Financial Accounting

MGMT 210 Financial Accounting BluJay Aviation, Episode 3

Scene In January, Wren and Brad are in the new BluJay Aviation hangar office at Worldwide International Airport. Wren: Opening our business bank account and depositing those checks for $100,000 each was really scary. I hope this is a good decision. Brad: It was interesting meeting with the attorney. I had no idea we had to file so much paper work. I think we got our money’s worth for the $600 fee to incorporate and file the necessary tax papers. Instead of the corporation paying taxes, we will each get half of the profits to include on our personal income tax returns. Same goes for losses, but we’re not going to let that happen. Wren: Not if I can help it. As I recall costs to setup the business are considered an asset, but I’m not sure about that. Doing this should benefit us as long as we are in business. Brad: I think we did well with the C-172; $135,000 was a good price and the plane is in excellent shape. I talked to Jerry at Eagle One and he’s willing to give us a break on fuel and maintenance since I’m his best employee, and he knows where I live. Plus, he’s going to allow us to charge the purchases and pay the next month. This should help with the cash flow. Wren: But remember we have to recognize the expense when we use up the fuel and the maintenance costs have to be taken into consideration. We have to match the expenses in the same time period that we earn revenue. Brad: I’m relying on you to handle all that accounting stuff. Wren: No way, you have to be involved too; after all, half of this business is yours. No one should be more interested in your money as you are. Brad: I have contacted an insurance agent that is willing to insure the plane for $3,600 for a one year policy, but we have to pay now even though we are not starting operations until next month. Wren: The airport wants us to pay the rent upfront also. They want $500 a month for the next three months since we won’t take possession...