In Module Seven, you will submit your final project. It should be a complete, polished artifact containing all of the critical elements of the final product. It should reflect the incorporation of feedback gained throughout the course. This submission wil

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ACC 308 Final Project Guidelines and Rubric Overview The final project for this course is the creation of an accounting workbook, various notes to the financial statements, and a management analysis memo. In the professional field, accountants are expected to perform accurate calculations and articulate how financial information impacts the company in a couple of key ways: First, an accountant is responsible for producing the financial information that will be reviewed in a year-end audit. It is important to not only record information correctly but also follow appropriate accounting reporting and recording methodologies. Second, an accountant should be able to use financial information to evaluate a company’s financial health. This information is important to know so that management can make day-to-day operating decisions. In addition, the financial information that accountants provide is important for companies to be aware of as they consider pursuing other goals, such as expansion. In the management analysis memo, you will evaluate the company’s current performance and explain what the financial information that you presented means for the company. The project is divided into two milestones, which will be submitted at various points throughout the course to scaffold learning and ensure quality final submissions. These milestones will be submitted in Modules Three and Five. The final product will be submitted in Module Seven. In this assignment, you will demonstrate your mastery of the following course competencies:    ACC-308-01: Apply accounting rules and methodologies in finalizing financial statements ACC-308-02: Analyze basic financial statements to evaluate an organization’s financial performance ACC-308-03: Generate financial records for various accounting situations Prompt You will assume the role of a financial accountant responsible for preparing for a year-end audit. In addition, management would like a report of where the company stands currently, and how it stands in relation to meeting future goals for growth. To complete this project, review the Final Project Scenario document and use the accompanying workbook. Specifically, you must address the critical elements listed below. Most of the critical elements align with a particular course competency (shown in brackets). I. Accounting Workbook: Your accounting workbook must include appropriate calculations, ratios, and notes. Be sure to complete all tabs in the spreadsheet. A. Create adjusting entries for financial statement preparation. [ACC-308-03] B. Create an adjusted trial balance for financial statement preparation. [ACC-308-03] 1 C. Prepare financial statements for determining the company’s financial position. [ACC-308-03] D. Calculate ratios for determining the company’s financial health. [ACC-308-03] E. Create pro forma financial statements for predicting ability to meet future expansion goals. [ACC-308-03] II. Notes to the Financial Statements: Your notes must contain the following: A. Create appropriate notes as year-to-year documentation for managing depreciation, supplies, and inventory. [ACC-308-01] B. Create appropriate notes for long-term debt [ACC-308-01] III. Management Analysis Memo: Your management analysis memo should explain financial information to management. Provide evidence from your accounting workbook to support your ideas. A. Assess the company’s financial health based on ratio analyses presented in the accounting workbook. [ACC-308-02] B. Compare ratio analysis to trends in financial ratios over time for illustrating their impact, providing examples to support your claims. [ACC-30802] C. Summarize the effects of different compounding periods and interest rates on future value of money. [ACC-308-02] D. Discuss the impact of the pro forma financial statements for predicting ability to meet future expansion goals. [ACC-308-02] E. Identify potential issues in interpretation of financial information, providing examples to support your ideas. [ACC-308-02] F. Explain how alignment to relevant regulations and ethical reporting influenced your accounting practices and notes, providing examples to support