Robert Case
Assignment 2
Exercise
Robert’s Hardware Franchise
Philippe Levy
Financial Accounting
MBA
© Philippe Levy 1994-2014
1
CASE EXERCISE
Home Repair Inc. offers the latest styles in residential hardware at competitive prices. In business since 1986, Home Repair operates under a franchise concept with 80 locations across Canada.
Robert owns and operates a franchise. He has asked you for some advice regarding a document he has received. The franchisor has just advised him of a contest whereby the franchisee showing the greatest improvement in net income (using generally accepted accounting principles) from 2012 to 2013 would receive a $25,000 award.
Robert is quite interested in winning this award and given your expertise in business and accounting, would like you to identify any strategies to assist him in winning.
Preliminary financial statements are provided on page 3 and additional information on page 4.
REQUIRED:
1.
Prepare an adjusted (corrected) income statement for 2012.
2.
Any planning advice for Robert?
3.
Any advice for the franchisor?
© Philippe Levy 1994-2014
2
Preliminary franchise statements are as follows:
ROBERT FRANCHISEE
BALANCE SHEET
DECEMBER 31, 2012
Cash
$ 2,000
Accounts Receivable 14,000
Inventory
18,000
Equipment
50,000
Accounts payable
Bank loan
Common stock
Retained earnings
$84,000
$ 8,000
40,000
20,000
16,000
$84,000
ROBERT FRANCHISEE
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 2012
Sales
Cost of sales
$45,000
20,000
$25,000
Rent
Salaries
Interest
Depreciation
Office
Net income
Dividends
Retained Earnings
© Philippe Levy 1994-2014
$1,000
4,000
2,000
0
2,000
9,000
$16,000
0
$16,000
3
Additional information
The accounts receivable include one key customer that owes
$6,000 for merchandise already delivered and that is 240 days overdue. Robert will not deliver any further
Exercise
Robert’s Hardware Franchise
Philippe Levy
Financial Accounting
MBA
© Philippe Levy 1994-2014
1
CASE EXERCISE
Home Repair Inc. offers the latest styles in residential hardware at competitive prices. In business since 1986, Home Repair operates under a franchise concept with 80 locations across Canada.
Robert owns and operates a franchise. He has asked you for some advice regarding a document he has received. The franchisor has just advised him of a contest whereby the franchisee showing the greatest improvement in net income (using generally accepted accounting principles) from 2012 to 2013 would receive a $25,000 award.
Robert is quite interested in winning this award and given your expertise in business and accounting, would like you to identify any strategies to assist him in winning.
Preliminary financial statements are provided on page 3 and additional information on page 4.
REQUIRED:
1.
Prepare an adjusted (corrected) income statement for 2012.
2.
Any planning advice for Robert?
3.
Any advice for the franchisor?
© Philippe Levy 1994-2014
2
Preliminary franchise statements are as follows:
ROBERT FRANCHISEE
BALANCE SHEET
DECEMBER 31, 2012
Cash
$ 2,000
Accounts Receivable 14,000
Inventory
18,000
Equipment
50,000
Accounts payable
Bank loan
Common stock
Retained earnings
$84,000
$ 8,000
40,000
20,000
16,000
$84,000
ROBERT FRANCHISEE
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 2012
Sales
Cost of sales
$45,000
20,000
$25,000
Rent
Salaries
Interest
Depreciation
Office
Net income
Dividends
Retained Earnings
© Philippe Levy 1994-2014
$1,000
4,000
2,000
0
2,000
9,000
$16,000
0
$16,000
3
Additional information
The accounts receivable include one key customer that owes
$6,000 for merchandise already delivered and that is 240 days overdue. Robert will not deliver any further