Option one is
raising $150,000 in exchange for 30% of
the company.
The
option is good as there is no interest rate paid thus helps solve the company’s
cash flow (From Cash flow Statement) problem. On the other hand, 30% of the company is sold.
Option two is
to secure a loan of $150,000 to be paid in 7 years at an interest rate of 10%
Interest = 10% of $150,000
=$15,000 annually
Principal
payment = $150,000 / 7
=$ 21428.5
This
option helps the company maintain its share but with the cashflows issues
payment on the principal and interest might be an issue.
Option three is
to secure a loan of $100,000 at an interest rate of 7% to be paid over 7 years
and personally finance $50,000
Interest = 7% of $150,000
=$10,500 annually
Principal
payment = $150,000 / 7
=$ 21428.5
The issue with this
option is that the company is not in a state to personally finance the $50,000
in the first place as it also needs additional capital to stimulate demand. To
add to that, the payment of interest will worsen the company’s cash flow
issues.
From the options given, the best is
option one as it does not take cash inflows from the company. The venture
capital firm might also bring vital experience in the retail sector.
Accounting
Cycle
Currently, the junior accountant has
just summarized the information in the different journals. The next step is to
post in the ledger then come up with unadjusted trial balance. If there are any
mistakes, he should prepare the adjusting entries before preparing an adjusted
trial balance. After that, he should prepare the financial statements, make
closing entries and post closing trial balance. In finalizing, the next step is
to analyze the information from the reports (Meghan).
The best financial statement that I will
recommend is the balance sheet. The debts are located under the liability
section. They consist of current liabilities which are expected to be paid
within a short span of time or the long-term which should be paid for a longer span
of time. I would recommend this since they show all liabilities against the
company’s asset thus showing if the company can meet the obligation (Accounting-Simplified).
Works Cited
Accounting-Simplified. Accounting-Simplified.
2015. 29 January 2018.
<http://accounting-simplified.com/financial/statements/types.html>.
Meghan, Fleury . Ignitespot Accounting. 24
February 2015. 29 january 2018.
<http://blog.ignitespot.com/basic-accounting-the-accounting-cycle-explained>.
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