your claims. [ACC-308-01] G. Describe the implications of inventory costing, contingent liabilities, and revenue recognition. [ACC-308-02] Milestones Milestone One In Module Three, you will submit a partial accounting workbook and a brief management analysis memo. This milestone will be graded with the Milestone One and Rubric. Milestone Two In Module Five, you will submit a partial accounting workbook and a brief management analysis memo. This milestone will be graded with the Milestone Two Rubric. Final Project Submission In Module Seven, you will submit your final project. It should be a complete, polished artifact containing all of the critical elements of the final product. It should reflect the incorporation of feedback gained throughout the course. This submission will be graded with the Final Project Rubric. (Note new elements that were not covered in Milestones 1 and 2 – Notes to the Financial Statements B and Management Analysis Memo F.) 2 Final Project Rubric Guidelines for Submission: Your accounting workbook must be submitted as a Microsoft Excel document, notes to the financial statements must be submitted as a Microsoft Word document, and your management analysis memo should be a 2- to 3-page Microsoft Word document written in APA format: Use double spacing, 12-point Times New Roman font, and one-inch margins. Critical Elements Exemplary Proficient Needs Improvement Not Evident Value Does not create adjusting entries (0%) 5 Creates an adjusted trial balance, Does not create an adjusted trial but balances are inaccurate balance (0%) (55%) 5 Accounting Workbook: Adjusting Entries [ACC-308-03] Creates adjusting entries for Creates adjusting entries, but financial statements preparation entries are inaccurate (55%) (100%) Accounting Workbook: Adjusted Trial Balance [ACC-308-03] Creates and adjusted trial balance for financial statement preparation. (100%) Accounting Workbook: Financial Statements [ACC-308-03] Prepares financial statements for Prepares financial statements, determining the company’s but calculations are inaccurate financial position (100%) (55%) Accounting Workbook: Ratios [ACC-308-03] Does not prepare financial statements (0%) 5 Calculates ratios for determining Calculates ratios, but calculations Does not calculate ratios (0%) the company’s financial health are inaccurate (55%) (100%) 5 Accounting Workbook: Pro Forma Financial Statements [ACC-308-03] Creates Pro Forma Financial Statements for predicting ability to meet future expansion goals (100%) Creates Pro Forma Financial Statements, but calculations contain inaccuracies (55%) Does not create Pro Forma Financial Statements (0%) 5 Notes to the Financial Statements: Year-toYear Documentation [ACC-308-01] Creates appropriate notes as year-to-year documentation for managing depreciation, supplies, and inventory (100%) Creates appropriate notes as year-to-year documentation for managing depreciation, supplies, and inventory, but notes are cursory or illogical (55%) Does not create appropriate notes as year-to-year documentation for managing depreciation, supplies, and inventory (0%) 14 3 Notes to the Financial Statements: LongTerm Debt [ACC-308-01] Creates appropriate notes for long-term debt (100%) Creates appropriate notes for long-term debt, but notes are cursory or illogical (55%) Does not create appropriate notes for long term debt (0%) 7 Management Analysis Memo: Company’s Financial Health [ACC-308-02] Meets “Proficient” criteria, and assessment demonstrates a sophisticated awareness of ratio analyses and their relevance to the company’s financial health (100%) Assesses the company’s financial Assesses the company’s financial Does not assess the company’s health based on ratio analyses health, but assessment is cursory financial health (0%) presented in the accounting or contains inaccuracies (55%) workbook (85%) 7 Management Analysis Memo: Ratio Analysis and Ratios Over Time [ACC-308-02] Meets “Proficient” criteria, and examples demonstrate a sophisticated understanding of ratios and trends over time (100%) Compares ratio analysis to trends in financial ratios over time for illustrating their impact, providing examples to support claims (85%) Compares ratio analysis to trends Does not compare ratio analysis in financial ratios over time for to trends in financial ratios over illustrating their impact, but time (0%) examples are cursory, or response contains inaccuracies (55%) 7 Management Analysis Memo: Compounding