Question - As a staff accountant at ABC Tax & Accounting Service, you have a number of clients who need a variety of services from you. Some will contract with you to do their payroll only, some will ask that you perform the full accounting cycle for them from journal entries to financial statements to closing entries and preparation of the tax returns and payroll reports. One of your clients is Marabelle Hernandez, owner of Marabelle's Craft 'n Shop. As the accounting period comes to an end, you will prepare the adjusting and closing entries, as well as prepare the financial statements and for Marabelle's Craft 'n Shop. Please download and use the template below to complete your work.
Your order of completion should be:
1. Complete the adjusting journal entries.
2. Enter the adjusting journal entry amounts in the worksheet "Adjusting Entries" columns. Solve for the balance changes and enter new account balances in the "Adjusted Trial Balance" columns.
3. Transfer income statement account balances to the "Income Statement" debit and credit columns, and transfer balance sheet account balances to the "Balance Sheet" debit and credit columns.
4. Enter formulas to show total debits and credits of all worksheet columns. In the Debit side of the Income Statement columns and the Credit side of the balance sheet columns, enter the net income figure and find balance in debits and credits for these two worksheet items.
5. Journalize the closing entries. Recall, we close Revenue, Expense, and Drawing accounts. Use the Income Summary account to close revenue and expenses to, and the capital account to close the drawing account to, as Marabelle is a proprietor and not a corporation so there is no retained earnings account to be used.
6. Complete the Income Statement.
7. Complete the Balance Sheet. Remember, Marabelle's capital account balance will have changed from the worksheet balance to include the net income and the drawing balance.
8. Complete the Statement of Cash Flows. Use the "2015 PCTB" tab for end of last year's account balances to compare to end of the current year's balances for your operating section information.
9. On Ratio Analysis tab in the template, show a basic analysis of the information found in the statements. This should include, at minimum, the following ratios:
1. Current Ratio
2. Inventory Turnover
3. Debt Ratio
4. Gross Profit Percentage
5. Profit Margin
6. For each ratio, include what the benchmark is for that ratio for a company in the craft store market.
In a separate Word document, address the following questions related to the income statement, balance sheet, statement of cash flows, and ratio analysis.
Answer the following questions pertaining to the income statement:
1. What are the different formats available for presenting the income statement?
2. Which format is being used in the income statement presentation on the Income Statement tab? How can you tell?
3. Why is this format important for this type of business? What elements does it show that are important for decision making?
Answer the following questions pertaining to the balance sheet.
1. What are the different formats available for presenting the balance sheet?
2. Which format is being used in the balance sheet presentation on the Balance Sheet tab? How can you tell?
3. Why is this format important for this type of business? What elements does it show that are important for decision making?
Answer the following questions pertaining to the statement of cash flows:
1. What are the different formats available for presenting the statement of cash flows?
2. Which format is being used in the statement of cash flow presentation on the Statement of Cash Flows tab? How can you tell?
3. Why is this format important for this type of business? What elements does it show that are important for decision making?
Lastly, answer the following questions pertaining to the results on the Ratio Analysis tab:
1. What is the benchmark for each ratio? Why is it important to use benchmarks or historical numbers for comparison?
2. Are Marabelle's ratios falling within appropriate range? Explain.
Attachment:- Template.rar