Report for ADBS Incorporated

We have prepared the financial statements and additional analysis requested. See the table of
contents for the location of the requested information.

Prepared by:
Group member 1
Group member 2
Group member 3

Table of Contents Page

Financial statements for the year ended 12/31/2019 1
Analysis monthly operating income and operating cash flows 2
Analysis of customer base 2
Conceptual analysis of specific questions 3
Appendix (journal entries and t-accounts) 4
 ACC 356 Case 1: ADBS Incorporated 2020
Group member 1, group member 2, group member 3

Financial statements for ADBS Incorporated the year ended 31 December

2019
Balance sheet
As at As of
12/31/2018 12/31/2019
Assets
Cash $ 7,402 $ 15,630
Accounts receivable, net $ 25,626 $ 33,735
Prepaid rent $ 1,200 $ 1,200
Prepaid insurance $ 3,000 $ 3,600
PPE, net $ 61,750 $ 62,850
Total Assets $ 98,978 $ 117,015
Liabilities
Accounts payable $ 11,450 $ 14,407
Taxes payable $ 155 $ 6,430
Bank loan $ 31,876 $ 25,392
Equity
Common stock $ 55,000 $ 55,000
Retained earnings $ 497 $ 15,787
Total Liabilities and Equity $ 98,978 $ 117,015

Income statement Cash Flow Statement

For the period For the period ended
ended 12/31/2019 12/31/2019
Revenue $ 218,450 Operating activities
Less: Expenses Net Income $ 19,290
Add: Depreciation expense $ 6,900
Disposal expenses $ 82,200
Add: Bad debt expense $ 1,912
Wages expense $ 60,900
Less: Increase in A/R $ (10,021)
Operating expenses $ 12,305 Less: Increase in prepaid insurance $ (600)
Insurance expense $ 12,600 Add: Increase in A/P $ 2,957
Rent expense $ 14,400 Add: Increase in taxes payable $ 6,275
Bad debt expense $ 1,912 Cash flows from operating activities $ 26,712
Depreciation expense $ 6,900 Investing activities
Earnings before interest and tax $ 27,233 Purchase of PPE $ (8,000)
Interest expense $ 1,514 Cash flows from investing activities $ (8,000)
Earnings before taxes $ 25,719 Financing activities
Dividends paid $ (4,000)
Tax expense $ 6,430
Loan principal repayment $ (6,484)
Net income $ 19,290
Cash flows from financing activities $ (10,484)
Net cash inflow $ 8,228
Beginning cash balance $ 7,402
Ending cash balance $ 15,630

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 ACC 356 Case 1: ADBS Incorporated 2020
Group member 1, group member 2, group member 3

Monthly operating income and operating cash flows

Introduce key takeaway from the

analysis….

Describe what figure 1 shows…

How does figure 1 support your

conclusion…

Respond to anything else in the

question…

Figure 1: Value of monthly

operating income and operating cash flows

Text may wrap below the figure but make sure there is a space to be able to differentiate between
the body of the text and the figure label and description.

Customer analysis

Introduce key takeaway from the

analysis….

Describe what figure 2 shows… note, this

figure is not very good, but I have just put
something here quickly for you to get an
idea on formatting

How does figure 2 support your

conclusion…

Respond to anything else in the question…

Figure 2: Revenue by customer

Again, text may wrap below the figure but make sure there is a space to be able to differentiate
between the body of the text and the figure label and description.

2
 ACC 356 Case 1: ADBS Incorporated 2020
Group member 1, group member 2, group member 3

Conceptual analysis

A: Contract with Sun Homes

You should directly address the question that was asked. Identifying the main point/reasoning
why the question was wrong/right and then what the company’s options were for providing this
information. The key point in this question was to address whether the company has a present
obligation to do anything/whether they have a present right. May also comment on the fact that
nothing has really been done as of 12/31/2019. Recognition versus disclosure may have been a
relevant point to discuss.

B: Customers are not assets

Again, make sure the first sentence answers the question. In this question, the key notion is that
customers do not represent a “right” (i.e., the company does not control them). However, the
company could disclose the referrals and discuss how these referrals generate benefits to the
firm.

C: Lawsuit

Always with the same structure. Make the conclusion first and then support your conclusion
from the Conceptual Framework. The key point here is to discuss whether there is a present
obligation and if so, whether any measurement attribute could be recognized according to the
criteria for recognition. If not, discuss the company may want to disclose this information.

D: Equipment sale

Key point here was to discuss that selling equipment is not part of their ongoing or major
operations so it would not impact revenue. Rather there would be a gain/loss depending on the
selling price relative to the net book value.

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 ACC 356 Case 1: ADBS Incorporated 2020
Group member 1, group member 2, group member 3

Appendix: Journal entries and t-accounts

Copy and paste these in from excel in a readable format.

As I did with the financial statements, do not show the gridlines.