Periods and Interest Rates [ACC-308-02] Meets “Proficient” criteria, and summary demonstrates a sophisticated understanding of effects of different compounding periods and interest rates on future value of money (100%) Summarizes the effects of different compounding periods and interest rates on future value of money (85%) Summarizes the effects of different compounding periods and interest rates on future value of money, but summary is cursory or contains inaccuracies (55%) 7 Management Analysis Memo: Pro Forma Financial Statements [ACC-308-02] Meets “Proficient” criteria, and explanation of the impact of pro forma financial statements demonstrates a complex grasp of how they impact the company (100%) Discusses the impact of pro forma financial statements for predicting ability to meet future expansion goals (85%) Discusses the impact of pro Does not discuss the impact of forma financial statements for the pro forma financial predicting ability to meet future statements (0%) expansion goals, but explanation is cursory or contains inaccuracies (55%) 7 Management Analysis Memo: Issues in Interpretation [ACC-308-02] Meets “Proficient” criteria, and examples provided demonstrate a nuanced understanding of potential issues in interpretation of financial information (100%) Identifies potential issues in interpretation of financial information, providing examples to support ideas (85%) Identifies potential issues in Does not identify potential issues interpretation of financial in interpretation of financial information, but identification or information (0%) examples provided are cursory or illogical (55%) 7 4 Does not summarize the effects of different compounding periods and interest rates on future value of money (0%) Management Analysis Memo: Regulations and Ethical Reporting [ACC-308-01] Meets “Proficient” criteria, and examples provided make cogent connections between relevant regulations and ethical reporting and accounting practices (100%) Explains how alignment to relevant regulations and ethical reporting influenced accounting practices and notes, and provides examples to support claims (85%) Explains how alignment to relevant regulations and ethical reporting influenced accounting practices and notes, but explanation or examples are cursory or illogical (55%) Does not explain how alignment to relevant regulations and ethical reporting influenced accounting practices and notes (0%) 7 Management Analysis Memo: Inventory Costing, Contingent Liabilities, and Revenue Recognition [ACC-308-02] Meets “Proficient” criteria, and description demonstrates sophisticated understanding of the implications of inventory costing, contingent liabilities, and revenue recognition (100%) Describes the implications of inventory costing, contingent liabilities, and revenue recognition (85%) Describes the implications of inventory costing, contingent liabilities, and revenue recognition, but description is cursory or illogical (55%) Does not describe the implications of inventory costing, contingent liabilities, and revenue recognition (0%) 7 Articulation of Response Submission has no major errors related to, grammar, spelling, syntax, or organization (100%) Submission has some minor errors related to organization, grammar, and style (85%) Submission has several errors related to grammar, spelling, syntax, or organization (55%) Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas (0%) 5 Total 5 100% Southern New Hampshire University ACC 308 - Intermediate Accounting II MILESTONE 1 (Due in Module 3) For full instructions see Instructions Milestone 1 page MILESTONE 2 (Due in Module 5) For full instructions see Instructions Milestone 2 page Instructions Milestone 1 1. Trial Balance Using the Peyton Approved financial data, create: Adjusting Entries Adjusted Trial Balance 2. 