ACCOUNTING 101-As a staff accountant at ABC Tax & Accounting Service
Question # 00532695
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Updated on: 05/24/2017 01:22 AM Due on: 05/24/2017
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.
Module 03 Course Project Assignment Template
Your order of completion should be:
- Complete the adjusting journal entries.
- 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.
- 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.
- 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.
- 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.
- Complete the Income Statement.
- 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.
- 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.
- 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:
- Current Ratio
- Inventory Turnover
- Debt Ratio
- Gross Profit Percentage
- Profit Margin
- 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:
- What are the different formats available for presenting the income statement?
- Which format is being used in the income statement presentation on the Income Statement tab? How can you tell?
- 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.
- What are the different formats available for presenting the balance sheet?
- Which format is being used in the balance sheet presentation on the Balance Sheet tab? How can you tell?
- 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:
- What are the different formats available for presenting the statement of cash flows?
- Which format is being used in the statement of cash flow presentation on the Statement of Cash Flows tab? How can you tell?
- 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:
- What is the benchmark for each ratio? Why is it important to use benchmarks or historical numbers for comparison?
- Are Marabelle's ratios falling within appropriate range? Explain.
*No action required on this tab. Informational only for preparing the Statement of Cash Flows.
Marabelle's Craft 'n Shop
Post Closing Trial Balance
For the period ended December 31, 2015 Cash
Accounts Receivable
Merchandise Inventory
Office Supplies
Prepaid Insurance
Office Equipment
Accumulated Depreciation-Office Equipment
Store Equipment
Accumulated Depreciation-Store Equipment
Shop Equipment
Accumulated Depreciation-Shop Equipment
Accounts Payable
Salaries Payable
Interest Payable
Note Payable (due 2020)
Marabelle, Capital DR
64,900
179,200
186,980
4,220
1,880
50,000 CR 7,500
52,000
7,860
168,600 707,780 41,040
65,000
7,500
4,500
40,200
534,180
707,780 Marabelle's Craft 'n Shop
End of Period Worksheet
For the period ending 12/31/2016 Cash
Accounts Receivable
Merchandise Inventory
Office Supplies
Prepaid Insurance
Office Equipment
Accumulated Depreciation-Office Equipment
Store Equipment
Accumulated Depreciation-Store Equipment
Shop Equipment
Accumulated Depreciation-Shop Equipment
Accounts Payable
Salaries Payable
Interest Payable
Note Payable (due 2020)
Marabelle, Capital
Marabelle, Drawing
Sales
Cost of Merchandise Sold
Sales Salaries Expense
Service Salaries Expense
Office Salaries Expense
Advertising Expense
Depreciation Expense-Office Equipment
Depreciation Expense-Store Equipment
Depreciation Expense-Shop Equipment
Miscellaneous Selling Expense
Rent Expense
Insurance Expense
Interest Expense
Office Supplies Expense
Miscellaneous Administrative Expense Unadjusted Trial Balance (12-31-16)
DR
CR
184,500
145,200
210,000
6,720
4,080
60,000
6,000
40,000
9,360
185,600
41,040
68,720 55,200
534,180
42,000
1,468,000
900,000
207,840
100,980
52,560 1,920
37,620
1,560
1,920
2,182,500 2,182,500 Adjusting Entries
DR
CR Adjusted Trial Balance
DR
CR Income Statement
DR
CR Balance Sheet
DR
CR Marabelle's Craft 'n Shop
Income Statement
For the Period Ended December 31, 2016
Sales
Cost of Merchandise Sold
Gross Profit
Selling Expenses:
Sales Salaries Expense
Service Salaries Expense
Advertising Expense
Depreciation Expense-Store Equipment
Depreciation Expense-Shop Equipment
Miscellaneous Selling Expense
Administrative Expenses:
Office Salaries Expense
Depreciation Expense-Office Equipment
Rent Expense
Insurance Expense
Office Supplies Expense
Miscellaneous Administrative Expense
Income from Operations
Other Expense:
Interest Expense
Net Income Marabelle's Craft 'n Shop
Balance Sheet
December 31, 2016
Assets
Current Assets:
Cash
Accounts Receivable
Merchandise Inventory
Office Supplies
Prepaid Insurance
Total Current Assets
Property, Plant, & Equipment:
Office Equipment
Accumulated Depreciation-Office Equipment
Store Equipment
Accumulated Depreciation-Store Equipment
Shop Equipment
Accumulated Depreciation-Shop Equipment
Total PP & E
Total Assets
Liabilities and Owner's Equity
Current Liabilities:
Accounts Payable
Salaries Payable
Interest Payable
Total Current Liabilities
Long-Term Liabilities
Notes Payable
Total Liabilities
Owner's Equity
Marabelle, Capital*
Total Liabilities and Owner's Equity
*Remember, Marabelle's capital account balance will include the increase for net income,
the decrease for drawings from this year. Marabelle's Craft n' Shop
Statement of Cash Flows
For the Period Ended December 31, 2016
Cash Flows from Operating Activities
Net Income
Depreciation
