2:06 & & Cut alll 75% BAC 401 Course Project - Saved E . . Wilmington University BAC401 Advanced Accounting I Consolidation & Financial Statement Project Fall 2018 Project Design > The project is designed to reinforce acquisition and consolidation Accounting skills under situations you may encounter in practice. Additionally, the project requires you to prepare a full set of consolidated financial statements, including a relatively complex statement of cash flows. Background > You recently accepted the controller position for Java the Hut, a regional coffee chain. >> The owner informs you that a complete financial statement package will be required as part of a new bank loan compliance requirements ("covenants"). >> Prior to your arrival, the company had one accountant and relied heavily on the auditors in the preparation of financial statements. With the new controller position, the expectation is that you will assume the preparation of financial statements. > On your first day of work on April 1, 2018, the Java the Hut accountant informs you that there were a number of transactions in the first quarter of 2018 that she was unsure of the appropriate accounting. Consequently, she recorded the cash activity in Other Assets - Holding account as a temporary holding account. The good news is that the Java the Hut accountant maintained excellent detail of the various transactions and has a series of supporting schedules for you. ::. The project reflects a "real-life" challenge in that you are responsible for accounting issues months following the actual transaction O. In this case, an acquisition was completed on 1/1 and you are now responsible for acquisition accounting and consolidating financial statements for the first three months, or first quarter. BAC401 Project 12W 01/18/13 8:07 AM 1 - Project Requirements Eliminate Other Assets - Holding account balance on Java the Hut Ledgers 1. Prepare the appropriate journal entries to recognize the first quarter transactions, currently reported in Other Assets - Holding in the balance sheet of Java the Hut (Parent Company) outlined in Schedule 1. The goal of the journal entries is to eliminate the balance in the Other Asset - Holding account with new accounts to reflect the appropriate accounting recognition. Prepare Acquisition Journal Entry to reflect fair values of New Castle Coffee on 1/1 2. Prepare the acquisition accounting analysis of New Castle Coffee using the information in Schedule 2 and Schedule 2A 3. Prepare the acquisition journal entry for New Castle Coffee based on vour2:07 & & Cut alll 75% Prepare Consolidating Worksheets for the Income Statement and Balance Sheet 7. Prepare journal entries to recognize the intercompany transactions and eliminations identified in Schedule 6. Any supporting calculations should be included. 8. Prepare consolidating worksheets for the income statement (first quarter of 2018) and for the balance sheet (as of March 31, 2018) Y All adjustments included in the steps to this point should be included Y It is recommended that you utilize the consolidating worksheet formats we will cover in class Y Consolidating worksheets should utilize spreadsheet software Prepare Consolidated Financial Statements for the Bank Reporting Package Income Statement & Balance Sheet 9. Prepare consolidated financial statements for the bank reporting requirement outlined in the Background section above: Y Income Statement for the first quarter of 2018 (Multi-Step Format - See Format in Schedule 7) Y Balance Sheet as of March 31, 2018 (Classified Format - See Format in Schedule 7) Statement of Cash Flows 10.Prepare consolidated Statement of Cash Flow using the indirect method for the first quarter of 2018. Y Use the financial statements in Number 8 or 9 as the basis to prepare the statement of cash flow. Y Regarding capital expenditures, the change in the Construction in Progress ("CIP') should be assumed to equal capital expenditures. Preparation Reference & Guidelines - Financial Statements Y Schedule 7 referenced below includes a consolidating income statement and balance sheet worksheet examples. Schedule 7 also includes the appropriate accounts for your financial statements, except for those accounts that are eliminated in the consolidating process. Y The Statement of Cash Flow should use the format covered in our class examples. Y Remember, financial statements headings and presentation format should be used BAC401 Project 12W 01/18/13 8:06 AM 3 . Schedules Attached Schedule 1 Other assets - holding analysis Schedule 2 Trial Balance of New Castle Coffee as of 01/01/17. Schedule 2A New Castle Coffee Acquisition Support Schedule 3 Trial Balance of New Castle Coffee as of 03/31/17. Schedule 4 Schedule 5 Trial Balance of Java the Hut as of 12/31/16. Trial Balance of Java the Hut as of 03/31/17. Schedule 6 Schedule 7 Intercompany Transactions and subsidiary earnings 1Q18 Consolidating Income Worksheet Example Statement & Balance Sheet * Needed for cash flow statement only. Group Guidelines & Due Date :.-, Groups of 2-3 are encouraged. If you prefer to work as an individual, that is also acceptable. :.-, Time will provided at the end of our classes to work on the project, including review of calculations and results with Bob. >" The project is due at the beginning of the last class (Exam III). >" The project should be printed. Emails will not be accepted unless there "'The project is due at the beginning of the last class (Exam Ill). \\ >'"The project should be printed. Emails will not be accepted unless there are special circumstances like an illness or family emergency. Project Turn-In Checklist >'" Please assemble your project in the following order: 0 Consolidated Income Statement 0 Consolidated BalanceSheet 0 Consolidated Statement of Cash Flows o Consolidating Worksheets supporting the Consolidated Income Statement and Balance Sheet Journal entries clearing the Other Asset Account on Java's books 0 Java journal entries to recognize subsidiary earnings and dividends as required 0 Schedule of adjustments required for New Castle Coffee ("NCC") (Schedule 3) and Java (Schedule 5) trial balances o Other, optional 0 BAC401 Project 12W R 10 22 12 101291121259 PM '4' Schedule 1 Java the Hut Account Analysis Other Assets - Holding Account Analysis as of 38 1.118 Acquisition of New Castle Coffee on 1/1/18 Stock acquisition of 1,000 shares outstanding (Par Value $1400) Percent of shares outstanding 100% Purchase price atsettlement $ 150,000 Professional fees incurred $ 12,000 Debt set-upfees (revolving credit agreement) $ 6,000 Annuicitinn .4 Mann has": hnrrnn nn II1I1R 1'29 nnn I III %