HHH Appliance Practice Set Assignment 1 - Budgets.docx - Budgeting Cost Control HHH Appliance Budget Practice Set Assignment 1 Budgets Name Harry H

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Budgeting & Cost Control HHH Appliance Budget Practice Set Assignment 1 - Budgets Name: Harry H. Holloway is the new owner of HHH Appliance as a sole proprietor. His main business is selling new appliances but he also employs one service technician to perform repairs, cleanings, and installations of new and existing appliances and one part-time employee to do miscellaneous tasks. Harry’s business is located at 102 North Main Street, Rice Lake, Wisconsin 54868, a building that he rents. His FIN# is 41-3322557 and the phone number to his business is (715) 234-1188. Harry has decided to rent the building on Main Street with an option to buy after the first year. His rent is $2,000 per month plus utilities. The building contains a storefront along with a warehouse to store inventory, parts, supplies and equipment. Harry has an option to purchase the building for $300,000 with an 8% APR 10-year loan from a local bank. The bank requires Harry to provide financial statements for the months he has operated plus a budgeted income statement, balance sheet and cash flows. In addition, commercial real estate loans require a 25% down payment. Utility expenses vary each month but the building owner has told Harry to expect at least the following: Heat – $300/mo. Electric - $200/mo. Water - $180/yr. Telephones (Including cell phones) - $180/mo. Internet (Business account) - $100/mo. In addition to the utilities, Harry needs to get a business owner’s insurance policy including a business auto policy. Harry plans to prepay each of these expenses because he can save money doing that. He called his insurance agent and got a quote for the following: - Business owner’s policy: $3,600, this is a 2 –year policy -Business auto insurance: 1-year policy $1,800 Harry needs to purchase an updated computerized cash register point of sale system that tracks inventory and feeds into his accounting system. This equipment is expected to cost $1,800 with additional installation costs of $400. The equipment will be depreciated 20% in the first year. Harry will also be purchasing furniture and fixtures for approximately $5,000 that will be depreciated at 14.29% in the first year. The equipment will be bought with cash and the
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furniture will be bought using a business credit card. No Section 179 will be used with these items. Harry’s accountant told him he could deduct expenses related to the business use of your car if you use it for business purposes. Car and truck business expenses include loan or lease payments, interest payments and maintenance and repairs. Other tax deductible expenses include gas, oil changes and vehicle registration. Harry decided to buy a delivery van that also can be used to do repair calls.
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  • Summer '19
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