Identifying Accounting Issues, Performing Analysis, and Making Recommendations
University Canada West
ACCT 621 – Winter
Professor Yasamin Alami
18th February 2023
Executive Summary
Vic graduated from college last year with a Bachelor of Business Administration degree with a
Marketing concentration and found a job as a marketing assistant for Pooja, a prominent realtor in the
area. Pooja quickly realized that Vic was a bigger help to her than anyone she had hired before and
bumped up his compensation from an hourly minimum wage to $28,000 a year. Vic believes he can earn
more ($50,000) if he works full-time in real estate, but it would be a long, slow climb up. Pooja also
reimburses Vic for his driving at the prescribed CRA rate (61¢ per kilometre for the first 5,000 kilometres
driven in 2022), but Vic is concerned about the rising fuel and vehicle maintenance costs. He is
considering adding some of his personal driving to the weekly mileage totals he reports to Pooja.
Vic is considering taking a second job which would pay him $18 an hour for six hours of work
per day, four weekdays per week. He is also considering his own start-up, a travel agency business, as he
has a natural knack for booking flights, applying for tourist visas, researching the best resort deals, etc.
With $3,500 worth of one-time advertising, Vic estimates he can book $200,000 worth of vacation
activity in his first year and charge a fee of 5%. He can double the number in the second year, raise the
fee to 6% and benefit from 10% year-overgrowth for three years. After that, the fee would be raised to 7%
at that point with flat revenues for the following five years He has run some rough numbers and believes
business expenses (mostly car-related) can be held to only 11% of business revenues with this plan- he
hasn’t considered borrowing costs yet,
Vic has no student loan debt and pays a low monthly rent to his parents. He has talked to his bank
and was offered a $15,000 line-of-credit at a 7.50% annual rate. He believes that, if needed, he can
renegotiate the line-of-credit to $25,000, but maybe with an 8% interest rate. He is also considering
renting a billboard for $500 per month at a busy corner in town (the initial sign would have a $2,000
upfront cost) or buying the billboard outright for $22,000. With the billboard, Vic anticipates his
projections getting boosted by 50% over the next decade. Vic believes the billboard will last ten years
with yearly maintenance of $1,200.
He is not great with projections and numbers, so he is asking for help in deciding if this business
is lucrative enough to pursue. He also wants advice on journal entries, T-accounts, and the importance of
maintaining accurate records. Finally, he is considering bringing in a business partner who is willing to
cover the costs of the billboard in exchange for a 25% share in his business. His friend, Nina studied
accounting and he would be willing to give her a 33.3% share if she took care of all accounting/finance
tasks along with the billboard. He is open to advice beyond what is discussed in this case, but it should be
relevant to his situation.
(((not summarized)))
Vic, who graduated from college last year with a Bachelor of Business Administration degree with a
Marketing concentration, is at a career crossroad. Last year, after some job hunting, Vic managed to get
a job as a marketing assistant for a prominent realtor in the area, Pooja. With a colourful, outgoing
personality, Vic was a natural fit to host home viewings and even going door-to-door talking to
homeowners, brochures in hand.
Pooja quickly realized that Vic was a bigger help to her than anyone she had hired before and bumped up
his compensation from an hourly minimum wage to $28,000 a year (they agreed on about twenty-four
hours a week, mostly on weekends). Vic believes he can earn $50,000 a year working full-time in real
estate, but that would be long, slow climb up- perhaps over five years.
Pooja also reimburses Vic for his driving at the prescribed CRA rate (61¢ per kilometre for the first 5,000
kilometres driven in 2022). While Vic has strictly tracked his kilometres driven for work purposes in the
past, he has been a bit concerned about the rising fuel and vehicle maintenance costs. He is wondering if
he should add some of his personal driving to the weekly mileage totals he reports to Pooja- she doesn’t
really ask for details and he does tend to talk about her new listings quite a bit outside of work hours. For
instance, he discussed juicy details of specific buyers and sellers with his friends at a busy birthday party
last Tuesday.
