OVERVIEW One of the measures of success in any business is profitability. All successful managers and business owners must have an understanding of how to assess the profitability of a company. This is done through the use of accounting. By working through the accounting cycle, you will understand how money flows through a company and what other components are included in the assessment of profitability and financial stability. Using this information can also help you determine whether or not the organization can afford to stay open employing current practices. The accounting information helps you determine what types of changes might need to be made to allow the organization to become profitable if it is currently struggling financially. This process also helps you understand the level of commitment to attention to detail that is required in a successful business venture. In the ratio analysis and memo, you will use course-provided information to 1) Demonstrate the purpose and importance of the ratios used, and 2) Communicate the results of operations to stakeholders and/or interested parties. This assessment addresses the following course outcomes: ? Apply the accounting cycle to business transactions for communicating financial data ? Interpret financial statements for informing business decisions ? Analyze the importance of industry standards and regulations in the implementation of the accounting cycle in supporting responsible practices Prompt Your dog, Peyton, has severe allergies and cannot have the usual store-bought dog treats. You have been making homemade treats for him that are all-natural and hypo-allergenic. Over the past year, you have been making and selling these treats out of your home and have been quite successful. You now have an opportunity to open your own dog treat bakery. You have decided on a corporate form of business and have named your company ?Peyton Approved.? During the first part of this final project, you were asked to follow the business transactions for a six-month period from that initial stage of analysis and recording through the reporting process. Now, you will use this information to compose a memorandum to the bank detailing the results of operations as communicated in the financial statements you have produced based on the business transactions for the period. Use your completed workbooks to prepare your ratio analysis and memo, which will include an overview of the company?s accounting system, discussion of the results of operations and what those results mean, and a discussion on what changes in operations might need to be made to make the company more profitable. This memo will be used as part of a loan package to request additional funding for potential expansion in year two. Specifically, the following critical elements must be addressed: 1. Ratio Analysis a) Create a ratio analysis. Be sure to include all relevant ratios. b) Discuss each ratio. What does the ratio tell you? c) Why is ratio information useful? What decisions will you make based on the ratio? 2. Prepare a Memo to a Bank a) Provide an overview of the company?s accounting system. What basis of accounting is used? Why? b) What strategies is the business using to ensure responsible accounting practices? Why have these strategies been selected? c) Describe the overall accounting process. For example, when are entries made, how often are statements produced and reviewed, and why? Describe the internal controls for cash that are in place. d) Analyze the results of operations. What do these results tell a business? e) What do the statements themselves tell about the strengths and weaknesses of the company?s financial position? What does the ratio analysis tell someone about the strengths and weaknesses in the company?s financial position? f) Discuss the changes in operations that might need to be made to make the company more profitable. Justify why each change may be necessary. g) What are the company?s financial strengths and weaknesses? What specific changes can be made to alleviate the weaknesses? h) What opportunities can the company explore because of its strengths? How would these be beneficial? *****FIND ALL RELEVANT NUMBERS NEEDED IN ATTACHMENT WORKBOOK.*****