1. Pro Forma Financial Statements Using the given Pro Forma information, create: Pro Forma Income Statement Pro Forma Balance Sheet Revised Financial Statements Using the Trial Balance and Preliminary financial statements, prepare: Revised Balance Sheet Revised Income Statement Revised Retained Earnings Statement Revised Statement of Cash Flows 3. Instructions Milestone 2 Ratio Analysis Using the financial statements from 2015, 2016, and revised 2017, calculate the following ratios: Current Ratio (Working Capital ) Quick Ratio A/R Turnover Inventory Turnover Gross margin Return on Sales Return on Equity Return on Assets Remember the written portion of the Milestone! See the Milestone 2 Assignment Guidelines and Rubric document. Remember the written portion of the Milestone! See the Milestone 1 Assignment Guidelines and Rubric document. Module 5) Southern New Hampshire University ACC 308 - Intermediate Accounting II INSTRUCTIONS FOR MILESTONE 1 (Due Module 3) IMPORTANT NOTE: Make sure to completely review the Rubric for Milestone 1 Use the data from this Milestone and begin working on your final presentation due in Final Project (Module 7) ITEMS TO COMPLETE FOR THIS MILESTONE (Blue Tabs) : GENERAL You just began a position as a financial accountant at Peyton Approved. In this role, your first task is to prepare the company’ year-end audit. Additionally, the company is interested in expanding its business within the next year. They would like your su their ability to meet their goals. TRIAL BALANCE 2017 TAB Using the Peyton Approved financial data (see bottom of page): Create the necessary adjusting journal entries. Use the REF column to reference the entry to each event Complete the adjusted trial balance REVISED FINANCIAL STATEMENTS Using the preliminary financial statements (yellow tabs) and the Trial Balance 2017, prepare the following statements: Balance Sheet (BS 2017 Revised tab) Income Statement (IS 2017 Revised tab) Retained Earnings Statement (RE 2017 Revised tab) Statement of Cash Flows (CF 2017 Revised tab) RATIO ANALYSIS Using the revised 2017 financial statements, 2016 financial statements (orange tabs), and 2015 financial statements (o a ratio analysis with the following ratios: Current Ratio (Working Capital ) Quick Ratio A/R Turnover Inventory Turnover Gross margin Return on Sales Return on Equity Return on Assets PEYTON APPROVED FINANCIAL DATA Preliminary Financial Statements have already been prepared (2017 statements in the Final Project Workbook). entries have not yet been made. See table for possible adjustments that indicate what will be recorded at 12/31/ Use the following to complete year-to-year documentation and notes for managing depreciation, inventory, and 1. A supplier shipped $3,000 of ingredients on 12/29/17. Peyton receives an invoice for the goods, as well as a b $175, all dated 12/29/17. Goods were shipped FOB supplier’s warehouse. 2. At 12/31/17, Peyton has $200 worth of merchandise on consignment at Bruno’s House of Bacon. 3. On 12/23/17, Peyton received a $1,000 deposit from Pet Globe for product to be shipped by Peyton in the sec January. 4. On 12/03/2017, a mixer with cost of $2,000, accumulated depreciation $1,200, was destroyed by a forklift. As insurance company has agreed to pay $700 in January, 2018, for accidental destruction. 5. Note about later borrowing financials will show loan from parents repaid and use of bank financing. Adjusting Journal Entries Ref No. 1 2 3 Date Account Tittle 12/29/2107 Supplies Freight Expense Supplies Debit Credit $ 3,000 $ 175 $ 3,175 12/31/2107 Goods in Transit Bruno's House of Bacon $ 12/23/2107 Cash $ 200 12/3/2107 Profit and LossAccount Insurance Claim Accumulated Depreciation Baking Equipment $ $ $ 200 $ 1,000 $ 2,000 1,000 Advance from Customer - Pet Globe 4 $ 100 700 1,200 3) roject (Module 7) sk is to prepare the company’s financials for the year. They would like your support in assessing e entry to each event are the following statements: d 2015 financial statements (orange tabs), prepare HOME he Final Project Workbook). Final adjusting hat will be recorded at 12/31/17 (fiscal year end). depreciation, inventory, and long-term debt. e for the goods, as well as a bill for freight for House of Bacon. e shipped by Peyton in the second week of as destroyed by a forklift. As of 12/23/17, ion. of bank financing. PEYTON APPROVED TRIAL BALANCE As of December 31, 2017 Cash Accounts Receivable Other Receivable - Insurance Baking Supplies Merchandise Inventory Consignment Inventory Prepaid Rent Prepaid Insurance Misc. Supplies Baking Equipment Accumulated Depreciation Customer Deposit Accounts Payable Wages Payable Interest Payable Notes Payable Common Stock Beginning Retained earnings Dividends Bakery Sales Merchandise Sales Cost of Goods Sold - Baked Cost of Goods Sold - Merchandise Rent Expense Wages Expense Misc. Supplies Expense Business License Expense Misc. Expense Depreciation Expense Insurance Expense Advertising Expense Interest Expense Telephone Expense Gain/Loss on disposal of equipment Unadjusted trial balance Dr Cr 67,520.04 68,519.91 ref 3 4 1 