Problem:
Partners and yourself are looking at two bussinesses, Coffee End,and Bocha Brewed, that are both for sale at the same price, both in great areas. With the financial information to compare the end of year conditions of both, noted below: Review numbers of both businesses.
1. Which one do you choose, and why? Detail the process you used to make your decision.
2. What factors should you consider before deciding which company to buy? What additional data might be helpful to you? (Note that net income is implied).
3. What questions should you ask about the methods used to record revenues and expenses?
December 31, 2003, year end balance sheets
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Bocha Brewed
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Coffee End
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Assets
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|
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Cash
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$10,000
|
$25,000
|
|
Accounts receivable
|
2,000
|
4,000
|
|
Coffee equipment
|
50,000
|
80,000
|
|
Supplies
|
11,000
|
18,000
|
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Other assets
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22,000
|
34,000
|
|
TOTAL ASSETS
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$95,000
|
$161,000
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|
|
|
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Liabilities and Owners' Equity
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|
|
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Accounts payable
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$21,000
|
$38,000
|
|
Bank loans payable
|
49,000
|
68,000
|
|
Owner's equity
|
25,000
|
55,000
|
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TOTAL LIABILITIES & OWNERS' EQUITY
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$95,000
|
$161,000
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|
|
|
|
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Other data
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|
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Personal withdrawls from cash during 2003
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$40,000
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$38,000
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Owners' investments in business during 2003
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$16,000
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$32,000
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Capital balances for each business on January 1, 2003
|
$30,000
|
$12,000
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