Horse Vet, Llc: Transaction Analysis and Statement of Cash Flows Preparation (Option 1)
12 Pages Posted: 30 May 2017
Abstract
This case pertains to the foundational underpinnings of the accounting process and the statement of cash flows. In Part I, students are presented with 23 business events that they must evaluate for recording in the financial records. Part II requires students to prepare a 2012 statement of cash flows using the information presented in the company's 2011 and 2012 year-end balance sheets along with its 2012 income statement. In Part III, students must rely on a 2011 balance sheet and a 2011 statement of cash flows to work backward to derive the 2010 year-end balance sheet. There are two versions of this case: Option 1 and Option 2. The Option 2 case is a bit more challenging than the Option 1 case. Instructors should use Option 2 if they feel students are well grounded in their understanding of financial statement relationships and the customary financial reporting of a typical set of business events. Both cases reinforce students' learning related to the accounting process and the connectivity between the financial statements. Please note that only one version of the case should be used due to the existence of some overlap between the two.
Excerpt
UVA-C-2333
Aug. 9, 2012
HORSE VET, LLC: TRANSACTION ANALYSISAND STATEMENT OF CASH FLOWS PREPARATION (OPTION 1)
Part I
Sam Birch, like his brother Jeff (who owned Dog Concierges, LLC), was a financial novice. His passion, though, was horses, and after years of vet school, interning, and working for other horse vets, he had finally started his own veterinary practice in Virginia horse country. In its first five years, Horse Vet, LLC, had grown to about $ 1,000,000 in client billings—a major accomplishment he was deservedly proud of. Just as his brother had done with his business, Sam had put all his company's financial concerns in the hands of their sister, Jennifer Birch, now a successful CPA 500 miles away. Sam believed he had a pretty good handle on the day-to-day running of the business, but he was clueless when it came to crafting a financial story reflective of his business activities and accomplishments. Up until now, if there were adequate balances in the business checking account and the family checking account, he was happy. He thought, however, that he needed an Accounting 101 tutorial so that he would have some simple understanding of the process of preparing and interpreting a basic set of business financial statements. He couldn't avoid raising his financial acumen any longer. Such an understanding would be key when he talked to his banker next month about a $ 400,000 line of credit he needed to expand his business into two adjoining counties.
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Keywords: cash flows
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