Marion Boats Case Solution 4h3ms

Transaction Date

Transaction Details

CASH

1-Oct-05

OWNER EQUITY: Fred purchased 1800 shares for $72000 and Bill Purchased 500 shares for $20000. A portion of it was used for legal services(72000+20000- $ 91200=$800)

91,200.00

1-Nov-05

BANK LOAN: to purchase property

$

40,000.00

1-Nov-05

PROPERTY: used $40000 loan and $32000 company's money

$

-72,000.00

1-Nov-05

BUILDING DEMOLITION TO PREPARE FOR NEW BUILDING: Mr. Mahoney agreed to clear the existing building for $7000 if he was allowed to retain the stones from the demolition. If he was not allowed he would charge 9000. Since, Fred was convinced he could not get a better price for the stones, he decided to allow mr. Mahoney to retain the stones. therefore, the effective price of the stones is $2000. The amount was agrred to be paid on May 31 2006.

31-Dec-05

FINANCING FROM SPORTS BOAT: Sports boats agreed to provide financing for the building through a loan payable in 10 equal annual installments. The loan carried interest rates of 10% payable from 1 April 2006 and the first installment $ was due on 31 March 2007. The first cheque was sent for $40000 and the rest would be sent after the completion of the building

40,000.00

INVENTORY BOUGHT FROM SPORTS BOAT: 17 modelsat an average cost of $9000 bought on credit. GROSS MARGIN: Total Sales:-$112000 in cash+58000 trade in allowances+ $13600 credit sales (183600-112000-58000)-$153000(COGS)=$30600

$

112,000.00

TRADE IN BOATS SOLD

$

54,800.00

FRED'S COMPENSATION FOR USING HIS PRIVATE BOAT AS DISPLAY: Fred would receive $40 for every new boat sold.

$

-680.00

31-Jan-06

HOLMES BROTHERS CONSTRUCTION PAYMENT 1(with company's money)

$

-40,000.00

28-Feb-06

HOLMES BROTHERS CONSTRUCTION PAYMENT 2(with Bank loan money)

$

-40,000.00

31-Mar-06

HOLMES BROTHERS CONSTRUCTION PAYMENT 3

$

-60,000.00

ADDITIONAL CHARGE OF MATERIAL

$

-2,400.00

30-Mar-06

LOAN REPAYMENT(repaid by cheque)

$

-42,000.00

31-Mar-06

ARCHITECT BILL

$

-2,600.00

1-Jan-06

31-Mar-06

FRED'S SALARY: The brothers agreed that they would each receive a salary of $24000 per year at all times during which they were egaged in company's business on full time basis. On 1 Nov 2005, Fred left his job to work for the company on a full time basis. therefore the effective tenure for which he should receive his salary is from Nov 2005 to March 2006, i.e., 5 months. Slary earned per month= 24000/12=$2000, for 5 months= 5 x 2000=$10000

$

-10,000.00

TOTAL

$

68,320.00

BALANCE SHEET SIZE

OWNER EQUITY 72000 F

20000 I

-800

MARION BOATS INC ING EQUATION ,31st MARCH,2006

=

ASSETS BUILDING

LAND

$

72,000.00

$

7,000.00

INVENTORY

S RECEIVABLE

TRADE-IN ALLOWANCE

STONES

$

2,000.00

$

40,000.00

$

40,000.00

$

60,000.00

$

2,400.00

$

2,600.00

$

153,000.00

$

-153,000.00

$

13,600.00 $

58,000.00

$

-58,000.00

$

145,000.00 $

79,000.00

$

-

$

13,600.00

$

239,600.00

Key Cash from Mr Fred

F

Financing activity

Cash from Bill

I

Investing activity

Service fee for lawyer

Op

Operating activity

$

-

$

2,000.00

LIABILITIES + EQUITY OWNERS' EQUITY

$

PAYABLE

BANK LOAN

BUILDING DEMOLIOTION PAYABLE

RETAINED EARNINGS

91,200.00 $

40,000.00

$

9,000.00

SPORTS BOAT LOAN

###

$

153,000.00

$

$

30,600.00

$

-3,200.00

$

-680.00

-40,000.00 $

-2,000.00

$

$

91,200.00

$

153,000.00 $

$

307,920.00

-

$

-10,000.00

14,720.00 $

9,000.00 $

40,000.00

ACTIVITY

F and Op (break down given below) F I

I

F

OP

OP

OP

OP

I I I I F I

OP

Balance sheet as of March 31, 2006 Current Assets Cash $ s Recievables $ Inventory $ Trade in allowance $ Non Current Assets Stones $ Building $ Land $ Total $

68,320 13,600 -

Liabilities s Payable Bank Loan Sports boat loan Site Preparation Payable Owners equity owners equity

2,000 145,000 retained Earnings 79,000 307,920 Total

$ $ $ $

153,000 40,000 9,000

$

91,200

$

14,720

$

307,920

Marion Boats, Inc Income Statement Sales of new boats Credit sales Trade in allowance Net Revenue Cost of goods sold Gross Margin Expenses Sale of trade in goods Freds salary Fred's commision Bank Interest Total Expense Net Income

$ $ $ $ $ $

112,000 13,600 58,000 183,600 153,000 30,600

$ $ $ $ $

3,200 10,000 680 2,000 15,880

$

14,720

Marion Boats, Inc Cash Flow Statemet(Direct Method) Cashflows from Operating Activities Cash Inflows Sale From Customers Trade in goods

$ $

112,000.00 54,800.00

$ $ $ $ Total $

-10,000.00 -680.00 -800.00 -2,000.00 153,320.00

Cash Outflows Fred's salary Fred's compensation Legal fees Intrest paid

Cashflows form Investing Activities Cash Outflows Architect Fee Material Cost Property Construction Payments

$ $ $ $ Total $

-2,600.00 -2,400.00 -72,000.00 -140,000.00 -217,000.00

Cashflows from Financing Activities Cash Inflows Cash from Fred Cash from bill Loan from Bank Advance from sports boat

$ $ $ $

72,000.00 20,000.00 40,000.00 40,000.00

$ Total $

-40,000.00 132,000.00

$

68,320.00

Cash Outflows bank loan repaid

Total Cash Balance

Fred and Bill's Equity No of shares Share Value

Total 2300 $ 14,720.00

$

Fred 1800 11,520.00

$

Bill 500 3,200.00