I will add a screenshot of the question my classmates are answering.

1. Raymond
Part 1

According to Charles’s income statement (single-step format) if he continued to be self-employed for another two years he could meet that goal of a net income of 40,000 per year and it would only continue to increase after four years if business continues grow. If I was to advise him I would wait another two years to so if business continues to expand and he sees growth. The purpose of this type of income statement is to evaluate how profitable a business may be according to Porter and Norton (2016).

Part II

The bookkeeper recorded the transaction accordingly. If a client is depositing cash then that would be considered service revenue because the client is paying for a type of service. The client may have deposited the cash before the fiscal year has ended but I believe the receipt would need to be annotated next year at the end since the service will be provided next year. As the controller I would need to modify the books because it is my responsibility to report accurate info.

2. Timothy
PART 1:

I would advise Charles to give his business an opportunity to grow. His business is already showing profitability in its second year with an increase of 78% in profit margins and 260% increase in revenue. In addition, his depreciation expense for his vehicle will drop after the third year and gain $15,000 in net income on his fourth year. If he can continue to grow his business by 38.5% on the third year, he will increase his revenue to about $100,000 and his only increasing cost is his secretarial services of about $3,000 for every $25,000 in revenue resulting of approximately $12,000 on the third year. Through this extrapolation his net income on the third year would increase to about $54,500. His business has the potential to double the $40,000 salary from working at a firm in just a few years. Essentially Charles is exchanging risk of running his own business for the potential of higher returns.

PART 2:

No, the bookkeeper did not properly account for the client’s deposit because the $10,000 was recorded as a revenue rather than a liability because the work is not complete and is scheduled for the following year.
I would need to correct the entry to reflect the $10,000 accurately as liability. As the controller of the firm, I have the responsibility for all accounting operations of the business (accountingtools.com, 2019).