.494px;=”” block;=”” baseline;=”” 14px;=”” sans-serif;=”” arial,=”” helvetica,=”” neue”,=”” “helvetica=”” web”,=”” grot=”” “haas=”” inherit;=”” 6px;=”” 0px=”” border-box;=”” 3741px;’=””>Case 1: Financial Statement Case – Part 1
The purpose of this assignment is to review material covered in Acct:2100 and refresh
your journal entry and financial statement skills as well as build your cash-flow skills.
You may collaborate with colleagues; however, you are required to do your own work
and your own case. Using the balance sheet at September 30, 2016 and information
below: Prepare the Income Statement, Statement of Owners’ Equity and the Balance Sheet
for the fiscal year ending September 30, 2017. To support your work prepare the
appropriate journal entries and post to the related Accounting Equation or “Taccounts,” template on the accompanying Excel Workbook
Your work is to be done using Microsoft Office’s EXCEL or an EXCEL compatible
program.
Submit to ICON by 11:59pm Thursday, September 21, 2017. The attached Balance Sheet gives your firm’s position at the end of fiscal 2016. During
fiscal 2017, your firm has the following transactions:
A. Your firm has total sales for the year of $1,210,500. Included in the total sales figure
are $1,010,500 sales on credit. During the year, the firm received $792,000 of
payments on account. Customers returned $7,800 for cash refunds during the year.
B. During the year, the firm determined that accounts totaling $2,900 were
uncollectible. Moreover, a $375 receivable written off during the year was
subsequently collected. The $375 is not included in “A.” above.
C. Your firm uses the allowance method to record bad debts. Specifically, the firm uses
the percentage of receivables method to compute the allowance for doubtful
accounts. The firm uses the following information to determine the allowance:
Age of
Receivables
<30 days
< 60 days
>60 days Percent of
current balance
70%
23%
7% Percent expected
uncollectible
2%
10%
50% D. Your firm purchases $650,500 of additional inventory on account during the year.
The purchases are charged to accounts payable. Total payments made on account
for the year were $590,725. Inventory (prior to any LCM write-down’s) at September
30, 2017 totaled $131,875.
E. Your firm has an outstanding 4% note payable (in long-term debt). Interest is paid
annually on September 30th. 1 /4 F. On October 1, 2016, the firm used $75,000 cash to purchase Abbee Company 5%
bonds at face (par) value. The bonds pay interest semi-annually on April 1 st and
October 1st. Your firm intends to hold the bonds as Available-for-Sale Securities.
G. On October 1, 2016, the firm put a new roof on the administrative building. The cash
cost of the new roof was $25,000 and is expected to add 6 years to the life of the
building from the date of installation. The firm also repainted the exterior of the
building. The cash cost of the painting, which the firm does every three years, was
$12,000.
H. On October 20, 2016, the firm sold trading securities with a book value of $8,400 for
$9,800 in cash.
I. Annual liability insurance premiums are payable on January 1 st of each year. The
premium amount paid in January 2017 was $72,000.
J. On March 1st, the firm purchased Sales Building 4 costing $450,000. Your firm paid
thirty percent (30%) of the building’s cost in cash and issued a 4% 5-year note
payable for the balance. The note requires annual interest payments. The expected
life of the facility is 20 years, with no salvage value. Your firm uses the straight-line
method of depreciation. The book values (as of 9/30/2016) of other PP&E currently
on the books (also with no salvage value) are as follows:
Asset
Land Sales Building 1
Sales Building 2
Sales Building 3
Administration Building
Total Historical
Cost
$ 247,500
418,000
451,000
368,500
148,500
$1,633,500 Accumulated
Depreciation
$
229,900
180,400
92,125
44,550
$ 546,975 Remaining
Life
9
12
15
14 K. Administrative and Sales employee wages of $180,650 were earned and paid during
fiscal 2017. In addition, during October 2016, the firm paid wages owed from the
prior year. Unpaid wages for Fiscal 2017, which will be paid in October 2017,
amount to $16,200.
L. On September 30, 2017, the firm sold Sales Building 2 for $244,000. The firm
received payment in cash.
M. Also on September 30th, the firm determined that a piece of equipment in Sales
Building 1 was outdated due to significant technology changes. The estimated future
undiscounted cash flows over the useful life of the equipment is expected to be
$20,000 and the fair value of the equipment is estimated to be $15,000. The book
value of the equipment at September 30th (after adjusting for current year
depreciation) is $29,300. 2 /4 N. On August 31, 2017, the ABBEE 4% bonds have a fair market value of $81,300.
Trading Securities have a fair market value of $98,200.
O. During September 2017, Your Firm paid $33,000 to acquire its own shares. These
shares were correctly classified as Treasury Shares.
P. In the closing process, the firm determines that a substantial lower of cost or market
(LCM) write-down of inventory is required. The estimated loss is $5,250.
Q. During August 2017, your firm’s board of directors declared $44,000 of dividends. At
September 30, 2017, the Dividend Payable account balance was $4,750.
Additional information:
1. The firm uses the periodic inventory system.
2. Ignore income taxes
CHECK FIGURES Net Income = $121,571 Total Assets = $1,967,106 3 /4 Your Firm
Balance Sheet
September 30, 2016
Assets
Cash
Accounts receivable
$ 101,640
Allowance for doubtful accounts
(6,160)
Accounts receivable, net
Inventories
Trading securities
Prepaid insurance
Total Current Assets
Property, Plant and Equipment, gross
$ 1,633,500
Accumulated depreciation
(546,975)
Property, Plant and Equipment, net
Total Assets
Liabilities and Shareholders’ Equity
Accounts payable
Salaries payable
Dividends payable
Total Current Liabilities
Long-term note payable
Total Liabilities
Common stock, no par
Retained Earnings
Accumulated Other Comprehensive Income
Treasury stock
Total Shareholder’s Equity
Total Liabilities and Shareholder’s
Equity $ 102,530 95,480
136,400
111,100
17,100
462,610 1,086,525
$ 1,549,135
$ 89,645
31,575
4,400
125,620
380,000
505,620
490,000
591,215
4,300
(42,000)
1,043,515 $ 1,549,135 4 /4

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