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    Current Assets: Asofjunei As of June 30

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    Stranger Sinha
    1) The document discusses how a company's shareholders' equity of $619,446 does not necessarily reflect what the company is worth. 2) If the company's assets were liquidated, they would be worth less than $619,446 due to liquidation costs and outstanding liabilities. 3) However, as a going concern with a typical monthly net income of $19,635, the company could be worth over $2 million based on capitalizing the annual net income.

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    Current Assets: Asofjunei As of June 30

    Uploaded by

    Stranger Sinha
    34 views3 pages
    1) The document discusses how a company's shareholders' equity of $619,446 does not necessarily reflect what the company is worth. 2) If the company's assets were liquidated, they would be worth less than $619,446 due to liquidation costs and outstanding liabilities. 3) However, as a going concern with a typical monthly net income of $19,635, the company could be worth over $2 million based on capitalizing the annual net income.

    Original Description:

    Maynard Finance Case Study Balance Sheet Solution.

    Original Title

    Maynard a Solution

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    1) The document discusses how a company's shareholders' equity of $619,446 does not necessarily reflect what the company is worth. 2) If the company's assets were liquidated, they would be worth less than $619,446 due to liquidation costs and outstanding liabilities. 3) However, as a going concern with a typical monthly net income of $19,635, the company could be worth over $2 million based on capitalizing the annual net income.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    34 views3 pages

    Current Assets: Asofjunei As of June 30

    Uploaded by

    Stranger Sinha
    1) The document discusses how a company's shareholders' equity of $619,446 does not necessarily reflect what the company is worth. 2) If the company's assets were liquidated, they would be worth less than $619,446 due to liquidation costs and outstanding liabilities. 3) However, as a going concern with a typical monthly net income of $19,635, the company could be worth over $2 million based on capitalizing the annual net income.

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    This question is intended to emphasize early in the course that shareholder’s equity does not necessarily reflect

    what the entity is worth. Time permitting, the instructor can have students estimate the cash proceeds of piecemeal
    sale of the assets by a liquidation company, which, net of liabilities, will certainly be less than $619,446. Then the
    value of the company as a going concern can be discussed; if June’s $19,635 net income is typical, the firm would
    be worth more than $619,446 as a going concern. Capitalizing June’s net income on an annual basis ($19,635 x
    12) at 10 times earning gives the company a value in excess of $2 million. The company’s return on equity is very
    high. On an annual basis it may be as high as 32%. This figure is 12 months’ income ($19,635 x 12) divided by
    projected year-end equity ($619,446 + $19,635 x 6). This is not a typical business. It is better.

    MAYNARD COMPANY
    BALANCE SHEETS AS OF JUNE 1 AND JUNE 30
    Assets
    Current Assets: As of June I As of June 30:
    Cash $ 34,983 $ 66,660
    .....................................................................................
    Accounts 21,798 26,505
    receivable
    .....................................................................................
    Note 11,700 0
    receivable
    .....................................................................................
    Merchandise 29,835 26,520
    inventory
    .....................................................................................
    Supplies on 5,559 6,630
    hand
    .....................................................................................
    Prepaid 3,150 2,826
    insurance
    .....................................................................................
    Total current $107,025 $129,141
    assets
    .................................................................................
    Noncurrent assets:
    Land 89,700 89,700
    .....................................................................................
    Building 585,000 585,000
    .....................................................................................
    Less: Accumulated (156,000 ) 429,000 ( 157,950 ) 427,050
    depreciation
    .................................................................................
    Equipment 13,260 36,660
    .....................................................................................
    Less: Accumulated ( 5,304 ) 7,956 ( 5,928 ) 30,732
    depreciation
    .................................................................................
    Other noncurrent 4,857 5,265
    assets
    .....................................................................................
    Total noncurrent 531,513 552,747
    assets
    .................................................................................
    Total $638,538 $681,888
    assets
    ..........................................................................
    Liabilities and Shareholders’ Equity
    Current liabilities:
    Accounts $8,517 $ 21,315
    payable
    .................................................................................
    Bank notes 8,385 29,250
    payable
    .................................................................................
    Taxes 5,700 7,224
    payable
    .................................................................................
    Accrued wages 1,974 2,202
    payable
    .................................................................................
    Total current $ 24,576 $ 59,991
    liabilities
    ............................................................................
    Other noncurrent 2,451 2,451
    liabilities
    .................................................................................
    Total 27,027 62,442
    liabilities
    ............................................................................
    Shareholders’ Equity:
    Capital 390,000 390,000
    stock
    .................................................................................
    Retained 221,511 229,446
    earnings
    .................................................................................
    Total shareholder’s 611,511 619,446
    equity
    ............................................................................
    Total liabilities and shareholders’ $638,538 $681,888
    equity
    .......................................................................

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