a. Prior to examining the company's actual balance sheet, read the description of Rocky Mountain chocolate Factory, above. What accounts do you expect to see on the balance sheet? Which are the major assets? Liabilities?

b. Prepare journal Entries, as needed, for each of the following fiscal 2010 transactions. All figures are in thousands of dollars.

1. The company purchased $7,500,000 of raw material inventory on account. On account means that that suppliers have not yet been paid. That is Rocky Mountain Chocolate has an additional Account Payable for the inventory purchases.

2. During the year, the company incurred $6,000,000 of factory wages. When wages relate to the production of a companys inventory, the wage costs are added to the inventory account. For now, assume that the wages have not yet been paid.

3. The company sold inventory that cost $14,000,000 for a total of $22,000,000. Or that, $17,000,000 was received I cash and $5,000,000 was on account (that is, added to Accounts Receivable)

4. The company paid $8,200,000 to suppliers for inventory it had previously purchased on account. That is, it paid $8,200,000 of accounts payable.

5. The company collected $4,100,000 of accounts receivable.

6. The company incurred Sales and Marketing Expenses of $1,505,431, General and Administrative Expenses of $2,044,569, and Retail Operating Expenses of $1,750,000. They paid $2,000,000 in cash and $3,300,000 was added to Other Accrued Expenses.

7. The company paid $6,423,789 to employees for wages that had been previously accrued.

8. Rocky Mountain Chocolate Factory received $125,000 in cash from new franchisees. The company must provide services to the franchisees over the next five years. As such, the fees are considered deferred income.

9. The company paid $498,832 for new property and equipment.

10, During the year, the company declared $2,407,167 of dividends on its common shares. They paid $2,403,458 during the fiscal year. The difference, $3,709 will be paid in the following fiscal year,

11. Many other transactions were recorded during the year. They are summarized in the spreadsheet. Do not attempt to interpret individual entries as many invoice offsetting debits and credits and the resulting values are net figures.

.c. Post the journal entries for the transactions to the spreadsheet.

d. Prepare an unadjusted trial balance from the spreadsheet. Hint: the unadjusted balance for Retained Earnings is $3,343,850.

e. Based on the transactions you recorded in parts b and c, list at least three adjustments or reclassifications that might need to be made prior to preparing the final financial statements.

f. Prepare journal entries for the following adjustments.

12. Rocky Mountain Chocolate Factory employees took a physical count of inventory on February 28, 2010. The cost of inventory in the companys possession on that date was s$3,281,447.

13. Depreciation and amortization expense on Property and Equipment was $698,580 for the fiscal year.

14. At year end, the company determined that $646,156 of wages were earned but remained unpaid. Of that total, $639,200 relates to general and administrative expenses, and $6956 relates to retail operating expenses.

15. In February 2010, a consulting firm hired by Rocky Mountain Chocolate Factory issued a report stating that the Rocky Mountain Chocolate Factory brand name is worth $500,000.

g. Post the journal entries for the adjustments to the spreadsheet and complete the pre-closing trial balance column.

h.Construct an income statement for the year ended February 28, 2010. Use the headings from your spreadsheet rows as the account titles.