Final Project Peyton Approved Data You will prepare financial statements that will allow you to assess how profitable the business is. Below you will find the data required to make entries in your accounting workbook. Remember that you are following the business transactions for a six-month period from the initial stage of analysis and recording, through the reporting process. These transactions will include: the initial setup of the business sales purchases making payments to vendors paying store employees managing debt It will help you to print this document as you are making your entries in your workbook. Your textbook prepares you and can be used as a reference to assist you in completing this assignment. You should begin this project in Module Two. Step 1: Complete the following in the \"July Journal Entries\" in your workbook (be sure to look for the July Journal Entries tab at the bottom of the Peyton Approved Student Workbook). The following events occur in July 2014: July 1 - Open a bank account for Peyton Approved.This has been done for you in the July Journal Entries tab. July 1 - You take $15,000 from your personal savings account and buy common stock in Peyton Approved. This has been done for you in the July Journal Entries tab. July 3 - Your parents lend the company $10,000 cash, in exchange for a two-year, 6% note payable. Interest and the principal are repayable at maturity. July 7 - Sign a lease agreement for retail/bakery space. The agreement is for 1 year, with the option to extend the lease on a month-to-month basis after 1 year. The rent is $1,500 per month. The lease period starts on July 15, first and last month's rent due at that time. Subsequent rents are due on the 15 th day of each month. July 10 - Pay $375 to the county for a business license. July 11 - Purchase a cash register for $250 (deemed to be not material enough to qualify as depreciable equipmentuse misc. exp.). July 13 - You have baking equipment, including an oven and mixer, that you have been using for your home-based business and will now start using in the bakery. You estimate that the equipment is currently worth $5,000, and you transfer the equipment into the business in exchange for additional common stock. The equipment has a 5-year useful life. July 13 - Pay $200 for business cards/flyers/posters/ads to use for advertising. July 14 - Pay $1,000 for baking ingredients (use baking supplies account). July 14 - Pay $300 for miscellaneous (use misc. supplies). July 15 - Hire part-time helper to be paid $12 per hour. Pay periods are the 1 st through the 15th and 16th through the end of the month with paydays being the 20 th for the first pay period and the 5th of the following month for the second pay period. July 15 - Pay first and last month's rent. July 16 - Open the doors of the bakery. July 31 - Pay $1,200 for a 12-month insurance policy. Step 2: Enter the Bakery Sales totals (below) in the appropriate Journal Entries month tab, as indicated below. See sample in the August Journal Entries tab. The following events occur during the next 6 months: Bakery sales are recorded on the last day of the month. The following sales occurred: July - $5,000 August - $20,000 (cell B28) September - $22,500 October - $27,000 November - $25,000 December- $30,000 Step 3: Enter the baking supply purchases (below) in the appropriate Journal Entries month tab, as indicated below. See sample in the September Journal Entries Tab. The following baking supplies purchases are made on credit: August 8 - $8,500, net 30 - paid 8/30 September 10 - $9,000, net 30 - paid 10/1 (cell B10) October 12 - $10,000, net 30 - paid 11/1 November 10 - $10,000, net 30 - paid 12/1 December 4 - $12,000, net 30 - paid 1/2 Step 4: Enter the miscellaneous supplies purchased (below) in the appropriate Journal Entries month tab, as indicated below. See sample in the October Journal Entries Tab. The following misc. supplies were purchased: August 25 - $300 September 19 - $325 October 14 - $310 (cell B19) November 11 - $300 