1
McGhee Corporation, founded in the late 1980s by Calvin McGhee, specializes in
“jobber” sales at truck stops and travel centers across the U.S. and Canada. By the end of 2003,
McGhee Corporation had become one of the largest jobbers in the U.S. This is when Calvin had
decided to take some time for himself. He wished to step back and travel a bit. In order to
accomplish this, he needed his new assistant Sheryl Plath to run the business during his absences.
To test Sheryl’s ability to do this Calvin came up with some exercises to accomplish. These are
the results of those exercises.
First we will convert the income statement into the firm’s daily sales, daily cost of goods
sold, average daily purchases, and average operating expenses.
Income Statement
Annual
Daily
Sales Revenue, net
15,968,750
43,750.00
Cost of Goods Sold, net
10,675,000
29,246.58
Purchases, net
11,252,500
30,828.77
Operating expenses
4,462,500
12,226.03
McGhee Corporation
Balance Sheet
Assets
Current assets:
Cash
Accounts receivable
Inventory
Total current assets
Fixed assets:
Net fixed assets
Total fixed assets
2
Total assets
4,375,000.00
Liabilities and owner’s equity
Current liabilities:
Accounts payable
Accruals
Notes payable – bank
Current maturities of LT Debt
Total current liabilities
Long-term liabilities:
Long-term debt
Total long-term liabilities
Owner’s equity:
2003
Common stock & PIC
297,000.00
Retained earnings
1,400,000.00
Total owner’s equity
1,697,000.00
Total liabilities and owner’s equity
4,375,000.00