Rocky Mountain Chocolate Factory nc Preparing Financial Statements Rocky Mountain Chocolate Factory, Inc., incorporated in 1982, is an international franchiser, confectionery mamufacturer and retail operator in the United States, Canada and the United Arab Emirates. The Company manufactures an extensive line of premium chocolate candies and other confectionery products. The Company's revenues are derived from three principal sources: sales to franchisees and others of chocolates and other onfectionery products mamjactred by the Company the collection of nitial franchise fees and royalties from franchisees' sales; and sales at Company-owned stores of chocolates and other confectionery products. (Source. company Web site.) Learning Objectives Understand how economic events are recorded in the financial statements. Appreciate the linkages between the balance sheet and the income statement. Be able to record transactions and adjustments in journal entry form. are a simple set of financial statements Distinguish between cash and accrual-basis accounting. To complete this case you need to develop a simple spreadsheet. The structure of the spreadsheet folows after the case questions The spreadsheet does not use debits and credits, per se. However, you should understand that debits (credits) increase (decrease) asset and expense accounts. In contrast, credits (debits) increase (decrease) liability, owners' equity, and revenue accounts. If you wish to check that each transaction balances in terms of debits and credits, simply define a row beneath the list of accounts such that Assets Liabilities + Owners' Equity + (Revenues Expenses). In other words, in each column, verify that Assets Liabilities -OB - Revenues + Expenses 0. This will ensure that the sum of the debits equals the sum of the credits. Enter the opening (i.e., February 28, 2009) and ending (i.e, February 28, 2010) actual balance sheet or income statement balances into the accounts on your spreadsheet. Asset and expense accounts have debit balances, liability, shareholders' equity, and sales accounts should have credit balances. The income statement accounts should have opening balances of $0. All figures are in thousands of dollars. A series of transactions has already been entered into the spreadsheet (see b. 11 later in the case) The column labeled "Unadjusted trial balance" should be defined so that each cell equals the sum of the opening balance and the transactions n hat row. Each trial balance sum should be either a net debit or a net credit. The column labeled "Pre-closing balances" should be defined so that cach cell equals the sum of the "Unadjusted trial balance" and the adjusting journal entries for each row. The column labeled "Post-closing balances" should be defined so that each cell equals the "Pre-closing balance" plus the closing entry in that row The last column (ie., February 28, 2010 F/IS figures) serves as a check that you get to the correct year-end balances. The row labeled "Retained Earnings" should be used only for the dividend entry (#10), the larg aggregate entry (#11), and the closing entry. All transaction and adjusting joumal entries that affect income statement accounts should be posted to the income statement (revemue and expense) accounts and then closed to the row labeled "Retained earnings" in part i of the case. 2/28/09 Actual Beginning F/S Balances J/E JIE JIE J/E J/E J/E JE JE JE JE JIE Unadjusted Trial Balance Financial Statement Item #1 #2 #3 #4 #5 #6 #9 #10 #11 1,253,947 4,229,733 ash and cash e 1,253,947 4,229,733 receivable s receivable.current 4,064,611 369,197 224,378 5,253,598 124.452 1046,944 183,135 91,057 1,074.643 23,789 531,941 598,986 142,000 827,700 179,696 7,311,280 5,751,017 Inventories 4,064,611 369,197 224,378 5,253,598 124,452 ncome taxes Pr and E receivable less current portion et 1,046,94 83,135 91,057 1,074,643 423,789 531,941 598,986 142,000 827,700 179,696 7,311,280 5,71,017 Intangible assets.net counts payable salaries and wages accrued e ble d Income Taxes stock Additional paid-in c Sales Franchise and 1 Cost of sales fees ranchuse costs Sales&mark Generaland administrative eciation and aamortization Interest income Income Tax Rocky Mountain Chocolate Factory nc Preparing Financial Statements Rocky Mountain Chocolate Factory, Inc., incorporated in 1982, is an international franchiser, confectionery mamufacturer and retail operator in the United States, Canada and the United Arab Emirates. The Company manufactures an extensive line of premium chocolate candies and other confectionery products. The Company's revenues are derived from three principal sources: sales to franchisees and others of chocolates and other onfectionery products mamjactred by the Company the collection of nitial franchise fees and royalties from franchisees' sales; and sales at Company-owned stores of chocolates and other confectionery products. (Source. company Web site.) Learning Objectives Understand how economic events are recorded in the financial statements. Appreciate the linkages between the balance sheet and the income statement. Be able to record transactions and adjustments in journal entry form. are a simple set of financial statements Distinguish between cash and accrual-basis accounting. To complete this case you need to develop a simple spreadsheet. The structure of the spreadsheet folows after the case questions The spreadsheet does not use debits and credits, per se. However, you should understand that debits (credits) increase (decrease) asset and expense accounts. In contrast, credits (debits) increase (decrease) liability, owners' equity, and revenue accounts. If you wish to check that each transaction balances in terms of debits and credits, simply define a row beneath the list of accounts such that Assets Liabilities + Owners' Equity + (Revenues Expenses). In other words, in each column, verify that Assets Liabilities -OB - Revenues + Expenses 0. This will ensure that the sum of the debits equals the sum of the credits. Enter the opening (i.e., February 28, 2009) and ending (i.e, February 28, 2010) actual balance sheet or income statement balances into the accounts on your spreadsheet. Asset and expense accounts have debit balances, liability, shareholders' equity, and sales accounts should have credit balances. The income statement accounts should have opening balances of $0. All figures are in thousands of dollars. A series of transactions has already been entered into the spreadsheet (see b. 11 later in the case) The column labeled "Unadjusted trial balance" should be defined so that each cell equals the sum of the opening balance and the transactions n hat row. Each trial balance sum should be either a net debit or a net credit. The column labeled "Pre-closing balances" should be defined so that cach cell equals the sum of the "Unadjusted trial balance" and the adjusting journal entries for each row. The column labeled "Post-closing balances" should be defined so that each cell equals the "Pre-closing balance" plus the closing entry in that row The last column (ie., February 28, 2010 F/IS figures) serves as a check that you get to the correct year-end balances. The row labeled "Retained Earnings" should be used only for the dividend entry (#10), the larg aggregate entry (#11), and the closing entry. All transaction and adjusting joumal entries that affect income statement accounts should be posted to the income statement (revemue and expense) accounts and then closed to the row labeled "Retained earnings" in part i of the case. 2/28/09 Actual Beginning F/S Balances J/E JIE JIE J/E J/E J/E JE JE JE JE JIE Unadjusted Trial Balance Financial Statement Item #1 #2 #3 #4 #5 #6 #9 #10 #11 1,253,947 4,229,733 ash and cash e 1,253,947 4,229,733 receivable s receivable.current 4,064,611 369,197 224,378 5,253,598 124.452 1046,944 183,135 91,057 1,074.643 23,789 531,941 598,986 142,000 827,700 179,696 7,311,280 5,751,017 Inventories 4,064,611 369,197 224,378 5,253,598 124,452 ncome taxes Pr and E receivable less current portion et 1,046,94 83,135 91,057 1,074,643 423,789 531,941 598,986 142,000 827,700 179,696 7,311,280 5,71,017 Intangible assets.net counts payable salaries and wages accrued e ble d Income Taxes stock Additional paid-in c Sales Franchise and 1 Cost of sales fees ranchuse costs Sales&mark Generaland administrative eciation and aamortization Interest income Income Tax