December 8 - $300 Step 5: Enter payroll (below) in the appropriate Journal Entries month tab, as indicated below. See sample in the November Journal Entries Tab. Through December 31, the part-time employee worked the following hours: (ignore payroll taxes) (see table to right) Step 6: Enter the following monthly bills received and paid (below) in the appropriate Journal Entries month tab, as indicated below. See sample in the December Journal Entries tab (sample in cells B22, B28, and B57). The following monthly bills are received and paid (July-December) Rent - paid each 15th - $1,500 Phone - received on the 30th of each month, paid on the following 10 th - $45 Step 7: You pay yourself via the issuance of dividends. Enter the dividends (below) in the appropriate Journal Entries month tab, as indicated below. See sample in the September Journal Entries tab. The following dividends were paid and issued: 9/30 - 2,000 (Cell B32) 10/30 - 2,500 11/30 - 2,500 12/31 - 2,500 Step 8: Many customers have been asking for more hypo-allergenic products, so in November you start carrying a line of hypo-allergenic shampoos on a trial basis. The following information relates to the purchase and sales of the shampoo: You use the perpetual inventory method. You are uncertain as to which valuation method to useFIFO, LIFO, or weighted average, so you calculate inventory using all three and then decide which one you would like to choose. You will use the \"Inventory Valuation\" tab in your workbook to complete the following entries. See samples for November for FIFO, LIFO, and the Weighted Average (wt. avg). Purchases 11/7: 10 bottles purchased at $6 11/20: 20 bottles purchased at $6.10 12/1: 25 bottles purchased at $6.05 12/14: 30 bottles purchased at $6.00 12/26: 20 bottles purchases at $6.08 Sales - selling price, $8.50 a bottle 11/15: 8 bottles 11/30: 18 bottles 12/15: 22 bottles 12/24: 24 bottles Step 9: You will use the \"Adjusting Entries\" tab in your workbook to complete the following entries. See sample for Depreciation of Baking Equipment. On December 31, the following adjustments must be made: Depreciation of baking equipment transferred to company on 7/13. Assume month of depreciation in July using the straight-line method. ( Cell B6) Accrue interest for note payable (Assume a full month of interest for July). Record insurance used for the year. An inventory of baking supplies shows $1,100 of supplies are remaining. An inventory of misc. supplies shows $50 remaining. Congratulations, you have now completed Section 1 (all) and parts a & b of Section 2 of the Final Project Part I. Now you will work on your trial balance sheet, balance sheet, and financial statements. The information is below as well: Month Hours Rate Pay 31-Jul $10.00 $12.00 $120.00 15-Aug $40.00 $12.00 $480.00 31-Aug $35.00 $12.00 $420.00 15-Sep $38.00 $12.00 $456.00 30-Sep $40.00 $12.00 $480.00 15-Oct $37.00 $12.00 $444.00 31-Oct $40.00 $12.00 $480.00 15-Nov $35.00 $12.00 $420.00 Cell B29 30-Nov $30.00 $12.00 $360.00 Cell B55 15-Dec $45.00 $12.00 $540.00 31-Dec $40.00 $12.00 $480.00 Step 10: You will use the \"T-Accounts\" tab in your workbook to complete the following. See sample in row 3. Complete the rest on your own. Accumulate the numbers in your t-accounts using the T-Accounts tab in your workbook. Step 11: You will use the \"Trial balance\" tab in your workbook to complete the following. See sample in row 7. Complete the rest on your own. See Exhibit 3-7 on page 62 for more information and use those to guide you through the following steps. Using the account balances from your t-accounts, accurately prepare unadjusted trial balance. Step 12 Continue using the \"Trial balance\" tab in your workbook to complete the following. See sample in row 7. Complete the rest on your own. See Exhibit 3-7 on page 62 for more information. Interpret trial balance and make appropriate end-of-period adjustments. Step 13 You will use the \"Adjusting Entries\" tab in your workbook to complete the following. See Exhibit 3-7 on page 62 for more information. Post adjusted entries and prepare the adjusted trial balance. Step 14 