15,506.70 1,238.07 2 2,114.55 2,114.55 170.49 14,000.00 1,606.44 4 20,262.11 3,383.28 211.46 5,000.00 20,000.00 50,144.84 105,000.00 327,322.55 1,205.64 105,834.29 859.77 24,549.19 10,670.72 3,000.46 2,045.77 1,363.84 677.86 1,091.08 1,549.74 818.31 490.98 4 429,136.32 429,136.32 ON APPROVED L BALANCE cember 31, 2017 Instructions Milestone 1 Adjusting entries Dr Cr 1,000.00 ref 700.00 3,175.00 200.00 2 2,000.00 4 1,000.00 3,175.00 3 1 200.00 1,200.00 100.00 6,375.00 6,375.00 Adjusted trial balance Dr Cr 68,520.04 68,519.91 700.00 18,681.70 1,038.07 200.00 2,114.55 2,114.55 170.49 12,000.00 406.44 1,000.00 23,437.11 3,383.28 211.46 5,000.00 20,000.00 50,144.84 105,000.00 327,322.55 1,205.64 105,834.29 859.77 24,549.19 10,670.72 3,000.46 2,045.77 1,363.84 677.86 1,091.08 1,549.74 818.31 490.98 100.00 432,111.32 432,111.32 - - Preliminary Peyton Approved Balance Sheet As of December 31, 2017 Assets Current Assets: Cash Accounts Receivable Baking Supplies Merchandise Inventory Prepaid Rent Prepaid Insurance Misc. Supplies Liabilities 67,520.04 68,519.91 15,506.70 1,238.07 2,114.55 2,114.55 170.49 Total Current Assets Long Term/Fixed Assets: Baking Equipment Accumulated Depreciation Net Fixed assets Total Assets: 157,184.31 14,000.00 -1,606.44 12,393.56 169,577.87 oved eet 31, 2017 Liabilities and Owners' Equity Current Liabilities: Accounts Payable 20,262.11 Wages Payable 3,383.28 Interest Payable 211.46 Total Current Liabilities 23,856.85 Long Term Liabilities: Notes Payable Total Long Term Liabilities: 5,000.00 Total Liabilities: Common Stock Retained Earnings 5,000.00 28,856.85 20,000.00 120,721.02 Total Equity 140,721.02 Total Liabilities & Equity 169,577.87 Peyton Approved Balance Sheet As of December 31, 2017 Assets Current Assets: Cash Accounts Receivable Baking Supplies Merchandise Inventory Prepaid Rent Prepaid Insurance Misc. Supplies Other Receivable - Insurance Consignment Inventory Liabiliti 68,520.04 68,519.91 18,681.70 1,038.07 2,114.55 2,114.55 170.49 700.00 200.00 Total Current Assets 162,059.31 Long Term/Fixed Assets: Baking Equipment 12,000.00 Accumulated Depreciation -406.44 Net Fixed assets 11,593.56 Total Assets: 173,652.87 Approved e Sheet mber 31, 2017 Instructions Milestone 1 Liabilities and Owners' Equity Current Liabilities: Accounts Payable 23,437.11 Wages Payable 3,383.28 Interest Payable 211.46 Customer Deposit 1,000 Total Current Liabilities Long Term Liabilities: Notes Payable Total Long Term Liabilities: 28,031.85 5,000.00 5,000.00 Total Liabilities: Common Stock Retained Earnings 33,031.85 20,000.00 120,621.02 Total Equity 140,621.02 Total Liabilities & Equity 173,652.87 - Instructions Milestone 1 Preliminary Peyton Approved Income Statement For Year Ended 12/31/2017 Bakery Sales Merchandise Sales Total Revenues Cost of Goods Sold - Baked Cost of Goods Sold - Merchandise Total Cost of Goods Sold Gross Profit $ 327,322.55 1,205.64 328,528.19 105,834.29 859.77 106,694.06 221,834.13 Operating Expenses: Rent Expense Wages Expense Misc. Supplies Expense Business License Expense Misc. Expense Depreciation Expense Insurance Expense Advertising Expense Interest Expense Telephone Expense Total Operating Expenses: Net Income 24,549.19 10,670.72 3,000.46 2,045.77 1,363.84 677.86 1,091.08 1,549.74 818.31 490.98 46,257.95 175,576.18 Peyton Approved Income Statement For Year Ended 12/31/2017 Bakery Sales Merchandise Sales Total Revenues Cost of Goods Sold - Baked Cost of Goods Sold - Merchandise Total Cost of Goods Sold Gross Profit $ 327,322.55 1,205.64 328,528.19 105,834.29 859.77 106,694.06 221,834.13 Operating Expenses: Rent Expense Wages Expense Misc. Supplies Expense Business License Expense Misc. Expense Depreciation Expense Insurance Expense Advertising Expense Interest Expense Telephone Expense Gain/Loss on disposal of equipment Total Operating Expenses: Net Income 24,549.19 10,670.72 3,000.46 2,045.77 1,363.84 677.86 1,091.08 1,549.74 818.31 490.98 100.00 46,357.95 175,476.18 Instructions Milestone 1 Preliminary Peyton Approved Statement of Retained Earnings For Year Ended 12/31/2017 Beginning Balance: plus Net Income $ 50,144.84 175,576.18 less Dividends: Ending Balance 105,000.00 $ 120,721.02 Peyton Approved Statement of Retained Earnings For Year Ended 12/31/2017 Beginning Balance: plus Net Income $ 50,144.84 175,476.18 less Dividends: Ending Balance 105,000.00 $ 120,621.02 Instructions Milestone 1 Preliminary Peyton Approved Statement of cash Flow For Year Ended 