# Hynes and the Cost of Capital

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Date Submitted: 11/18/2012 09:53 AM

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P3-2A:

Accounts Receivable: \$50

Accounts Payable: - \$1675

Total Expenses: \$2425

Total Revenue: \$5000

P3-3A:

Depreciation: Normal Balance: Debit; Financial Statement: Statement of Earnings; Classification: Expenses

Cost of Goods Sold: Normal Balance: Debit; Financial Statement: Statement of Earnings; Classification: Expenses

Interest Expense: Normal Balance: Debit; Financial Statement: Statement of Earnings; Classification: Expenses

Retained Earnings: Normal Balance: Credit; Financial Statements: Statement of Retained Earnings and Balance Sheet; Classification: Shareholder’s Equity

Prepaid Expenses: Normal Balance: Debit; Financial Statement: Balance Sheet; Classification: Current Assets

C3-3:

1. Individuals external to a business that are making an investment decision utilize a company’s profit plans (in the form of financial statements) to evaluate whether to buy, hold, or sell their ownership stake. Investors in Dispensers of California, Inc. want to evaluate whether the company’s projected transactions will earn enough to give them a suitable return on their investment dollars.

As the company’s operator, Hynes on the other hand can utilize his profit plan to determine whether there is enough money to pay the bills, help him determine a price for his product that will maximize profits, and aid him in determining his human resource needs and affordability. By analyzing his projected operating, investment, and financing revenues and expenditures, he may make more informed decisions that will not only keep his company operational, but hopefully help him and his investors make a profit as well.

2.

Assets: \$467,000

Liabilities: \$22,500

Shares: \$200,000

Revenues: \$598,500

Expenses: \$349,000

Dividends: \$5000

3.

Cost of Goods Sold:

(beginning inventory + cost of goods purchased) – ending inventory

(0 + \$212,100 – \$15,100 = \$197,000)