You will use the \"Income Statement,\" \"Balance Sheet,\" and \"Statement of Retained Earnings\" tabs in your workbook to do the following: Apply adjusted trial balance and prepare financial statements. Step 15 You will use the \"Closing Entries\" tab in your workbook to do the following: Close all temporary income statement accounts and create closing entries. Step 16 You will use the \"Trial Balance\" tab in your workbook to do the following: Prepare the post-closing trial balance for the next accounting period. Step 17 You will use the \"Reversing Entries\" tab in your workbook to do the following: Prepare reversing entries. Step 18 Almost there! Finally, after you have completed your workbook, address the following written sections in a separate document and submit along with your workbook. Discuss the financial statements. Determine the purpose of each statement. What does each financial statement tell you as a business owner? What decisions/changes in operations will you make based on the results reported in your statements? Peyton Approved General Journal Entries Jul-14 Date Accounts 1 Cash Common Stock To Record Sale of Common Stock 3 Cash Notes Payable Complete the following in the \"July Journal Entries\" The following events occur in July 2014: Debit 15,000.00 Credit 15,000.00 10,000.00 10,000.00 Received cash in exchange for two-year, 6% note 10 Business License Expense Cash Purchase business license from county 375.00 11 Misc Expense Cash Purchase cash register 250.00 13 Baking Equipment Common Stock 375.00 250.00 5,000.00 5,000.00 Contribution of baking equipment in exchange for common stock 13 Advertising Expense Cash Purchased advertising materials 14 Baking Supplies Cash Purchased baking ingredients 14 Misc Supplies Cash Miscellaneous expense 200.00 200.00 1,000.00 1,000.00 300.00 300.00 15 Rent Expense Cash First month rent 1,500.00 15 Prepaid rent Cash Last month rent 1,500.00 30 Telephone Expense Accounts payable Phone bill 1,500.00 1,500.00 45.00 45.00 31 Prepaid Insurance Cash 12-Month Insurance Policy 1,200.00 31 Cash Bakery Revenue Sales revenue 5,000.00 31 Salary and wages expense Salary and wages payable To accrue salaries and wage expense 1,200.00 5,000.00 120.00 120.00 7/1 7/1 7/3 7/7 7/10 7/11 7/13 7/13 7/14 7/14 7/15 7/15 7/16 7/31 Open a bank account for Peyton Approved. This has been done for you You take $15,000 from your personal savings account and buy common stock in Peyton Approved. This has be Your parents lend the company $10,000 cash, in exchange for a two-year, 6% note payable. Interest and the principal are Sign a lease agreement for retail/bakery space. The agreement is for 1 year, with the option to extend the lease on a mon Pay $375 to the county for a business license. Purchase a cash register for $250 (deemed to be not material enough to qualify as depreciable equipmentuse misc. exp You have baking equipment, including an oven and mixer, that you have been using for your home-based business and w Pay $200 for business cards/flyers/posters/ads to use for advertising. Pay $1,000 for baking ingredients (use baking supplies account). Pay $300 for miscellaneous (use misc. supplies). Hire part-time helper to be paid $12 per hour. Pay periods are the 1st through the 15th and 16th through the end of the m Pay first and last month's rent. Open the doors of the bakery. Pay $1,200 for a 12-month insurance policy. een done for you e repayable at maturity. nth-to-month basis after 1 year. The rent is $1,500 per month. The lease period starts on July 15, first and last month's rent due at that time. Subsequent rents are due on the 15th day of each month. p.). will now start using in the bakery. You estimate that the equipment is currently worth $5,000, and you transfer the equipment into the business in exchange for additional common stock. The equipment has a 5-year useful life. month with paydays being the 20th for the first pay period and the 5th of the following month for the second pay period. Peyton Approved General Journal Entries Aug-14 Date Accounts 5 Salary and wages payable Cash To record payment of salaries and wages 8 Baking