Maria Hernandez and Associates

Maria Hernandez and Associates

1. Introduction

Maria Hernandez, a graduate of the Massachusetts College of Art, thought of putting up her own business after losing her job for the second time in six months. She took a technical course in webpage design using part of her savings she earned from working in an advertising agency. After this, she worked with a startup retail in less than a year. She was able to find her next job one week later but lost it after less than six months.

Maria Hernandez is a skilled webpage designer. But she was hesitant to look for a third job after being out of job from two startups.

She created a business plan to put up a webpage design consultancy. She will be the head of the company and will employ other designers to cater the demand.

Below is the summary of her company’s transaction in the first few days:

1. On June 20, 2001, she transferred her savings amounting to $ 30,000 to a new bank account.
2. Two days later, she added $ 20,000 loaned from her father to her account.
3. She rented an office space for $ 3,000 a month, paying one month in advance and for July 2004.
4. She purchased stationary and office supplies for $ 5,000.
5.  She purchased computer equipment for $27,000.

At this point, remaining cash in bank is $ 12,000.

On July 2, 2004, Maria Hernandez and Associates opened for business. Maria managed to get two webpage design projects. Soon, she hired four designers and more projects through referrals. In its ninth week, her asked Maria how things were going but she could not answer right away.

Here are the next transactions her consultancy had:

1. Clients have paid $ 40,000 and two clients owes a total of $ 7,000.
2. Additional office supplies and stationery has been purchased for $ 900.
3. Maria Hernandez and Associates spent $ 1,700 of the stationery and office supplies. Leaving them with $ 4,200 worth of office supplies and stationery.
4. Rent for August and September was paid for $6,000.
5. And on August 27, $ 11,000 equipment and software were purchased; half of it was paid in cash and half of it is due one month later.

At this point, she found out that cash in bank decreased by $ 5,400 leaving her with just $ 6,600.

The following also need to be accounted for:

1. The loan’s interest of 6% per year.
2. Depreciation of the equipment and software with technological life of no more than three years.

1. Statement of the Problem

Did Maria Hernandez & Associates make profit through August 31, 2001?

1. Objectives

The objectives of this case study are as follows:

1. To provide a report on operations of Maria Hernandez & Associates.
2. To determine the net income of Maria Hernandez & Associates.
3. To explain the decline of cash in bank.
4. To provide a report on the status of the business for Maria Hernandez’s father.

1. Solution

Whether Maria Hernandez & Associates made a profit or not can be shown by an income statement. An income statement can also give an overview of the operations of the company. The income can be computed using the following equation:

Net income = Revenues – Expenses

        During this period, Maria Hernandez & Associates was able to gather a total revenue of $47,000 from its clients. Its expenses compose of rent, office supplies, utility and salary, loan interest, and depreciation of equipment and software which totals to $ 42,400. This means Maria & Associates has a net income of $ 4,600. Below is a detailed income statement.