Vic is considering taking a second job which would pay him $18 an hour for six hours of work per day,
four weekdays per week. While this would mean immediate cash in his pocket (he is currently living
paycheck to paycheck), the job doesn’t really relate to his career, nor does it have potential for promotion
in the field (waste management). Due to his tight cash situation, Vic was about to accept the job on the
spot after calling the number his friend had given him. However, he decided to hold off for a bit as the
manager wanted him to start this week, which would conflict with his scheduled hangout with friends.
Vic is also considering his own start-up, a travel agency business. While scheduling a family vacation at
age 15 (his parents were swamped with their bakery business at the time), Vic realized he had a natural
knack for booking flights, applying for tourist visas, researching the best resort deals, etc. He managed to
negotiate his way to such a great and affordable trip that his parents and sister insisted that he plan all
their vacations each year. Furthermore, his uncles and aunties also insisted on getting his help!
Vic believes he can finally monetize on his abilities. With $3,500 worth of one-time advertising
(brochures and social media ads), Vic estimates that he can book $200,000 worth of vacation activity in
his first year. From this, he can charge a fee of 5%. While this wouldn’t mean much money immediately,
especially considering he would be spending about ten hours a week on the business, Vic does believe he
can double the $200,000 number in the second year once word-of-mouth really kicks in.
Then, he would be in a position to raise the fee to 6% and benefit from 10% year-overgrowth for three
years. After that, the fee would be raised to 7% at that point with flat revenues for the following five
years. He has run some rough numbers and believes business expenses (mostly car-related) can be held
to only 11% of business revenues with this plan- he hasn’t considered borrowing costs yet, though.
Luckily, Vic has no student loan debt and pays a very low monthly rent to his parents. However, that
could change if he decides to start his own business- he has talked to his bank and was offered a $15,000
line-of-credit at a 7.50% annual rate. He believes that, if needed, he can renegotiate the line-of-credit to
$25,000, but maybe with an 8% interest rate.
Another option is to advertise more aggressively. Vic is thinking about renting a billboard for $500 per
month at a busy corner in town (the initial sign would have a $2,000 upfront cost). With the billboard, Vic
anticipates his projections getting boosted by 50% (same fee percentages) over the next decade. There is
also the option of buying the billboard outright for $22,000. Vic believes the billboard will last ten years
with yearly maintenance of $1,200- he isn’t sure how expensing an asset such as this works.
Vic isn’t great with projections and numbers, so he is asking you for help in deciding if this business is
lucrative enough to pursue. He is also wondering about the importance about maintaining accurate
records in general. He doesn’t really know much about accounting, so he wants some quick advice on
journal entries, T-accounts, and the like.
Vic is thinking of one final consideration- bringing in a business partner who is willing to cover the costs
of the billboard in exchange for a 25% share in his business. His friend, Nina studied accounting and he
would be willing to give her a 33.3% share if she took care of all accounting/finance tasks along with the
billboard. Vic hasn’t mentioned this idea to her yet- he wants your thoughts first. Vic wants specific
advice on what he should do. If it is a good idea to pursue the Vic Vacations business, he wants detailed
advice on business strategy, financing, ethical considerations, etc. He is open to advice beyond what is
discussed in this case, but it should be relevant to his situation.
Issues
-
The first issue would be deciding if Vic would stay for his job as a Marketing assistant under
Pooja. Vic is tight in cash and even though he can earn more in real estate, that would be a long
and slow climb up. Despite the raise in his wage, he is still concerned about other things. For
instance, although Pooja reimburses Vic for his driving at the prescribed CRA rate, he is still on
the edge because of the rising fuel and vehicle maintenance cost. That’s why he is considering if
he should add some of his personal driving to the weekly mileage totals he reports to Pooja.
-
Secondly, the issue would be whether considering the second job or not. This is a great deal since
it pays higher. The problem is that it does not relate to his career nor have the potential for
promotion. Moreover, the manager wanted him to start this week if ever he’ll accept the job offer,
but this will be a conflict hedule because he has already prior plans with his friends.
