Take-home Assessment

Due Friday, October 15th

Name: Lizelle Laserna

Brett Cameron, owner of Cameron Laundromat, wants to look at his financial situation. As his
accountant, you are to create two financial statements for his business. His numbers are as follows:

Cash: $75,000, Accounts Receivable: $13,500, Accounts Payable: $45,000, Supplies: $800, Equipment:
$30,000, Vehicles: $50,000, Land & Building: $320,000, Mortgage Payable: $270,000, Sales: $225,000,
Salaries Expense: $110,000, Transportation Expense: $15,000, Utilities: $12,000, Repairs/Miscellaneous
Expense: $8,000, Inventory January 1st, 2021: $4,750, Purchases: $3,000, Inventory December 31st, 2021:
$1,800

Cameron Laundromat
Balance Sheet
December 31, 2021
Assets Liabilities
Cash $ 75 000 Accounts Payable $ 45 000
Accounts 13 500 Mortgage Payable 270 000
Receivable
Supplies 800 Total Liabilities $ 315 000
Land & Building 320 000
Equipment 30 000
Vehicles 50 000 Owner´s Equity

B. Cameron, $ 174 300

Capital
Total Assets $ 489 300 Total Liabilities $ 489 300
and Owner’s
Equity

Cameron Laundromat
Income Statement
Year Ending December 31, 2021
Revenue
Sales $ 225 000

Total Revenue $ 225 000

Cost of Goods Sold

Inventory January 1st, 2021 $ 4 750
 Purchases 3 000

Cost of Goods Available for Sale 7 750

Inventory December 31st, 2021 (1 800)

Cost of Goods Sold (5 950)

Gross Profit $ 219 050

Expenses
Salaries Expense $ 110 000
Transportation Expense 15 000
Utilities 12 000
Repairs/Miscellaneous Expense 8 000

Total Expenses (145 000)

Net Income $ 74 050

Is there a net income or a net loss?

Cameron Laundromat has a net income of $ 74 050, since total revenue – gross profit – total expenses =
a positive number (74 050); essentially, the total revenue is greater than the gross profit and total
expenses all together.

/20

Is Cameron Laundromat financially successful at this point in time, and which financial statement do
we look at to determine this? Provide any recommendations for Cameron Laundromat if necessary. (1
paragraph, 3-5 sentences)

/3

In order to determine whether or not Cameron Laundromat is financially successful, we must

use the data provided by the Income Statement. Considering we want to identify the financial success at
this point in time, the Income Statement would be the best financial statement to use in this situation,
as it shows the company’s net income/profit from January 1st, 2021 to December 31st, 2021. Therefore, it
is evident that the Income Statement is a reliable source to indicate the business’ current and future
health. By analyzing the Income Statement, the company is financially successful at this point in time,
considering it can pay off all of its expenses, including costs of goods sold, that are needed to
successfully operate the company while still making a steady profit. Knowing that the business’ fiscal
year runs from January 1st, 2021 to December 31st, 2021, $ 74 050 is a good annual profit that may be
considered above average, depending on the company’s length of service or social value. With that
being said, one can infer that this profitable business has a growing revenue, which enables it to meet all
of its financial duties.

Although Cameron Laundromat has enough assets to meet its financial obligations, there are
still some recommendations that may be useful to produce a prosperous future for the company:

• B. Cameron’s Owner’s Equity is only 36% of the business’ assets (Owner’s Equity/Total
Assets = $ 174 300/$ 489 300 (100) = 35.6%); the rest of the value of assets are being
used to pay off liabilities.
o In order to increase Owner’s Equity: the company can purchase more assets,
especially in supplies as it is only worth $ 800 (Balance Sheet)
o Increasing the value of current assets, including supplies, will allow the
company to pay its debt more efficiently – without the need of taking out loans,
external capital, equity financing, etc — due to higher liquidity, making the
business financially stronger.

• Continue to ensure that the number of assets remains greater than liabilities, enabling
the company to have more value than if its assets were a 1:1 ratio or if liabilities were
greater than assets.
o Will help the business pay off both its short-term and long-term obligations

• Cameron Laundromat’s net income is only 33% of the revenue (Net Income/Revenue =
$ 74 050/ $ 225 000 (100) = 32.9%), as the remaining money is generally used for
expenses or costs of goods sold.
o To increase revenue and hence profit (as long as the business is staying on top
of its expenses), the company can increase its number of customers through…
§ Advertisements (no advertising expenses on the Income Statement)
§ Quality customer support and service
§ Expanding the business with numerous locations
§ Upselling
§ Upgrade laundry equipment and amenities (e.g., fold services)
§ Host a special event; for example, Free Laundry Day to increase
customer loyalty and engagement
§ Improve the business’ exterior impression (e.g., keep the environment
free of waste, trim plants, wash windows regularly, retain good lighting,
etc.)
§ Occasionally promote business through freebies, rewards and
giveaways (e.g., free shirts, pens, laundry materials)
• According to the Income Statement, the salaries expense is high ($110 000), meaning the
business is operated by a lot of employees or a few high-demand workers; the company should
aim to decrease its labour cost to further elevate revenue growth by:
o Utilizing more automated labour, reducing employee turnover by improving staff
retention (e.g., keep staff informed, promoting a healthy and safe work environment,
provide employee recognition, etc.), and cross-training staff rather than hiring
professional labour.