12/31/2017 Net Income Depreciation Expense $ 175,576.18 677.86 176,254.04 Increase in Accounts Receivable Increase in Baking Supplies Increase in Merchandise inventory Increase in Prepaid Rent Increase in Prepaid Insurance Increase in Misc. Supplies Increase in Accounts Payable Increase in Wages Payable Increase in Interest Payable (25,886.91) (8,187.84) (443.10) (449.55) (1,004.55) (114.99) 3,292.11 1,850.48 44.96 Operating Cash Flow Cash Flow from Investments Equipment Purchases (6,000.00) Cash Flow from Investments Cash Flow from Financing Repayment of Note Payable Dividends Paid Cash Flow from Financing Net Cash Flow Beginning Cash Ending Cash (10,000.00) (105,000.00) 145,354.65 (6,000.00) (115,000.00) 24,354.65 43,165.39 67,520.04 Peyton Approved Statement of cash Flow For Year Ended 12/31/2017 Net Income Depreciation Expense Loss on Disposal $ 175,476.18 677.86 100.00 176,254.04 Increase in Accounts Receivable Increase in Baking Supplies Increase in Merchandise inventory Increase in Prepaid Rent Increase in Prepaid Insurance Increase in Misc. Supplies Increase in Accounts Payable Increase in Wages Payable Increase in Interest Payable Increase in Other Receivable - Insurance Increase in Consignment inventory Increase in Customer Deposit (25,886.91) (11,362.84) (243.10) (449.55) (1,004.55) (114.99) 6,467.11 1,850.48 44.96 Operating Cash Flow Cash Flow from Investments Equipment Purchases Insurance Proceeds Cash Flow from Investments Cash Flow from Financing Repayment of Note Payable Dividends Paid Cash Flow from Financing Net Cash Flow Beginning Cash Ending Cash (4,000.00) (10,000.00) (105,000.00) 0 Instructions Milestone 1 145,554.65 (4,000.00) (115,000.00) 26,554.65 43,165.39 68,520.04 Peyton Approved Balance Sheet As of December 31, 2015 Assets Current Assets: Cash Accounts Receivable Baking Supplies Merchandise Inventory Prepaid Rent Prepaid Insurance Misc. Supplies Liabilities and Owners Current Liabilities: Accounts Payable Wages Payable Interest Payable 31507.58 35118.97 8042.23 580.27 1215.32 810.21 40.51 Total Current Assets Long Term/Fixed Assets: Baking Equipment 6000 Accumulated Depreciation -677.79 Net Fixed assets 77,315.09 Total Current Liabilities Long Term Liabilities: Notes Payable Total Long Term Liabilities: 5,322.21 Total Liabilities: Common Stock Retained Earnings Total Equity Total Assets: 82,637.30 Total Liabilities & Equity Liabilities and Owners' Equity iabilities: 15086.84 1118.83 121.53 rent Liabilities 16,327.20 m Liabilities: 10,000.00 g Term Liabilities: 10,000.00 26,327.20 20,000.00 36,310.10 bilities & Equity 56,310.10 82,637.30 Peyton Approved Balance Sheet As of December 31, 2016 Assets Current Assets: Cash Accounts Receivable Baking Supplies Merchandise Inventory Prepaid Rent Prepaid Insurance Misc. Supplies Liabilities an 43,165.39 42,633.00 7,318.86 794.97 1,665.00 1,110.00 55.50 Total Current Assets Long Term/Fixed Assets: Baking Equipment Accumulated Depreciation Net Fixed assets Total Assets: 96,742.72 8,000.00 -928.58 7,071.42 103,814.14 proved Sheet er 31, 2016 Liabilities and Owners' Equity Current Liabilities: Accounts Payable 16,970.00 Wages Payable 1,532.80 Interest Payable 166.50 Total Current Liabilities Long Term Liabilities: Notes Payable Total Long Term Liabilities: 18,669.30 15,000.00 15,000.00 Total Liabilities: Common Stock Retained Earnings Total Equity Total Liabilities & Equity 33,669.30 20,000.00 50,144.84 70,144.84 103,814.14 Peyton Approved Income Statement For Year Ended 12/31/2016 Bakery Sales Merchandise Sales Total Revenues Cost of Goods Sold - Baked Cost of Goods Sold - Merchandise Total Cost of Goods Sold Gross Profit 214,256.48 770.76 215,027.24 73,159.59 549.64 73,709.23 141,818.01 Operating Expenses: Rent Expense Wages Expense Misc. Supplies Expense Business License Expense Misc. Expense Depreciation Expense Insurance Expense Advertising Expense Interest Expense Telephone Expense Total Operating Expenses: Net Income 15,694.23 6,821.76 1,668.18 1,307.85 871.9 433.36 697.52 740.74 523.14 313.88 29,072.56 112,745.45 2017 2016 Current Ratio (Working Capital ) 5.78 5.18 Quick Ratio 4.89 4.60 A/R Turnover 5.91 5.53 Inventory Turnover 7.61 8.81 Gross margin 68% 66% Return on Sales 53% 52% Return on Equity 125% 161% Return on Assets 101% 109% Instructions Milestone 1 2015 average A/R 8042.23 580.27 8622.5 2016 2017 38875.99 55576.46 7318.86 794.97 18681.7 1038.07 200 8113.83 19919.77 average inventory 8368.165 14016.8 average equity 