,950

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Depreciation Schedules

Truck (D-Decline) Cost: 260,000

Year Depreciation Accumulated Depreciation Salvage: 25,000
2019 $ 65,000 $ 65,000 Life (Years): 8
2020 $ 48,750 $ 113,750
2021 $ 36,563 $ 150,313
2022 $ 27,422 $ 177,734
2023 $ 20,566 $ 198,301
2024 $ 15,425 $ 213,726
2025 $ 11,569 $ 225,294
2026 $ 8,676 $ 233,971
Ending Balance: $ 26,029

Office Furniture (Straight Line) Cost: 92,000

Year Depreciation Accumulated Depreciation Salvage: 4,000
2019 $ 8,800 $ 8,800 Life (Years): 10
2020 $ 8,800 $ 17,600
2021 $ 8,800 $ 26,400
2022 $ 8,800 $ 35,200
2023 $ 8,800 $ 44,000
2024 $ 8,800 $ 52,800
2025 $ 8,800 $ 61,600
2026 $ 8,800 $ 70,400
2027 $ 8,800 $ 79,200
2028 $ 8,800 $ 88,000

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AMORTIZATION SCHEDULES

Bonds Issued: 1,000 Bond Schedule

Semi-Annual Amortization of B/P Discount on Bonds
Face-Value: 1,000,000 Interest Payment Interest Expense Carry Value
Payment Date Discount Payable Balance
Par-Value: 97.2911 At issue, 7/1/2019 $ 27,089 $ 972,911
Carry-Value: 972,911 1/1/2020 $ 16,000 $ 18,485 $ 2,485 $ 24,604 $ 975,396
Stated Rate 7/1/2020 $ 16,000 $ 18,533 $ 2,533 $ 22,071 $ 977,929
1.60%
(Semi-annual): 1/1/2021 $ 16,000 $ 18,581 $ 2,581 $ 19,491 $ 980,509
Market Rate 7/1/2021 $ 16,000 $ 18,630 $ 2,630 $ 16,861 $ 983,139
1.90%
(Semi-annual): 1/1/2022 $ 16,000 $ 18,680 $ 2,680 $ 14,181 $ 985,819
7/1/2022 $ 16,000 $ 18,731 $ 2,731 $ 11,451 $ 988,549
1/1/2023 $ 16,000 $ 18,782 $ 2,782 $ 8,668 $ 991,332
7/1/2023 $ 16,000 $ 18,835 $ 2,835 $ 5,833 $ 994,167
1/1/2024 $ 16,000 $ 18,889 $ 2,889 $ 2,944 $ 997,056
7/1/2024 $ 16,000 $ 18,944 $ 2,944 $ 0 $ 1,000,000

Cost: 79,000 Patent (Straight Line)

Accumulated
Salvage: 0 Year Depreciation
Depreciation
Life (Years): 10 2019 $ 7,900 $ 7,900
2020 $ 7,900 $ 15,800
2021 $ 7,900 $ 23,700
2022 $ 7,900 $ 31,600
2023 $ 7,900 $ 39,500
2024 $ 7,900 $ 47,400
2025 $ 7,900 $ 55,300
2026 $ 7,900 $ 63,200
2027 $ 7,900 $ 71,100
2028 $ 7,900 $ 79,000

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