Overview: You just began a position as a financial accountant at Peyton Approved. In this role, your first task is to prepare the company’s financials for the year-end audit. Additionally, the company is interested in expanding its business within the next year. They would like your support in assessing their ability to meet their goals.
Refer to the data below and use the Final Project Workbook that includes the income statement, balance sheet, retained earnings statement and cash flow statement to complete the final project and associated milestones.
Peyton Approved Financial Data: Preliminary Financial Statements have already been prepared (2017 statements in the Final Project Workbook).Final adjusting entries have not yet been made. See table for possible adjustments that indicate what will be recorded at 12/31/17 (fiscal year end). Use the following to complete year-to-year documentation and notes for managing depreciation, inventory, and long-term debt.
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The company is planning to open another location in 2018. Using the Preliminary Statements as a base, prepare pro forma (budgeted) financials for 2018 for the new location using the following information:
Cost of leasing commercial space: $1,500 per month. |
Cost of new equipment: $15,000, purchased with a long-term note. Use straight line depreciation assuming a seven-year life, no residual value. Use full year’s depreciation for the first year.Equipment purchase was financed with a long-term note. |
Cost of hiring and training new employees: three at $25,000 each for the first year. |
Except as noted in 1, 2, 3, and 5, assets, current liabilities, sales, costs, and expenses are expected to be 80% of the existing store (from preliminary statements) except no stock. Retained earnings = net income. |
Cash: $7,000. Accounts receivable amount to 4.0 turns (accounts receivable turnover will be 4.0); inventory amount to show 3.0 turns (inventory turnover will be 3.0). No stock will be issued. Retained earnings are to equal net income. Additional financing of $5,000 will be long-term. Add remaining amount needed to balance into accounts payable. |
For notes to the financial statements and Management Analysis Memo, consider the following:
Peyton Approved uses the following accounting practices:
Business Financing Information: Use this information to calculate interest rates and insurance information, and to assess their impact on the company’s financial obligations: