DUE: December 4/5, 2019 Financial Statement Big Picture Project Instructions Bert started a bicycle repair business by acquiring funding from investors and creditors. After a successful first year, Bert decided to expand into bicycle soles, os well as repairs. In Year 3, Bert spent money on an advertising campaign to grow the business. By the 4th year he was able to repay some of the money he had borrowed and pay a dividend to stockholders Requirements: 1. Use the Horizontal Transaction Analysis table to record the transactions you were given for each year. (Note: There are multiple combinations of transactions and solutions) (20 points) - Indicate the increase / (decrease) to each account involved in the transaction . Identify the type of clash flow activity for all cash transactions (OA Operating, IA Investing, FA Financing - Record the Closing Entry for each year by zeroing out the temporary accounts and transferring the net income to retained earnings - Calculate the total in each column at the end of the each year. Permanent account balances will carry forward from one year to the next, so year end totals will accumulate through the years. 2. Use the Horizontal Transaction Analysis balances and the details from the transactions each year to create the following Financial Statements for each year (30 points) - Income Statement - Statement of Retained Earnings - Balance Sheet - Statement of Cash Flows 3. Use the financial statement information and the transaction details to answer the following questions Show all calculations to support your response. (10 points) - What is the remaining balance of Notes Payable in Yr. 5? How much interest is due for Yr. 5, if no more principal payments are made? - If the equipment is sold for $6,500 cash on 1/1/Yr. 5, how much gain or (loss) would there be? - What is the inventory Turnover Ratio in years 3 & 4 ? - What is the Debt to Assets Ratio each year? Are assets funded primarily by creditors or investors? 4. Submit the project by Wednesday, 12/4, or Thursday 12/5 - Must be handwritten and physically turned in (no email submissions) - Turn in the following - Horizontal Transaction Analysis - Financial Statements - Calculations and responses to questions Financial Statement Big Picture Project Transactions 1-1 Get Funding Sign Note for $50,000 @ 10% Issue Stock for $13,000 1-2 Business Operations Service Revenue $20,000 Operating Expense $12,000 Interest Exp. - Principal x 10%x12/12 1-3 Purchase Equipment @12/31 Purchase a workbench and tools for $32,000 cash; Begin SL Depreciation in Yr. 2 4 yr. useful life, $0 salvage value 2-1 Purchase Inventory for $20,000 cash 2-2 Sell Inventory Sales Revenue $8,000 COGS $3,000 2-3 Business Operations Service Revenue $20,000 Operating Expense $12,000 Depreciation Exp. = cost x 1/4 Interest Exp. = Principal X 10%x12/12 Financial Statement Big Picture Project Transactions 3-1 Advertising Campaign $4,000 Cash 3-2 Sell Inventory Sales Revenue $15,000 COGS $7,000 3-3 Business Operations Service Revenue $20,000 Operating Expense $10,000 Depreciation Exp. = cost x 1/4 Interest Exp. = Principal x 10%x12/12 3-4 Purchase Inventory for $12,000 cash 4-1 Sell Inventory Sales Revenue $16,000 COGS $5,500 4-2 Business Operations Service Revenue $38,000 Operating Expense $12,000 Depreciation Exp. = cost x 1/4 Interest Exp. = Principal x 10%x12/12 4-3 Make a Loan Payment @ 12/31 Pay $15,000 on Notes Payable 4-4 Pay Dividends Pay a 15% dividend on the amount invested in Common Stock If there is enough cash & RE (Record Dividend as a reduction of Retained Earnings) Financial Statement Big Picture Project Transaction Analysis Balance Sheet Income Statement Assets Revenue Expense Yearf Cash Liabilities Stockholders Equity Accumulated Relained Depreciation Notes Payable Common Stock Earnings Inventory Equipment 150,000 13,000 Trans | flow Cash Yearl Balance 1-1 150.000 152 50.000 1- 1 3.000 13,000 1-2 20.000 20,000 12 12.000 /2000) 1-2 1-3 Closing Total 20,000 Year 2 Balance 2-1 2-2 2-2 2-3 23 2-3 2-3 Closing Total Financial Statement Big Picture Project Transaction Analysis Balance Sheet Income Statement Assets Revenue Expense Year Trans Year3 Balance Cash flow Liabilities Stockholders Equity Accumulated Retained Depreciation Notes Payable Common Stock Earnings cash invent Inventory Equipment 31 3-2 3-2 3-3 34 Closing Total Vear 4 Bulance 4-1 1-1 INN 4-4 Closing Total Year 3 Year 4 Financial Statement Big Picture Project Financial Reports for Bert's Bikes Year 1 Year 2 Income Statement Net Sales & Service Revenue Cost of Goods Sold Gross Profit Less: Operating Expenses Depreciation Expense Advertising Expense Operating Income Nonoperating Items Interest Expense Net Income Stmt of Retained Earnings Beginning Retained Earnings + Net Income - Dividends Ending Retained Earnings Balance Sheet Assets Cash Inventory Equipment Accumulated Depreciation Total Assets Llabilities Notes Payable Total Liabilities Stockholders Equity Common Stock Retained Earnings Total Stockholders Equity Totol Liabilities & SE Statement of Cash Flows Net Cashflow from Operating Net Cashflow from Investing Net Cashflow from Financing Net Change in Cash Beginning Cash Balance Ending Cash Balance DUE: December 4/5, 2019 Financial Statement Big Picture Project Instructions Bert started a bicycle repair business by acquiring funding from investors and creditors. After a successful first year, Bert decided to expand into bicycle soles, os well as repairs. In Year 3, Bert spent money on an advertising campaign to grow the business. By the 4th year he was able to repay some of the money he had borrowed and pay a dividend to stockholders Requirements: 1. Use the Horizontal Transaction Analysis table to record the transactions you were given for each year. (Note: There are multiple combinations of transactions and solutions) (20 points) - Indicate the increase / (decrease) to each account involved in the transaction . Identify the type of clash flow activity for all cash transactions (OA Operating, IA Investing, FA Financing - Record the Closing Entry for each year by zeroing out the temporary accounts and transferring the net income to retained earnings - Calculate the total in each column at the end of the each year. Permanent account balances will carry forward from one year to the next, so year end totals will accumulate through the years. 2. Use the Horizontal Transaction Analysis balances and the details from the transactions each year to create the following Financial Statements for each year (30 points) - Income Statement - Statement of Retained Earnings - Balance Sheet - Statement of Cash Flows 3. Use the financial statement information and the transaction details to answer the following questions Show all calculations to support your response. (10 points) - What is the remaining balance of Notes Payable in Yr. 5? How much interest is due for Yr. 5, if no more principal payments are made? - If the equipment is sold for $6,500 cash on 1/1/Yr. 5, how much gain or (loss) would there be? - What is the inventory Turnover Ratio in years 3 & 4 ? - What is the Debt to Assets Ratio each year? Are assets funded primarily by creditors or investors? 4. Submit the project by Wednesday, 12/4, or Thursday 12/5 - Must be handwritten and physically turned in (no email submissions) - Turn in the following - Horizontal Transaction Analysis - Financial Statements - Calculations and responses to questions Financial Statement Big Picture Project Transactions 1-1 Get Funding Sign Note for $50,000 @ 10% Issue Stock for $13,000 1-2 Business Operations Service Revenue $20,000 Operating Expense $12,000 Interest Exp. - Principal x 10%x12/12 1-3 Purchase Equipment @12/31 Purchase a workbench and tools for $32,000 cash; Begin SL Depreciation in Yr. 2 4 yr. useful life, $0 salvage value 2-1 Purchase Inventory for $20,000 cash 2-2 Sell Inventory Sales Revenue $8,000 COGS $3,000 2-3 Business Operations Service Revenue $20,000 Operating Expense $12,000 Depreciation Exp. = cost x 1/4 Interest Exp. = Principal X 10%x12/12 Financial Statement Big Picture Project Transactions 3-1 Advertising Campaign $4,000 Cash 3-2 Sell Inventory Sales Revenue $15,000 COGS $7,000 3-3 Business Operations Service Revenue $20,000 Operating Expense $10,000 Depreciation Exp. = cost x 1/4 Interest Exp. = Principal x 10%x12/12 3-4 Purchase Inventory for $12,000 cash 4-1 Sell Inventory Sales Revenue $16,000 COGS $5,500 4-2 Business Operations Service Revenue $38,000 Operating Expense $12,000 Depreciation Exp. = cost x 1/4 Interest Exp. = Principal x 10%x12/12 4-3 Make a Loan Payment @ 12/31 Pay $15,000 on Notes Payable 4-4 Pay Dividends Pay a 15% dividend on the amount invested in Common Stock If there is enough cash & RE (Record Dividend as a reduction of Retained Earnings) Financial Statement Big Picture Project Transaction Analysis Balance Sheet Income Statement Assets Revenue Expense Yearf Cash Liabilities Stockholders Equity Accumulated Relained Depreciation Notes Payable Common Stock Earnings Inventory Equipment 150,000 13,000 Trans | flow Cash Yearl Balance 1-1 150.000 152 50.000 1- 1 3.000 13,000 1-2 20.000 20,000 12 12.000 /2000) 1-2 1-3 Closing Total 20,000 Year 2 Balance 2-1 2-2 2-2 2-3 23 2-3 2-3 Closing Total Financial Statement Big Picture Project Transaction Analysis Balance Sheet Income Statement Assets Revenue Expense Year Trans Year3 Balance Cash flow Liabilities Stockholders Equity Accumulated Retained Depreciation Notes Payable Common Stock Earnings cash invent Inventory Equipment 31 3-2 3-2 3-3 34 Closing Total Vear 4 Bulance 4-1 1-1 INN 4-4 Closing Total Year 3 Year 4 Financial Statement Big Picture Project Financial Reports for Bert's Bikes Year 1 Year 2 Income Statement Net Sales & Service Revenue Cost of Goods Sold Gross Profit Less: Operating Expenses Depreciation Expense Advertising Expense Operating Income Nonoperating Items Interest Expense Net Income Stmt of Retained Earnings Beginning Retained Earnings + Net Income - Dividends Ending Retained Earnings Balance Sheet Assets Cash Inventory Equipment Accumulated Depreciation Total Assets Llabilities Notes Payable Total Liabilities Stockholders Equity Common Stock Retained Earnings Total Stockholders Equity Totol Liabilities & SE Statement of Cash Flows Net Cashflow from Operating Net Cashflow from Investing Net Cashflow from Financing Net Change in Cash Beginning Cash Balance Ending Cash Balance