Balance Sheet For Big Ed's Motorcycle Shop December 3 255514

Balance Sheetbig Eds Motorcycle Shopbalance Sheetdecember 31 2015ass

Balance Sheet Big Ed's Motorcycle Shop Balance Sheet December 31, 2015 Assets Current Assets: Cash 184,500 Accounts Receivable 145,200 Merchandise Inventory, Parts 97,000 Merchandise Inventory, Motorcycles 110,000 Office Supplies 5,220 Prepaid Insurance 2,880 Total Current Assets 544,800 Property, Plant, & Equipment: Office Equipment 50,000 Accumulated Depreciation-Office Equipment (17,500) Store Equipment 52,000 Accumulated Depreciation-Store Equipment (18,260) Shop Equipment 183,600 Accumulated Depreciation-Shop Equipment (59,400) Total PP & E 190,440 Total Assets 735,240 Liabilities and Owner's Equity Current Liabilities: Accounts Payable 66,720 Salaries Payable 9,500 Interest Payable 5,376 Total Current Liabilities 81,596 Long-Term Liabilities: Notes Payable 67,200 Total Liabilities 148,796 Owner's Equity 586,444 Ed Silver, Capital 534,180 Total Liabilities and Owner's Equity 735,240

Paper For Above instruction

The financial position and performance of Big Ed's Motorcycle Shop as of December 31, 2015, can be analyzed through its balance sheet, income statement, and statement of cash flows. These financial statements provide insight into the company's assets, liabilities, equity, profitability, and cash management practices, essential for stakeholders evaluating its operational health and strategic direction.

Introduction

Financial statements serve as vital tools in assessing a company's overall health. For a motorcycle shop like Big Ed’s, these documents reveal the adequacy of assets to meet operational needs, the capacity to generate profit, and the effectiveness in managing cash flows. This analysis will break down each statement, interpret their implications, and contextualize the financial data within the broader scope of retail and service operations in the motorcycle industry.

Balance Sheet Analysis

The balance sheet provides a snapshot of Big Ed's assets, liabilities, and owner’s equity at year-end. Total assets amount to $735,240, reflecting substantial investments in both current and long-term resources. Current assets, primarily cash ($184,500), accounts receivable ($145,200), and inventories ($207,000), indicate liquidity and inventory management capabilities, crucial for a retail operation dependent on timely sales of parts and motorcycles.

The property, plant, and equipment (PP&E) total $190,440 after depreciation, highlighting the shop's investment in operational infrastructure. The depreciation charges recorded for each category—office, store, and shop equipment—depict systematic asset valuation adjustments, affecting net book values.

Liabilities comprise $81,596 in current liabilities (accounts payable, salaries, and interest payable) and $67,200 in long-term notes payable. The firm’s owner’s equity of $586,444 signifies accumulated retained earnings and owner investments, emphasizing strong capital accumulation. The liabilities-to-assets ratio is approximately 20.2%, suggesting a moderate leverage level that supports operational flexibility without excessive risk.

Income Statement Analysis

The income statement demonstrates robust sales revenue of $1,488,000 against a cost of merchandise sold of $933,000, resulting in gross profit of $555,000. The gross profit margin of approximately 37.3% indicates effective pricing and cost management within the industry context.

Operating expenses aggregate to substantial figures across selling expenses (e.g., salaries, advertising) and administrative expenses (office salaries, rent, insurance). Notably, selling salaries ($210,840) and service salaries ($105,980) reflect a significant commitment to workforce remuneration, essential for customer service and sales performance.

The net income of $94,264, yields a net profit margin of about 6.3%, implying efficient operations considering industry standards, though margins could be optimized by controlling administrative costs or maximizing sales volume.

Statement of Cash Flows Analysis

The cash flows illustrate operational efficiency, with net cash provided by operating activities at $149,600, predominantly driven by net income and depreciation adjustments. The decrease in receivables and inventory levels reflects effective receivables and inventory turnover strategies.

Investing activities show a cash outflow of $15,000 due to the purchase of shop equipment, signifying continued investment in operational capacity or modernization.

Financing activities resulted in a net cash outflow of $32,000, mainly due to owner draws ($42,000) offset by proceeds from notes payable ($10,000), indicative of owner investment strategies and financing balance.

The overall increase in cash of $102,600 brought the ending cash balance to $184,500, enhancing liquidity and financial stability for upcoming operational needs or expansion.

Conclusion

Big Ed's Motorcycle Shop exhibits solid financial health, with balanced assets, manageable liabilities, and steady profitability. The company’s liquidity position, as evidenced by its cash flows and current assets, supports ongoing operations and investments. Although the profit margin is moderate, strategic management of expenses and continued investment in property and equipment could augment profitability further. Overall, the financial statements suggest a well-established business capable of sustaining growth and meeting its financial obligations.

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