Supplies Accounts Payable Net 30 10 Accounts Payable Cash Paid phone bill 15 Salary and wages expense Salary and wages payable To accrue salaries and wages expense 15 Rent Expense Cash Paid rent Debit 120.00 Credit 120.00 8,500.00 8,500.00 45.00 45.00 480.00 480.00 1,500.00 1,500.00 20 Salary and wages payable Cash To record payment of salaries and wages 480.00 25 Misc Supplies Cash Miscellaneous expense 300.00 30 Cash Bakery Revenue Sales revenue 30 Telephone Expense Accounts payable Phone bill 30 Accounts Payable Cash Paid cash on account 31 Salary and wages expense Salary and wages payable To accrue salaries and wage expense 480.00 300.00 20,000.00 20,000.00 45.00 45.00 8,500.00 8,500.00 420.00 420.00 Peyton Approved General Journal Entries Sep-14 Date Accounts 5 Salary and wages payable Cash To record payment of salaries and wages 10 Baking Supplies Accounts Payable Net 30 10 Accounts Payable Cash Paid phone bill 15 Rent Expense Cash Paid rent Debit 420.00 Credit 420.00 9,000.00 9,000.00 45.00 45.00 1,500.00 1,500.00 15 Salary and wages expense salary and wages payable Paid salaries 456.00 19 Misc Supplies Cash Miscellaneous expense 325.00 20 Salary and wages payable Cash To record payment of salaries and wages 456.00 30 Dividends Cash Paid myself 30 Telephone Expense accounts payable Phone bill 30 Cash Bakery Revenue Sales revenue 30 Salary and wages expense salary and wages payable To accrue salaries and wage expense 456.00 325.00 456.00 2,000.00 2,000.00 45.00 45.00 22,500.00 22,500.00 480.00 480.00 Peyton Approved General Journal Entries Oct-14 Date Accounts $1.00 Accounts Payable Cash Paid cash on account 5 Salary and wages payable Cash To record payment of salaries and wages 10 Accounts Payable Cash Paid phone bill 12 Baking Supplies Accounts Payable Net 30 Debit 9,000.00 Credit 9,000.00 480.00 480.00 45.00 45.00 10,000.00 10,000.00 14 Misc Supplies Cash Miscellaneous expense 310.00 15 Salary and wages expense Salary and wages payable Paid salaries 444.00 15 Rent Expense Cash Paid rent 20 Salary and wages payable Cash To record payment of salaries and wages 30 Dividends Cash Paid myself 30 Telephone Expense Accounts payable Phone bill 31 Cash Bakery Revenue Sales revenue 31 Salary and wages expense Salary and wages payable To accrue salaries and wage expense 310.00 444.00 1,500.00 1,500.00 444.00 444.00 2,500.00 2,500.00 45.00 45.00 27,000.00 27,000.00 480.00 480.00 Peyton Approved General Journal Entries Nov-14 Date Accounts 1 Accounts Payable Cash Paid cash on account 5 Salary and wages payable Cash To record payment of salaries and wages 7 Merchandise Inventory Cash 10 bottles purchased at $6.00 10 Accounts Payable Cash Paid phone bill 10 Baking Supplies Accounts Payable Net 30 11 Misc Supplies Cash Miscellaneous expense 15 Rent Expense Cash Paid rent 15 Salary and wages expense Salary and wages payable Paid salaries Debit 10,000.00 Credit 10,000.00 480.00 480.00 60.00 60.00 45.00 45.00 10,000.00 10,000.00 300.00 300.00 1,500.00 1,500.00 420.00 420.00 15 Cash Merchandise Sales Sold 8 bottles at $8.50 68.00 15 Cost of Goods Sold (8 x $6) Merchandise Inventory Recorded cost of goods 48.00 68.00 48.00 1.00 20 Merchandise Inventory Cash 20 bottles purchased at $6.10 122.00 20 Salary and wages payable Cash To record payment of salaries and wages 420.00 30 Dividends Cash Paid myself 30 Telephone Expense Accounts payable Phone bill 122.00 420.00 2,500.00 2,500.00 45.00 45.00 30 Salary and wages expense Salary and wages payable To accrue salaries and wage expense 360.00 30 Cash Merchandise Sales Sold 18 bottles at $8.50 153.00 30 Cost of Goods Sold (18 x $6.10) Merchandise Inventory Recorded cost of goods 109.80 30 Cash Bakery Revenue Sales revenue 360.00 153.00 109.80 25,000.00 25,000.00 Peyton Approved General Journal Entries Dec-14 Date Accounts 1 Accounts Payable Cash Paid cash on account 1 Merchandise Inventory Cash 25 bottles purchased at $6.05 4 Baking Supplies Accounts Payable Net 30 Debit 10,000.00 Credit 10,000.00 151.25 151.25 12,000.00 12,000.00 5 Salary and wages payable Cash To record payment of salaries and wages 360.00 8 Misc Supplies Cash Miscellaneous expense 300.00 10 Accounts Payable Cash Paid phone bill 14 Merchandise Inventory Cash 30 bottles purchased at $6.00 15 Rent Expense Cash Paid rent 360.00 300.00 45.00 45.00 180.00 180.00 1,500.00 1,500.00 15 Salary and wages expense Salary and wages payable Paid salaries 540.00 15 Merchandise Sales Cash Sold 22 bottles at $8.50 187.00 15 Cost of Goods Sold (22 x $6) Merchandise Inventory Recorded cost of goods 132.00 20 Salary and wages payable Cash To record payment of salaries and wages 540.00 24 Merchandise Sales Cash Sold 24 bottles at $8.50 204.00 26 Merchandise Inventory Cash 20 bottles purchased at $6.08 121.60 30 Telephone Expense Accounts payable Phone bill 31 Dividends Cash Paid myself 31 Cash Bakery Revenue Sales revenue 31 Salary and wages expense Salary and wages payable To accrue salaries and wage expense 540.00 187.00 132.00 540.00 204.00 121.60 45.00 45.00 2,500.00 2,500.00 30,000.00 30,000.00 480.00 480.00 Peyton Approved Adjusting Journal Entries $2,014.00 Date Accounts 31-Dec Depreciation Expense {a} Accumulated depreciation Debit $458.33 Credit 458.33 31-Dec Interest Expense {b} Interest payable 150.00 31-Dec Insurance Expense {c} Prepaid insurance 600.00 31-Dec Baking Supplies Expense {d} Baking Supplies 31-Dec Misc Supplies Expense {e} Misc Supplies 150.00 600.00 49,400.00 49,400.00 1,785.00 1,785.00 Account Cash Equipment Common stock Notes payable Business Liscense Miscellaneous expense Advertising Exp Baking Supplies Miscellaneous supplies Prepaid insurance Prepaid Rent Salaries Expense Rent expense Merchandise sales Salaries payable Bakery Revenue Telephone expense Account payable Merchandise inventory Cost of goods sold Dividends Baking Supplies expense Misc. Supplies expense Depreciation expense Accumulated Depreciation Insurance expense Interest expense Interest payable Total Peyton Approved Trial Balance $2,014.00 Unadjusted trial balance Debit Credit 87,692.15 5,000.00 20,000.00 10,000.00 375.00 250.00 200.00 50,500.00 1,835.00 1,200.00 1,500.00 4,680.00 9,000.00 612.00 480.00 129,500.00 270.00 12,045.00 200.25 434.60 9,500.00 Adjusting entries Debit Credit 49,400.00 1,785.00 600.00 49,400.00 1,785.00 458.33 458.33 600.00 150.00 172,637.00 172,637.00 - 52,393.33 150.00 52,393.33 Adjusted trial balance Debit Credit ### ### ### ### ### ### ### 1,100.00 50.00 ### ### ### ### ### ### ### ### ### ### ### ### ### ### 458.33 458.33 ### ### 150.00 173,245.33 173,245.33 - Peyton Approved Balance Sheet For the Period Ended December 31, 2014 Assets Current assets Cash Merchandise inventory Baking supplies Miscellaneous supplies Prepaid insurance Prepaid Rent Total Current assets Fixed Assets Equipment Less: Accumulated Depreciation Business Liscense Total Fixed assets Total Assets 87,692.15 200.25 1,100.00 50.00 600.00 1,500.00 91,142.40 $5,000.00 458.33 $ 4,541.67 $375.00 4,916.67 $96,059.07 Liabilities and Owners' Equity Current Liabilities Account payable Salaries payable Interest payable Total current liabilities Non-current liability Note payable Total Liabilities $ 12,045.00 480.00 150.00 12,675.00 10,000.00 22,675.00 Owner Equity Common Stock Retained Earnings Total owner equity 20,000.00 $53,384.07 73,384.07 Total Liabilities and equity $96,059.07 Peyton Approved Income Statement For the Year Ended 12/31/2014 Revenues: Bakery Revenue Merchandise Sales Total Revenues Less Cost of Goods Sold Gross Profit Less: Expenses Baking supplies expense Rent expense Salary expense Miscellanepus supplies expense Insurance expense Depreciation expense Telephone expense Miscellanepus expense Advertising expense Interest expense Total expenses Net Income 129,500.00 612.00 130,112.00 (434.60) 129,677.40 49,400.00 9,000.00 4,680.00 1,785.00 600.00 458.33 270.00 250.00 200.00 150.00 66,793.33 $62,884.07 Peyton Approved Statement of Retained Earnings For the Year Ended 12/31/2014 Retained Earnings beginning bal Add: Net Income Less: Dividends Retained Earnings ending bal 62,884.07 62,884.07 (9,500.00) 53,384.07 Peyton Approved Closing Entries $2,014.00 Date Accounts Dec-31 Sales Revenue Income summary To close revenue account b) c) d) Debit $130,112.00 Credit $130,112.00 Income summary Baking supplies expense Rent expense Salary expense Miscellanepus supplies expense Insurance expense Depreciation expense Cost of Goods Sold Telephone expense Miscellanepus expense Advertising expense Interest expense To close all expense account 67,127.69 Income summary Retained Earnings To transfer net income to R/E 62,984.31 Retained Earnings Dividends To close dividend to R/E $49,400.00 $9,000.00 $4,680.00 $1,785.00 $500.00 $458.33 $434.36 $270.00 $250.00 $200.00 $150.00 62,984.31 9,500.00 9,500.00 Peyton Approved Post Closing Trial Balance $2,014.00 Account Cash Merchandise inventory Prepaid insurance Prepaid rent Baking supplies Miscellaneous supplies Business Liscense Equipment Accumulated Depreciation Account payable Interest payable Salaries payable Notes Payable Common stock Retained Earmings Total Unadjusted Trial Balance Debit Credit $87,692.15 $200.25 $600.00 $1,500.00 $1,100.00 $50.00 $375.00 $5,000.00 $96,517.40 $458.33 $12,045.00 $150.00 $480.00 $10,000.00 $20,000.00 $53,384.07 $96,517.40 Peyton Approved Reversing Entries $2,014.00 Date Accounts Interest payable Interest Expense Prepaid insurance Insurance Expense Debit $150.00 Credit $150.00 600.00 600.00 date 1-Jul 3-Jul 31-Jul 30-Aug 30-Sep 31-Oct 15-Nov 30-Nov 30-Nov 15-Dec 24-Dec 31-Dec Bal. Cash 15,000.00 10,000.00 5,000.00 20,000.00 22,500.00 27,000.00 68.00 153.00 25,000.00 187.00 204.00 30,000.00 375.00 250.00 200.00 1,000.00 300.00 3,000.00 1,200.00 120.00 45.00 1,500.00 480.00 300.00 8,500.00 420.00 45.00 1,500.00 325.00 456.00 2,000.00 9,000.00 480.00 45.00 310.00 1,500.00 444.00 2,500.00 10,000.00 480.00 60.00 45.00 300.00 1,500.00 122.00 420.00 2,500.00 10,000.00 151.25 360.00 300.00 45.00 180.00 1,500.00 540.00 121.60 2,500.00 date Notes Payable 10,000 date Business License exp 10-Jul $375.00 3-Jul 10,000 Bal. Bal. Bal. 20,000 Bal. Insurance expense $600.00 adj {c} 12/3 Bal. Misc. expense $250.00 13-Jul $250.00 Baking supplies 14-Jul 1,000 $49,400.00 8-Aug $8,500.00 10-Sep $9,000.00 12-Oct $10,000.00 10-Nov $10,000.00 4-Dec $12,000.00 Bal. 1,100 15-Jul Bal. 31-Dec $600.00 Bal. Accounts payable 31-Jul Bal. Baking equipment 5,000 13-Jul 5,000 14-Jul 25-Aug 19-Sep 14-Oct 11-Nov 8-Dec Prepaid rent 1,500 $1,500.00 Common Stock 15,000 5,000 $375.00 87,692.15 11-Jul Bal. date 10-Jul 11-Jul 13-Jul 14-Jul 14-Jul 15-Jul 31-Jul 5-Aug 10-Aug 15-Aug 20-Aug 25-Aug 30-Aug 5-Sep 10-Sep 15-Sep 19-Sep 20-Sep 30-Sep 1-Oct 5-Oct 10-Oct 14-Oct 15-Oct 20-Oct 30-Oct 1-Nov 5-Nov 7-Nov 10-Nov 11-Nov 15-Nov 20-Nov 20-Nov 30-Nov 1-Dec 1-Dec 5-Dec 8-Dec 10-Dec 14-Dec 15-Dec 20-Dec 26-Dec 31-Dec Misc. supplies 300 $1,785.00 $300.00 $325.00 $310.00 $300.00 $300.00 50 Prepaid insurance 1,200 600 600 Salary and wages expense Bal 31-Dec 31-Dec $200.00 15-Jul 15-Aug 15-Sep 15-Oct 15-Nov 15-Dec Bal. Advertising expense $200.00 Rent expense 1500 1500 1500 1500 1500 1500 9,000 Bakery revenue 5,000 31-Jul 20,000 30-Aug 22,500 30-Sep 27,000 31-Oct 25,000 30-Nov 30,000 31-Dec 129,500 Bal. Salaries and wages payable 1-Jul 13-Jul 10-Aug 30-Aug 10-Sep 1-Oct 10-Oct 1-Nov 10-Nov 1-Dec 10-Dec $45.00 8,500 45 9,000 45 10,000 45 10,000 45 $45.00 8,500 45 9,000 45 10,000 45 10,000 45 12,000 $45.00 30-Jul 8-Aug 30-Aug 10-Sep 30-Sep 12-Oct 30-Oct 10-Nov 30-Nov 4-Dec 30-Dec 12,045 Bal. 30-Jul 30-Aug 30-Sep 30-Oct 30-Nov 30-Dec Bal. 31-Jul 15-Aug 30-Aug 15-Sep 30-Sep 15-Oct 31-Oct 15-Nov 30-Nov 15-Dec 31-Dec Bal. Telephone expense 45 45 45 45 45 45 $120.00 $480.00 $420.00 $456.00 $480.00 $444.00 $480.00 $420.00 $360.00 $540.00 $480.00 5-Aug 20-Aug 5-Sep 20-Sep 5-Oct 20-Oct 5-Nov 20-Nov 5-Dec 15-Dec 120 480 420 456 480 444 480 420 360 540 $120.00 $480.00 $420.00 $456.00 $480.00 $444.00 $480.00 $420.00 $360.00 $540.00 $480.00 $4,680.00 30-Sep 30-Oct 30-Nov 31-Dec Bal. 31-Jul 15-Aug 30-Aug 15-Sep 30-Sep 15-Oct 31-Oct 15-Nov 30-Nov 15-Dec 31-Dec 480 Bal. Dividends 2,000 2,500 2,500 2,500 depreciation expense adj {a} 12/31 458 Bal. acc dep 458 adj {a} 12/3 458 458 Bal. 9,500 270 adj {d} 12/3 baking supplies expense 49,400 adj {b} 12/31 Interest expense $150.00 Bal. $49,400.00 Bal. $150.00 misc supplies expense adj {e} 