63227.47 105382.9 average asset 93225.72 138733.5 Total credit Sales/Average A/R it Sales/Average A/R Southern New Hampshire University ACC 308 - Intermediate Accounting II INSTRUCTIONS FOR MILESTONE 2 (Due Module 5) IMPORTANT NOTE: Make sure to completely review the Rubric for Milestone 2 Use the data from Milestone 1 and this Milestone to finalize your final project due in Final Project (Module 7) ITEMS TO COMPLETE FOR THIS MILESTONE (Green Tabs) : GENERAL Use information from Milestone 1 and the plan to open a new location (see bottom of page) for your statements PRO FORMA FINANCIAL STATEMENTS Prepare the following Pro Forma Financial Statements for the proposed new location (pro forma statements in this case are budgeted statements for 2018 based on the new location scenario at the bottom of the page) Pro Forma Income Statement Pro Forma Balance Sheet PEYTON APPROVED PRO FORMA INFORMATION The company is planning to open another location in 2018 . Prepare pro forma financials for 2018 for the new loca the following information: 1. Cost of leasing commercial space: $1,500 per month. 2. Cost of new equipment: $15,000. Use straight line depreciation assuming a seven-year life. Use full year’s depr the first year. 3. Cost of hiring and training new employees: three at $25,000 each for the first year. 4. Except as noted in 5, assets, current liabilities, sales, costs, and expenses are expected to be 80% of the existing preliminary statements) except no stock. Retained earnings = net income. 5. Cash: $7,000. Accounts receivable amount to 4.0 turns (accounts receivable turnover will be 4.0); inventory am 3.0 turns (inventory turnover will be 3.0). No stock will be issued. Retained earnings are to equal net income. Addi financing of $5,000 will be long-term. Add remaining amount needed to balance into accounts payable. HOME ct (Module 7) your statements rma statements in this the page) s for 2018 for the new location using ar life. Use full year’s depreciation for d to be 80% of the existing store (from will be 4.0); inventory amount to show to equal net income. Additional counts payable. Peyton Approved Second Location Pro Forma Income Statement For Year Ending 12/31/2018 Bakery Sales Merchandise Sales Total Revenues Cost of Goods Sold - Baked Cost of Goods Sold - Merchandise Total Cost of Goods Sold Gross Profit Operating Expenses: Rent Expense Wages Expense Misc. Supplies Expense Business License Expense Misc. Expense Depreciation Expense Insurance Expense Advertising Expense Interest Expense Telephone Expense Total Operating Expenses: Net Income Workings: Depreciation = Cost/Useful life of Asset = $15,000/7 years Weighted Average interest rate = (6%×2 years + 7.5% × 5 Years)/ 7 Years Interest Expense = Loan × Interest rate = $ 5,000 × 7.07% Second Location me Statement ng 12/31/2018 Instructions Milestone 2 $ 261,858.04 964.51 262,822.55 84,667.43 687.82 85,355.25 177,467.30 18,000.00 75,000.00 2,400.37 1,636.62 1,091.07 2,142.86 872.86 1,239.79 353.50 392.78 ears × 5 Years)/ 7 Years 07% 103,129.85 74,337.45 $ $ 2,142.86 7.07% 353.50 Instructions Milestone 2 Peyton Approved Second Location Pro Forma Balance Sheet As of December 31, 2018 Assets Current Assets: Cash Accounts Receivable Baking Supplies Merchandise Inventory Prepaid Rent Prepaid Insurance Misc. Supplies Other Receivable - Insurance Consignment Inventory 7,000.00 65,705.64 14,945.36 229.27 1,691.64 174.57 136.39 560.00 160.00 Total Current Assets Long Term/Fixed Assets: Baking Equipment Accumulated Depreciation Net Fixed assets Total Assets: 90,602.87 15,000.00 -2,142.86 12,857.14 103,460.02 Workings: Account Receivable = Sales/Accounts Receivable Turnover = 262,822.55/4 = 65,705.64 Merchandise Inventory = Merchandise cost of goods sold/Inventory turnover = 687.82/3 = 229.27 Prepaid Insurance = Insurance Expense in Income Statement × 2/10 = 872.86 × 2/10 = 174.57 nd Location e Sheet 1, 2018 229.27 .57 Instructions Milestone 2 Liabilities and Owners' Equity Current Liabilities: Accounts Payable 446.78 Wages Payable 2,706.62 Interest Payable 169.17 Customer Deposit 800 Total Current Liabilities Long Term Liabilities: Notes Payable Total Long Term Liabilities: 4,122.57 5,000.00 5,000.00 Total Liabilities: Common Stock Retained Earnings Total Equity Total Liabilities & Equity 9,122.57 20,000.00 74,337.45 94,337.45 103,460.02 Instructions Milestone 2
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Running head: ACCT 308 Final Project

