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This project should be completed using Excel (with formulas and linked data). The parameters of the project are below:

A) Prepare an Income Statement for the year ended 2011. This statement should be flexibly designed (formulas in cells). This must be a multi-step income statement (see video and/or exhibit 4.1 on pg. 4-5). To the right of your dollars in this statement, show common-sized percentages based on sales (vertical analysis).

B) Show journal entries, adjusting entries and closing entries for the below additional information…none of the journal entries have been posted to the ledger (many journal entries have been booked to get you started, however none of the entries for 2011 have been posted). You can add a transaction analysis (not required), however you must show actual journal entries that include debits and credits.

C) Prepare a Statement of Retained Earnings for the year ended 2011. This statement must be flexibly designed.

D) Prepare a Balance Sheet dated Dec. 31, 2011.  Have the Balance Sheets for 12/31/10 and 12/31/11 on the same Excel sheet labeled Balance Sheets.  Again, a flexible design is needed so any changes will automatically update the balance sheet.

E) Prepare a Statement of Cash Flows by using the indirect method for the year ended 2011. The Statement of Cash Flows (operating section) must automatically change when suppositions are changed.  The ending cash as shown on the statement of cash flows will then flow to the Balance Sheet.

F) Analysis: On a separate sheet titled “Analysis” find out the given and show in a table (show your work below your table); your table must look similar to:

a) ROE for 2011
b) ROA for 2011
c) RNOA for 2011
d) Stockholders’ Equity for 2010 and 2011
e) Net Income for 2011
f) NOPAT for 2011
g) NOA for 2010 and 2011
h) NOPM for 2011
i) NOAT for 2011
j) NNO for 2010 and 2011
k) Current Ratio for 2010 and 2011
l) Quick Ratio for 2010 and 2011
m) Liabilities-to-Equity Ratio for 2010 and 2011

47_balance sheet.jpg

Additional Information (for all entries; please see the posted Excel spreadsheet with a few journal entries already provided):

1) Sales for 2011 are $310,000. All the sales are on credit.

2) Gross Margin ratio is 40 percent.

3) Accounts Receivable:

i) $190,000 of the accounts receivable is paid by the end of the year (the remaining balance remains on the balance sheet). 
ii) $4,000 of A/R is written off during the year.   
iii) 5% of Accounts Receivable (after prepare-off and collections) is considered to be uncollectible.

4) Inventory:

i) Inventory purchases are $180,000, all on credit. 
ii) All accounts payable is from inventory purchases; all however $12,000 of inventory purchased is paid by the end of the year.

5) Additional equipment is purchased on 4/1/11 for $20,000 cash. All the equipment when new, including the new purchase, has/had a five year life, no salvage value, and is depreciated by using the straight-line method.

6) The building depreciates at $5,000 per year.

7) Half of the marketable securities were sold for $1,200. The FMV and cost of the other half of the securities are similar, so no adjustment to FMV is needed.

8) Salaries are $2,200 per month (12 months of salaries expense should be booked). This is expected that one-half month will be owed on 12/31/11 because of when payday falls (thus, 11.5 months of salaries have been paid and ½ month is still owed to the employees at year end).

9) $55,000 in cash is borrowed on 9/30/11 by issuing a Note Payable. Interest is 8% per year.

10) The bonds were sold at face value last December and pay interest on Dec. 31, 2011.

11) 10,000 additional shares of stock were sold for $3 a share.

12) Insurance costing $18,000 was purchased on 6/1/11 (the same time in which the policy purchased in 2010 expired. The latest policy was for 12 months).

13) On Dec. 31, 1000 shares of stock are repurchased from the market at $2.90/share (treasury stock).

14) The tax rate is 30 %. Income taxes for the present year are due and thus paid during the first two months of the next year (you will have complete an entry to pay the 2010 taxes, though the 2011 taxes will not be paid till the end of January 2012).

15) Dividends of $3,000 were paid during 2011.

16) The unearned revenue has been earned throughout the year (classified as other revenue on the multi-step income stmt.).

Required Labeled Sheets (all statements should be for 2011):

1) Data Sheet for Additional Data

2) Entries: Basic and Adjusting (you don’t have to show closing entries, however keep in mind all temporary accounts are closed to retained earnings)

3) Adjusted Trial Balance for 2011 (comprises the posted amounts of all entries and adjusting entries)

4) Multi-step Income Statement.
5) Retained Earnings Statement.

6) Classified Balance Sheet.

7) Cash Flow Statement.

8) Post-Close Trial Balance for 2011.

9) Analysis.

The Post-Close Trial Balance for 2010 is given below (based on the above balance sheet). This can be employed as a starting point or you can use the above Balance Sheet; keep in mind all debits and credits ALWAYS equal AND Assets = Liabilities + Equity:

1652_trial balance.jpg

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M9403

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