January 15 donahoo purchased more furniture for

• January 15: Donahoo purchased more furniture for
$200,000. This time, it used trade credit for the entire
amount of the purchase, with credit terms of net
60 days.
• January 31: Donahoo sold $500,000 worth of furniture,
for which it had paid $400,000. The furniture was sold
for 10 percent cash down, with the remainder payable
in 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 at
the outset of the fi rm’s life?
question 2 What did the fi rm’s balance sheet look like
after each transaction?
question 3 Ignoring taxes, determine how much income
Donahoo earned during January. Prepare an income
statement for the month. Recognize an interest expense
of 1 percent for the month (12 percent annually) on the

question 4 What was Donahoo’s cash fl ow for the month
of 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, “ but
we’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.
“Venture
capitalists, individual investors, or banks,” says Bernstein,
who
owns the company with four partners, “we’ve thought about
them all.”
question 1 What is your impression of Bernstein’s
perspective 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 in
his situation?