• January 15: Donahoo purchased more furniture for$200,000. This time, it used trade credit for the entireamount of the purchase, with credit terms of net60 days.• January 31: Donahoo sold $500,000 worth of furniture,for which it had paid $400,000. The furniture was soldfor 10 percent cash down, with the remainder payablein 90 days. In addition, the fi rm paid a cash dividend of$100,000 to its stockholders and paid off $250,000 of its
long-term debt.question 1 What did Donahoo’s balance sheet look like atthe outset of the fi rm’s life?question 2 What did the fi rm’s balance sheet look likeafter each transaction?question 3 Ignoring taxes, determine how much incomeDonahoo earned during January. Prepare an incomestatement for the month. Recognize an interest expenseof 1 percent for the month (12 percent annually) on the
question 4 What was Donahoo’s cash fl ow for the monthof January? David Bernstein needs help fi nancing his Lodi, New Jersey–based Access Direct, Inc., a six-year-old $3.5 million company.“We’re ready to get to the next level,” says Bernstein, “ butwe’re not sure which way to go.” Access Direct spruces up
and then sells used computer equipment for corporations.It is looking for up to $2 million in order to expand. “Venturecapitalists, individual investors, or banks,” says Bernstein, whoowns the company with four partners, “we’ve thought aboutthem all.”question 1 What is your impression of Bernstein’sperspective on raising capital to “get to the next level”?question 2 What advice would you off er Bernstein as to
both appropriate and inappropriate sources of fi nancing inhis situation?
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