Simulation $5$

Narrative:

You have been hired as a Junior Accountant to work for Plants from Paradise $($Plants$)$ a garden centre in the city of Victoria, BC$.$ Your role reports directly to Plants' Controller Miranda Cornell. Each week you are emailed a series of tasks that are Miranda has aligned to match your current accounting class schedule. Each week tasks are laid out for you to assist Miranda in both operations and accounting decision making. Miranda is hoping to help you see the broader application that accounting has on operating a business and hopes that the weekly tasks help to identify how accounting impacts operations.

Plants from Paradise reports under ASPE, and has a December $31,2021,$ year end. All work that you are preparing is for their financial statements dated as such.

Additional Information:

Note from Miranda: $$

We have purchased and disposed of some equipment this year; I realize now I never recorded those entries. Can you please help me with the accounting for PP&E$?$ I also had a conversation with our attorney $($Appendix B$),$ can you please draft a preliminary assessment describing what our options are as well as what your recommendation is for us for an accounting treatment? We also received the underlying payroll information from our third$-$party supplier, but for some reason your payroll figures are not coming through properly can you please review your own payroll to see where the calculations are wrong?

$1.$ Please prepare the following draft financial statements:

a$.$ Income Statement $(20$ marks$)$

b$.$ Statement of Owners Equity $(15$ marks$)$

c$.$ Balance Sheet $(20$ marks$)$

$2.$ Ratio Analysis $($Appendix B$)(30$ marks$)$

Appendix A: Financial Statements

Tasks:

Note from Miranda: using the provided adjusted trial balance and templates, can you please prepare the financial statements so that next week we can analyze and present the statements?

Adjusted Trial Balance:

Plants From Paradise

Adjusted Trial Balance

December $31,2021$

Account Number Account Name Debit Balance Credit Balance

$1000$ Cash $12,200$

$1010$ Accounts Receivable $18,859$

$1015$ Allowance for Doubtful Accounts $-500$

$1020$ Interest Receivable $3,000$

$1030$ Inventory $-$ Plants $12,500$

$1040$ Inventory $$ Soil $15,500$

$1050$ PPE $$ Equipment $45,500$

$1055$ Acc. Amortization $$ Equipment $-19,500$

$1060$ PPE $$ Building $145,000$

$1065$ Acc. Amortization $-$ Building $-22,000$

$2000$ Accounts Payable $19,576$

$2010$ Salaries Payable $7,875$

$2020$ Line of Credit $2,000$

$2025$ Interest Payable $515$

$2030$ Unearned Revenue $7,600$

$3000$ Miranda Cornell, Capital $112,853$

$4000$ Sales Revenue $$ Plants $167,894$

$4010$ Sales Revenue $$ Soil $45,673$

$4020$ Sales Revenue $$ Delivery $12,345$

$5000$ Cost of Goods Sold $106,784$

$5020$ Salaries Expense $29,154$

$5040$ Bad Debt Expense $4,500$

$5050$ Utilities $2,275$

$5060$ Amortization Expense $15,500$

$5060$ Repairs Expense $4,699$

$5070$ Interest Expense $2,860$

Total Balance $$0$

Templates:

Income Statement:

$($Company$)$

$($Statement$)$

$($Date$)$

Revenues

Less: Cost of Goods Sold

Gross Profit

Operating Expenses

Total Operating Expenses

Profit$/$Loss

Statement of Owner$$s Equity:

$($Company$)$

$($Statement$)$

$($Date$)$

$($capital$)$

Balance Sheet:

$($Company$)$

$($Statement$)$

$($Date$)$

Assets

Current Assets

Total Current Assets

Property, plant and equipment

Total Assets

Liabilities and Owner$$s Equity

Current Liabilities

Total Current Liabilities

Appendix B: Ratio Analysis

Tasks:

$1)$ Prepare Ratio Analysis $$ Appendix B $(30$ marks$)$

Background:

Miranda has requested that from the above draft statements you prepare and analyze the following ratios. For each ratio she has requested that you provide a brief explanation of what it measures and your thoughts on any insights it presents about the company by comparing to any standard metrics for the ratio. For any ratio that requires an average, use the same value for the current year as the previous year $($meaning no need to average, take the current years value$)$

a$.$ working capital

b$.$ current ratio

c$.$ Profit Margin

d$.$ Receivable turnover ratio

e$.$ Asset Turnover Ratio

f$.$ Return on Assets