12/3 1,785 Bal. 7-Nov 20-Nov 1-Dec 14-Dec 26-Dec $1,785.00 Merchandise Sales Revenue 68.00 153.00 187.00 204.00 Bal. Merch. Inv. FIFO 60.00 48.00 122.00 109.60 151.25 133.30 180.00 144.35 121.60 199.60 15-Nov 30-Nov 15-Dec 24-Dec 7-Nov 20-Nov 1-Dec 14-Dec 26-Dec Bal. Merch. Inv. LIFO 60.00 48.00 122.00 109.80 151.25 132.00 180.00 144.80 121.60 200.25 Interest payable $150.00 adj {b} 12/3 $150.00 Bal. 15-Nov 30-Nov 15-Dec 24-Dec 7-Nov 20-Nov 1-Dec 14-Dec 26-Dec Bal. Merch. Inv. Weighted average 60.00 48.00 122.00 109.62 151.25 132.66 180.00 144.72 121.60 199.85 15-Nov 30-Nov 15-Dec 24-Dec 612.00 Bal. 15-Nov 30-Nov 15-Dec 24-Dec Bal. COGS FIFO 48.00 109.60 133.30 144.35 435.25 15-Nov 30-Nov 15-Dec 24-Dec Bal. COGS LIFO 48.00 109.80 132.00 144.80 434.60 15-Nov 30-Nov 15-Dec 24-Dec Bal. COGS Weighted average 48.00 109.62 132.66 144.72 435.00 15-Nov 30-Nov 15-Dec 24-Dec 31 31 Method chosen = LIFO LIFO shows a higher gross profit and the ending merchandise inventory is worth more Date Bottles Purchase Total Sales Ending Inventory FIFO 7-Nov 10 $ 6.00 $ 60.00 10 $ 6.00 $ 60.00 6.10 $ 122.00 30-Nov 1-Dec 14-Dec 30 $ $7.00 $ $17.00 $ 24-Dec 26-Dec LIFO 20 $ 6.10 $ 24.40 6.05 $ 108.90 $ 133.30 6.05 $ 42.35 6.00 $ 102.00 $ 144.35 6.08 $ 121.60 Date Bottles Purchase Total 7-Nov 10 $ 6.00 $ 60.00 15-Nov 20-Nov Sales $8.00 20 $ $6.00 $ 48.00 4 $ 6.10 $ 24.40 6.10 $ 6.05 $ $ 24.40 151.25 175.65 6.10 $ 6.05 $ 6.00 $ $ 24.40 151.25 180.00 355.65 7 $ 30 $ 37 6.05 $ 6.00 $ $ 42.35 180.00 222.35 13 $ 6.00 $ 78.00 6.00 $ 6.08 $ $ 78.00 121.60 199.60 Ending Inventory 10 $ 6.00 $ 60.00 $18.00 $6.10 $ 109.80 2 $ 6.00 $ 12.00 2 $ 20 $ 22 6.10 $ 122.00 30-Nov 12.00 122.00 134.00 13 $ 20 $ 33 $4.00 $ $18.00 $ 6.00 $ 6.10 $ $ 4 $ 25 $ 30 $ 59 6.00 $ 180.00 6.00 $ 6.10 $ $ 12.00 122.00 134.00 2 $ 2 $ 4 6.00 $ 6.10 $ $ 12.00 12.20 24.20 1-Dec 25 $ 6.05 $ 151.25 2 $ 2 $ 25 $ 29 6.00 $ 6.10 $ 6.05 $ $ 12.00 12.20 151.25 175.45 14-Dec 30 $ 6.00 $ 180.00 2 2 25 30 59 $ $ $ $ 6.00 6.10 6.05 6.00 $ $ $ $ $ 12.00 12.20 151.25 180.00 355.45 2 2 25 8 37 $ $ $ $ 6.00 6.10 6.05 6.00 $ $ $ $ $ 12.00 12.20 151.25 48.00 223.45 2 $ 2 $ 9 $ 13 6.00 $ 6.10 $ 6.05 $ $ 12.00 12.20 54.45 78.65 2 2 9 20 33 6.00 6.10 6.05 6.08 15-Dec $22.00 $ 6.00 $ 132.00 24-Dec $8.00 $ $16.00 $ 6.00 $ 48.00 6.05 $ 96.80 $ 144.80 26-Dec 20 $ 6.08 $ 121.60 $ $ $ $ $ $ $ $ $ $ 434.60 $ 435.00 Gross Profit $ 176.75 $ 177.40 $ 177.00 Beginning Merchandise Inventory $ $ $ $ 634.85 $ 634.85 $ 634.85 Cost of Goods Available for Sale $ 634.85 $ 634.85 $ 634.85 $ 435.25 $ 434.60 $ 435.00 Ending Merchandise Inventory $ 199.60 $ 200.25 $ 199.85 Sales Revenue (72 units x $8.50) 12.00 4 $ 25 $ 29 6.05 $ 151.25 15-Dec 6.00 $ 2 $ 20 $ 22 $2.00 $6.00 $ 12.00 $16.00 $ 6.10 $ 97.60 $ 109.60 25 $ 2 $ $ 435.25 Cost of Goods Sold 20 $ $6.00 $ 48.00 WeightedAverage $ 612.00 Net Cost of Purchases 20-Nov $8.00 LIFO $ 612.00 Less: Cost of Goods Sold 15-Nov FIFO $ 612.00 12.00 12.20 54.45 121.60 200.25 - - - Wt. Avg Date Bottles Purchase Total 7-Nov 10 $ 6.00 $ 60.00 15-Nov 20-Nov Sales $8.00 20 $ $6.00 $ 48.00 $18.00 $6.09 $ 109.62 2 $ 6.00 $ 22 $ 6.10 $ 122.00 30-Nov Ending Inventory 10 $ 6.00 $ 6.09 $ 4 $ 6.09 $ 60.00 12.00 133.98 (122+12=134) (134/22 units) (=$133.98) 24.36 1-Dec 25 $ 6.05 $ 151.25 29 $ 6.06 $ 175.74 (151.25+24.36=175.61) (175.61/29 units) (=$6.06) 14-Dec 30 $ 6.00 $ 180.00 59 $ 6.03 $ 355.77 (175.75+180=355.74) (355.75/59 units) (=$6.03) 15-Dec $22.00 $ 6.03 $ 132.66 37 $ 6.03 $ 223.11 24-Dec $24.00 $ 6.03 $ 144.72 13 $ 6.03 $ 78.39 33 $ 6.06 $ 26-Dec 20 $ 6.08 $ 121.60 199.98 (78.39+121.60=199.99) (199.99/33 units) (=$6.06) Peyton Approved Ratio analysis For the Year Ended 12/31/2014 Current ratio = Current assets Current liabilities 91,142.40 12,675.00 7.19 Quick ratio = Current assets - Merchandise inventory - Prepaid rent -prepaid insurance Current liabilities 88,842.15 12,675.00 7.01 Return on Shareholders funds = Net income Shareholders equity 62,884.07 73,384.07 0.86 Net Profit margin ratio = Net income Net Revenue 62,884.07 130,112.00 48.33% Inventory Turnover Ratio = Cost of goods sold Merchandise Inventory 434.60 200.25 2.17 Times