Decrease in Accounts Receivable
Increase in Merchandise Inventory
Increase in Office Supplies
Increase in Prepaid Insurance
Increase in Accounts Payable
Decrease in Interest Payable
Increase in Salaries Payable
Total adjustments
Net Cash Flows Provided from Operating Activities
Cash Flows from Investing Activities
Shop Equipment Purchased
Net Cash Flows Used by Investing Activities
Cash Flows from Financing Activities
Cash Paid for Owner Draw
Cash received for Note Payable proceeds
Net Cash Flow Used by Financing Activities
Net change in cash
Cash, beginning
Cash, ending Marabelle's Craft 'n Shop
Ratio Analysis
Fiscal Year 2016
Prepared by: _______________________ Formula: Appropriate
Ratio Range
Marabelle's
or
2016 Results Benchmark Current Ratio Current Assets/Current Liabilities Inventory Turnover Cost of Goods Sold/ Average Inventory Debt Ratio Total Liabilities/Total Assets Gross Profit PercentageGross Profit/Sales Profit Margin Net Income/Sales
Marabelle's Craft 'n Shop
Post Closing Trial Balance
For the period ended December 31, 2015 Cash
Accounts Receivable
Merchandise Inventory
Office Supplies
Prepaid Insurance
Office Equipment
Accumulated Depreciation-Office Equipment
Store Equipment
Accumulated Depreciation-Store Equipment
Shop Equipment
Accumulated Depreciation-Shop Equipment
Accounts Payable
Salaries Payable
Interest Payable
Note Payable (due 2020)
Marabelle, Capital DR
64,900
179,200
186,980
4,220
1,880
50,000 CR 7,500
52,000
7,860
168,600 707,780 41,040
65,000
7,500
4,500
40,200
534,180
707,780 Marabelle's Craft 'n Shop
End of Period Worksheet
For the period ending 12/31/2016 Cash
Accounts Receivable
Merchandise Inventory
Office Supplies
Prepaid Insurance
Office Equipment
Accumulated Depreciation-Office Equipment
Store Equipment
Accumulated Depreciation-Store Equipment
Shop Equipment
Accumulated Depreciation-Shop Equipment
Accounts Payable
Salaries Payable
Interest Payable
Note Payable (due 2020)
Marabelle, Capital
Marabelle, Drawing
Sales
Cost of Merchandise Sold
Sales Salaries Expense
Service Salaries Expense
Office Salaries Expense
Advertising Expense
Depreciation Expense-Office Equipment
Depreciation Expense-Store Equipment
Depreciation Expense-Shop Equipment
Miscellaneous Selling Expense
Rent Expense
Insurance Expense
Interest Expense
Office Supplies Expense
Miscellaneous Administrative Expense Unadjusted Trial Balance (12-31-16)
DR
CR
184,500
145,200
210,000
6,720
4,080
60,000
6,000
40,000
9,360
185,600
41,040
68,720 55,200
534,180
42,000
1,468,000
900,000
207,840
100,980
52,560 1,920
37,620
1,560
1,920
2,182,500 2,182,500 Adjusting Entries
DR
CR Adjusted Trial Balance
DR
CR Income Statement
DR
CR Balance Sheet
DR
CR Marabelle's Craft 'n Shop
Income Statement
For the Period Ended December 31, 2016
Sales
Cost of Merchandise Sold
Gross Profit
Selling Expenses:
Sales Salaries Expense
Service Salaries Expense
Advertising Expense
Depreciation Expense-Store Equipment
Depreciation Expense-Shop Equipment
Miscellaneous Selling Expense
Administrative Expenses:
Office Salaries Expense
Depreciation Expense-Office Equipment
Rent Expense
Insurance Expense
Office Supplies Expense
Miscellaneous Administrative Expense
Income from Operations
Other Expense:
Interest Expense
Net Income Marabelle's Craft 'n Shop
Balance Sheet
December 31, 2016
Assets
Current Assets:
Cash
Accounts Receivable
Merchandise Inventory
Office Supplies
Prepaid Insurance
Total Current Assets
Property, Plant, & Equipment:
Office Equipment
Accumulated Depreciation-Office Equipment
Store Equipment
Accumulated Depreciation-Store Equipment
Shop Equipment
Accumulated Depreciation-Shop Equipment
Total PP & E
Total Assets
Liabilities and Owner's Equity
Current Liabilities:
Accounts Payable
Salaries Payable
Interest Payable
Total Current Liabilities
Long-Term Liabilities
Notes Payable
Total Liabilities
Owner's Equity
Marabelle, Capital*
Total Liabilities and Owner's Equity
*Remember, Marabelle's capital account balance will include the increase for net income,
the decrease for drawings from this year. Marabelle's Craft n' Shop
Statement of Cash Flows
For the Period Ended December 31, 2016
Cash Flows from Operating Activities
Net Income
Depreciation
Decrease in Accounts Receivable
Increase in Merchandise Inventory
Increase in Office Supplies
Increase in Prepaid Insurance
Increase in Accounts Payable
Decrease in Interest Payable
Increase in Salaries Payable
Total adjustments
Net Cash Flows Provided from Operating Activities
Cash Flows from Investing Activities
Shop Equipment Purchased
Net Cash Flows Used by Investing Activities
Cash Flows from Financing Activities
Cash Paid for Owner Draw
Cash received for Note Payable proceeds
Net Cash Flow Used by Financing Activities
Net change in cash
Cash, beginning
Cash, ending Marabelle's Craft 'n Shop
Ratio Analysis
Fiscal Year 2016
Prepared by: _______________________ Formula: Appropriate
Ratio Range
Marabelle's
or
2016 Results Benchmark Current Ratio Current Assets/Current Liabilities Inventory Turnover Cost of Goods Sold/ Average Inventory Debt Ratio Total Liabilities/Total Assets Gross Profit PercentageGross Profit/Sales Profit Margin Net Income/Sales
-
Rating:
/5
Solution: ACCOUNTING 101-As a staff accountant at ABC Tax & Accounting Service