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# Accounting Essay

764 words - 4 pages

Christopher Bonner
BUS630: Managerial Accounting (NAH1313A)

Instructor; Brian Shaw
Middlehurst House
Analysis: Case 9A in Chapter 9

Middlehurst House
Analysis: Case 9A in Chapter 9

As we are familiar with the case, we feel that two very important issues have not been addressed which in sufficient detail, given that it may influence the profitability of the business venture. These are
General:
(1) The allocation of capital by both the partners and the stockholders
(2) Auditing of facilities and services so that expansion can be carried out later or even facility augmentation
Economic viability
(3) If such extension is meant to augment the profit of the partner, or to ...view middle of the document...

What is proposed is that Compton’s money \$4000 is given back to him with interest for 12 months on a monthly basis. Monetization of service is a tricky matter as questions come up regarding additional business which has been brought in by the service.
Therefore if interest is 12% compounded for an year, Compton will get at the end of the year= Principal (1+ rn) where r is the interest rate and n is the accounting cycle
=40000 x ( 1+0.12)=4000 x 1.12 =44800 p.a.
Hence, Compton gets 44800/12 every month \$3733.00. Let us assume that Freidman gets no salary, but he lives on his profit shares. Therefore, every moth there are three main expenses, which are the fixed costs, the variable costs are deducted from the revenue earned in addition to and the operating cost of \$5733.00. We have this figure which is to be earned first priority. The balance which remains is distributed less \$2 only the capital provided by Compton is paid back to him. Now, we have two possible solutions to a case. These are
(A) Keep the student quantity at the previous level., or he original level, Going back to the original excel sheet, we get the status-quo as under
Initial Workings | |
Age Group | 2 to 3 | 3 to 4 | 4 to 5 | 5 to 6 | |
|   |   |   |   | |
Number of Students per Class | 10 | 15 | 15 | 15 | |
|  ...

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