-
The third issue would be considering if Vic should start his own business, a travel agency. He
was planning to have a one-time advertisement. However he would incur costs and wouldn’t
receive money immediately. Vic has no student loan and pays a very low monthly rent. This
situation could change if he will start his own business. With regards to this, he talked to his bank
and it offered him options regarding his line of credit.
-
The fourth issue to consider is that Vic is adjudicating if he should just advertise more
aggressively; whether rent a billboard or buy it outright. The rent will be monthly payment. If he
will buy, it will last ten years but there will be a yearly maintenance for it.
-
Lastly, Vic is also considering if he should bring in a business partner who will cover the cost of
the billboard and will receive a percentage of shares in his business.
Analysis
SWOT Analysis for Vuc
Strengths
Weaknesses
Step 1 To understand this case scenario it is important yo know the meaning of term business. It's a vary
vast concept. It refers to a entity or organization that is carrying out professional activities. These
activities can be commercial, industrial or for others. For example: A business entity would do business to
earn a good amount of profit whereas an NPO (non- profit making organization) do it for charitable
reason.
Explanation It is an economic activity that involves the exchange, purchase, sale or production of goods
and services with a motive to earn profits, satisfy the need of the people at large or for any charitable
purpose.
Step 2 In this case study, Valeria graduated from college with a BBA degree. With this degree she got a
job as a marketing assistant. She got a year for working full time in real estate also she got reimbursement
for her driving from Diane for the first Kilometers. After this she got a second job which was paying per
an hour that too for six hours of work per day. $55,000 5,000 $17.75 She is also considering her own
startup, which is going to be a travel agency business. She did an advertising of and she booked worth of
vacation activity in the very first year. If she can double this amount she can charge a fees of and a year
over year growth.
Explanation Please refer to solution in this step.
3 Answer As per the above cases, it is advisable to Valeria to leave her job and start her own business as
if she succeed in her business startup as a travel agency, she can earn a lot better than her job.
Step 1 Answer:
Dear Valeria, Thank you for reaching out for advice regarding your career and business options. Based on
the information you have provided, it seems like you have a number of options available to you and a lot
of potential for success.
Starting your own business, Valeria Vacations, seems to be a promising option with a lot of potential for
growth and success. Before jumping in, however, it would be wise to create a detailed business plan and
perform a thorough analysis of the costs, risks, and potential returns of the business. This should include
an assessment of the current market and competition, as well as an understanding of the expenses required
to start and run the business, such as advertising, travel expenses, and vehicle costs.
Regarding the billboard, you have the option of renting it or buying it outright. Renting the billboard will
give you more flexibility, but it will also require a consistent monthly expense. Buying the billboard
outright may provide you with more control and a longer-term investment, but it will require a larger
upfront cost. You should consider the costs and benefits of each option and determine which is best for
your business.
In terms of accounting and record keeping, it is important to maintain accurate financial records to ensure
the success of your business. This includes keeping track of income and expenses, performing regular
financial statements, and having a system for tracking and organizing important information. Consider
seeking advice from a professional accountant to ensure that you are adhering to all legal requirements
and best practices for financial management.
As for the idea of bringing in a business partner, it is a decision that requires careful consideration. On the
one hand, a business partner could bring additional capital and expertise to the business, which could help
it grow and succeed. On the other hand, sharing ownership and control can also come with its own set of
challenges. Consider the benefits and risks of each option, and consider seeking advice from a business
attorney or financial advisor before making a final decision.
In conclusion, it seems that starting your own business, Valeria Vacations, could be a promising and
lucrative opportunity for you. However, it is important to take the time to create a detailed business plan
and assess the costs, risks, and potential returns of the business. Additionally, it is essential to maintain
accurate financial records and seek the advice of a professional accountant to ensure the success of your
business.
I hope this advice has been helpful. Good luck with your decision!
Sincerely,
[Your Name]
Explanation Please refer to solution in this step.
3 Answer In conclusion, it seems that starting your own business, Valeria Vacations, could be a
promising and lucrative opportunity for you. However, it is important to take the time to create a detailed
business plan and assess the costs, risks, and potential returns of the business. Additionally, it is essential
to maintain accurate financial records and seek the advice of a professional accountant to ensure the
success of your business