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ACCT 308 Final Project
Name:
Institution affiliation:
Date:

ACCT 308 Final Project

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Notes to the Financial Statements

The notes to the financial statements will comprise of Peyton Company’s year-to-year
documentation for managing supplies, depreciation, and inventory, as well as notes on the
company’s long-term debt
Peyton's year-to-year documentation of depreciation, supplies & inventory were as shown
in table 1. Firstly, depreciation increased due to the fact that as time goes by, the company's baking
equipment were bound to depreciate more. In particular, when using the straight-line depreciation
method, depreciation increases with time. Secondly, supplies and inventory increased in the year
2017 in comparison to the company's inventory and supplies in 2016. The increase was as a result
of the company realizing growth in terms of market share that prompted the need for more supplies
and inventory to meet the increased demand.
Table 1
Particulars
Year

Depreciation

Supplies

Inventory

2017

$1,606.44

$18,852.19

$1,238.07

2016

$ 928.58

$ 7,374.36

$ 794.97

Long-term debt
Peyton’s long-term debt, which is in the form of notes payable, decreased in 2017 in
comparison to how it was in 2016 due to the fact that the company was able to repay a substantial

ACCT 308 Final Project

3

amount of the debt in 2017. The decrease in notes payable points to the conclusion that Peyton’s
financial performances improved with time (Lewellen, 2004).
Figure 2
Particulars
Notes Payable

Total Long-term Liabilities

2016

$15,000

$15,000

2017

$5,000

$5,000

Year

Management Analysis Memo
It is of the essence for management to be aware of the company’s financial health based
on past performance before planning for the future (Lewellen, 2004). Financial ratios will be
analyzed to determine Peyton's current financial health. Additionally, the effect of different
compounding periods, as well as interest rates on the future value of money, will be discussed,
the impact of pro forma financial statements in predicting the ability to meet future expansion
goals will be discussed, potential issues when interpreting financial information will be
identified, the impact of aligning accounting practices and notes on relevant regulation and
ethical reporting will be explained, and lastly the implications of contingent liabilities, inventory
costing as well as revenue recognition will be described.
Ratio analysis
2017

2016

Current Ratio (Working Capital )

5.78

5.18

Quick Ratio

4.89

4.60

A/R Turnover

5.91

5.53

ACCT 308 Final Project

4

Inventory Turnover

7.61

8.81

Gross margin

68%

66%

Return on Sales

53%

52%

Return on Equity

125%

161%

Return on Assets

101%

109%

Firstly, Peyton’s quick and current ratios, which above 1 indicate that the company is in
good financial health. The current ratio points to the conclusion that Peyton is able to meet its
short term obligation, while the quick ratio indicates that it can do using its most liquid assets.
This is a clear indication that Peyton is in good financial health.
Secondly, looking at the company's gross margin, it is quite evident that Peyton is highly
profitable since its gross profit accounted for 68% of the total revenue the company generated in
2017. Additionally, the company's return on sales indicates that Peyton generated 53% per dollar
of sales in 2017. The return on equity of 125% points to the conclusion that Peyton’s
management was quite effective in 2017 when it came to using the company’s assets to create
profits. Peyton’s return on assets of 101% in 2017 supports the conclusion that Peyton’s
management was effective in creating profits from the company’s assets in 2017(Bull, 2008).
Thirdly, Peyton's A/R Turnover of 5.91 in 2017 indicates that the company was able to
turn its accounts receivable about six times over the 12 month period. Additionally, Peyton was
able to sell and replace its inventory about eight times in 2017, as indicated by the company's
inventory ratio of 7.61.

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5

The above ratio analysis indicates that Peyton is in good financial health. Additionally,
the good financial health the company is in is as a result of the effectiveness and efficiency of the
company's management.
Financial ratios over time
Peyton's current ratio, quick ratio, return on sales, and gross margin increased in 2017 in
comparison to how they were in 2016. Therefore, it is quite evident that the company's ability to
meet its short-term obligations as well as its profitability improved as time went by.
However, the company's return on equity, return on asset, and Inventory Turnover
decreased in 2017 in comparison to how they were in 2016. The decrease indicates that the
performance of Peyton’s management in 2017 was quite low in comparison to their
performances in 2016 (Bull, 2008).
Effects of different compounding periods & interest rates on the future value of money.
To maximize the future value of money, Peyton should take into consideration not only the
compounding periods but also the interest rates. The more the compounding periods, the higher
the future value of money. Additionally, the higher the interest rate, the more the future value of
money (Horngren and Harrison, 2015).
The impact of the pro forma financial statements for predicting the ability to meet future
expansion goals
Pro forma financial statements are simply financial projections that enable companies to
analyz...


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