Giturdone.com is an Internet wholesaler of a variety of commercial software applications. On January 1, 2007, the company's balance sheet appeared as follows (all amounts are in thousands of dollars):
|
Giturdone.com
Balance Sheet
January 1, 2007
|
|
Assets
Cash
Accounts receivable
Inventory
Buildings & equipment
Accumulated depreciation
Land (for plant expansion)
Total assets
|
$ 4,240
6,800
15,200
16,780
(4,780)
9,000
$ 47,240
|
Liabilities & Stockholder's Equity
Wages payable
Capital stock (owner's investment)
Retained earnings
Total liabilities and stockholders' equity
|
$ 640
33,000
13,600
_______
$ 47,240
|
During the first quarter of the current year (January, February, March), the following events occurred.
- New office furniture costing $500 was purchased on the last day of March. This was to be used in a new sales office that was scheduled to open April 1. The office furniture was paid for in cash.
- Wages and salaries totaling $3,200 were paid. Of this amount, 20% was to liquidate wages payable that arose in the fourth quarter of the previous year. The company has a policy of not making wage or salary advances to employees.
- All accounts receivable outstanding at January 1 were collected.
- The company's advertising agency billed the firm $1,000 for a campaign that had run during the current quarter. The company is planning to pay the bill during April.
- Sales totaling $18,000 were made to customers. Of these sales, 60% was collected during the first quarter, and the balance is expected to be collected during the next quarter. The goods that were sold had cost the company $13,000 when they were purchased.
- Dividends were declared and paid to stockholders in the amount of $1,500.
- Inventory (software programs) costing $10,500 was purchased, of which 10% was paid for by the end of the quarter.
- A 3-year, $4,000, 12% loan was obtained from a local bank on the last day of the quarter.
- New shares of stock were sold by the company for $2,000 in cash.
- A new 3-year lease agreement was signed and executed. The lease required that a $900 monthly rental be paid in advance for the first 2 quarters of the current year. (Total paid is $5,400 = $900 X 6 months.)
- The accountants calculated that depreciation totaling $350 should be recorded for the quarter for the firm's buildings and equipment.
- The land that had been held for plant expansion was sold for $9,000.
Required
Prepare any summary documents you believe might help management (or interested external parties) better understand the effectiveness or efficiency of the firm's first quarter transformation process. Did the company have a satisfactory first quarter?