Kim Fuller Case

KUSOM
Kim Fuller Case

Case Write-Up
Submitted by:
Submitted to: Sukeerti Shrestha (187105)
Ms. Nisha Adhikari Abina Thapa (187111 )
KUSOM Praci Karn (18742 )
Sugam Thapa (187116)
Prakriti Chhatkuli (18718)
Summary
Kim Fuller was employed as a district sales engineer for a large chemical firm. There he
learned of how the company had developed a use of recycled materials in pulverized form.
Because of how ready the supply of bottles was, Fuller saw a chance to start his own
business and began looking into the initial cost of starting the business in 1997.
He bought the required machines, the supplies and parts required to run and maintain the
machines, and a computer. All this cost him $65,000 of the $75,000 he had invested. He also
bought a warehouse which had an excellent location of $162,000. Three of his family
members invested $30,000 each, so $90,000 in total and he was able to make a down
payment of $50,000 on the warehouse. He borrowed a mortgage of the balance amount
from the bank. The bank suggested Fuller to have proper accounting records from the start
as they would be of great help.
Fuller was helped by his accountant neighbor, Zimmer who taught him how to use the
installed accounting software, and about balance sheet and income statement. Armed with
newly gained knowledge and confidence, Fuller signed contracts with two local bottling
companies, and hired two grinding machine workers and a truck driver.
It is mentioned that by 1998, Fuller’s firm was a regular supplier of his former employer.
Some Questions
1. What information will Fuller need to manage the business? Classify this information
in two categories: accounting information and non-accounting information.
ANS: The information that Fuller will need to manage his business, apart from the non-
accounting information, are the income, expenditures, assets and liabilities of his
business.
Accounting information has been described to be quantitative and historical. Non-
accounting information has been described as qualitative, narrative and future oriented.
The given information can be divided into two categories:
Accounting Information Non-Accounting Information

 Capital of $75,000  Help from neighbor in company
 Machinery, parts of machinery, accounts and installed an
computer for $65,000 accounting software
 Capital from family $90,000  Signed two contracts with bottling
 Warehouse of $162,000 and down companies
payment of $50,000 from capital  Hired two grinding machine
from family workers and a truck driver
 Mortgage from bank for the
balance amount on warehouse
2. See what you can do to draw up a beginning of business list of the assets and
liabilities of Fuller’s company making any assumptions you consider useful. How
should Fuller go about putting a value on the company’s assets? Using your values,
what is the company’s opening owners’ equity?
Particulars Sub-total (in $) Total (in $)

ASSETS
Current Assets:
Cash 800
Bank Balance 49,000
Total Current assets 49,800
Fixed assets:
Building 162,000
Machinery 42,000
Supplies and parts 1,000
Computer 2,000
Accounting software 200
Vehicles 20,000
Total fixed assets 2,27,200
Total Assets 2,77,000
LIABILITIES AND SHAREHOLDERS'
EQUITY
Long-Term Liabilities:
Notes Payable 112,000
Total liabilities 112,000
Shareholders' equity
Share capital 90,000
Owner’s capital 75,000
Total shareholders' equity 165,000
Total liabilities and shareholders' equity 277,000
To value the company’s total assets, Fuller should take the sum of all the individual assets
that are available to his business. We have assumed that Fuller has $8,000 in cash at hand
and a bank balance of $49,000.
The company’s opening owner’s equity is the sum of Fuller’s capital and the capital from
his family. So basically: Owner’s capital + Share Capital = $90,000 + $75000 = $165,000.
3. Now that Fuller has started to make sales, what information is needed to determine
“profit and loss”? What should be the general construction of a profit and loss
analysis for Fuller’s business? How frequently should Fuller do such an analysis?
ANS: In order to determine “profit and loss”, Kim Fuller needs to consider all the
expenses incurred and incomes earned by the business. Information such as sales, cost
of goods sold, general and administrative expenses, selling expenses, operating
expenses and taxation are required to prepare profit and loss account. Fuller should
prepare income statement and cash flow statement to keep track of his business. The
financial statements can be prepared quarterly since it’s a small business but as the
business grows, Fuller should do it monthly basis or weekly basis to keep his business
under control.
4. What other kinds of changes in assets, liabilities, and owners' claims will need careful
recording and reporting if Fuller is to keep in control of the business?
ANS: If Fuller is to keep in control of the business, he should record the depreciation and
appreciation value of the assets and he also needs to identify new assets purchased with
its estimated life expectancy. Basically, he should be very cautious about any changes in
the value of his assets. Talking about liabilities, he needs to make changes in interest
rate, interest charged by the banks and also the assets which changes from debt to
owner’s equity. For owner’s equity, Fuller needs to know how much amount he needs to
claim as the dividend payment to the shareholders and the amount he could claim as his
salary.

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Particulars Sub-total (in $) Total (in $)

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