The production and analysis of financial statements are core tasks for accounting professionals. The activities for this final project have traditionally been performed monthly by accountants in most organizations. However, with automation making accounting more efficient, many executives are requiring even more frequent financial statements. This new reality further underscores the need for accurate transaction collection and adjustment computations. Additionally, external users rely on ratio analyses to draw informed conclusions about a company’s financial health. This information often will factor heavily into their investment and lending decisions. In your final project, you will assume the role of an accountant and complete the year-end adjustment process for your company using a provided workbook. This workbook is the first deliverable (Part I) of your final project. In Part II, you will analyze the provided financials of the same company and create a report documenting your findings.
Asset Accounts
Acct #
Cash
Baking Supplies
Prepaid Rent
Prepaid Insurance
Baking Equipment
Office Supplies
Accounts Receivable
Accumulated Depreciation
Trademark
Leasehold Improvements
Accumulated Amortization
101
102
103
104
105
106
107
108
109
110
111
This chart of accounts should help you identify the appropriate accounts to record to as you are analyzing and
journaling transactions for this workbook. There is nothing to complete on this page; this is simply a resource
for you.
Liability Accounts
Equity Accounts
Acct #
Notes Payable
Accounts Payable
Wages Payable
Interest Payable
Loans Payable
he appropriate accounts to record to as you are analyzing and
is nothing to complete on this page; this is simply a resource
for you.
201 Common Stock
202 Dividends
203
204
205
Revenue Accounts
Bakery Sales
Merchandise Sales
Expense Accounts
Baking Cost of Goods Sold
Merchandise Cost of Goods Sold (FIFO)
Rent Expense
Insurance Expense
Misc. Expense
Business License Expense
Advertising Expense
Wages Expense
Telephone Expense
Interest Expense
Depreciation Expense
Amortization Expense
Office Supplies Expense
s
Acct #
301
302
ts
Acct #
401
402
ts
Acct #
501
502
503
504
505
506
507
508
509
510
511
512
513
Account
Cash
Baking Supplies
Merchandise Inventory (FIFO)
Prepaid Rent
Prepaid Insurance
Baking Equipment
Accumulated Depreciation
Leasehold Improvements
Accumulated Amortization
Trademark
Office Supplies
Accounts Receivable
Notes Payable
Interest Payable
Accounts Payable
Wages Payable
Loans Payable
Common Stock
Dividends
Bakery Sales
Merchandise Sales
Baking Cost of Goods Sold
Rent Expense
Interest Expense
Insurance Expense
Depreciation Expense
Amortization Expense
Misc. Expense
Office Supplies Expense
Business License Expense
Advertising Expense
Wages Expense
Telephone Expense
Merchandise COGS (FIFO)
Total
Peyton Approved
Trial Balance
2017
Unadjusted trial balance
Debit
Credit
64,713.72
165,250.00
25,750.00
7,500.00
2,400.00
17,000.00
3,285.72
10,000.00
2,000.00
2,300.00
1,600.00
30,401.00
10,000.00
27,325.00
21,000.00
30,000.00
20,000.00
335,675.00
35,200.00
90,000.00
2,780.00
375.00
5,200.00
3,456.00
15,760.00
464,485.72
464,485.72
Approved
Balance
017
Adjusting entries
Debit
Credit
137,400.00
400.00
2,642.86
2,000.00
1,350.00
1,518.75
5,700.00
137,400.00
1,518.75
400.00
2,642.86
2,000.00
1,350.00
5,700.00
151,011.61
151,011.61
Adjusted trial balance
Debit
Credit
64,713.72
27,850.00
25,750.00
7,500.00
2,000.00
17,000.00
5,928.58
10,000.00
4,000.00
2,300.00
250.00
30,401.00
10,000.00
1,518.75
27,325.00
5,700.00
21,000.00
30,000.00
20,000.00
335,675.00
35,200.00
137,400.00
90,000.00
1,518.75
400.00
2,642.86
2,000.00
2,780.00
1,350.00
375.00
5,200.00
5,700.00
3,456.00
15,760.00
476,347.33
476,347.33
Peyton Approved
Adjusting Journal Entries
2017
Date
Accounts
Debit
31-Dec Depreciation Expense
Accumulated depreciation
642.86
31-Dec Amortization Expense
Accumulated Amortization
2,000.00
31-Dec Interest Expense
Interest Payable
1,000.00
31-Dec Insurance Expense
Prepaid Insurance
400.00
Credit
642.86
2,000.00
1,000.00
400.00
31-Dec Baking Cost of Goods Sold
Baking Supplies
137,400.00
31-Dec Office Supplies Expense
Office Supplies
1,350.00
31-Dec Wages Expense
Wages Payable
5,700.00
137,400.00
1,350.00
148,492.86
5,700.00
148,492.86
Peyton Approved
Income Statement
For Year Ending 12/31/2017
Amount
Bakery Sales
Merchandise Sales
Total Revenues
Merchandise Cost of Goods Sold (FIFO)
Baking Cost of Goods Sold
Gross Profit
Operating Expenses:
Rent Expense
Interest Expense
Insurance Expense
Depreciation Expense
Amortization Expense
Misc. Expense
Office Supplies Expense
Business License Expense
Advertising Expense
Wages Expense
Telephone Expense
Total Operating Expenses:
Net Income
$ 335,675.00
$ 35,200.00
15,760.00
137,400.00
90,000.00
1,518.75
400.00
2,642.86
2,000.00
2,780.00
1,350.00
375.00
5,200.00
5,700.00
3,456.00
370,875.00
153,160.00
217,715.00
115,422.61
115,422.61
102,292.39
Peyton Approved
Closing Entries
For Year Ending 12/31/2017
Date
Accounts
Debit
31-Dec Bakery Sales
Merchandise Sales
Income Summary
335,675.00
35,200.00
31-Dec Income Summary
Baking Cost of Goods Sold
Rent Expense
Interest Expense
Insurance Expense
Depreciation Expense
Amortization Expense
Misc. Expense
Office Supplies Expense
Business License Expense
Advertising Expense
Wages Expense
Telephone Expense
Merchandise Cost of Goods Sold (FIFO)
31-Dec Income Summary
Retained Earnings
268,582.61
31-Dec Retained Earnings
Dividends
20,000.00
102,292.39
761,750.00
Credit
370,875.00
137,400.00
90,000.00
1518.75
400.00
2,642.86
2,000.00
2,780.00
1,350.00
375.00
5,200.00
5,700.00
3,456.00
15,760.00
102,292.39
20,000.00
761,750.00
Peyton Approved
Statement of Retained Earnings
For Year Ending 12/31/2017
Beginning Balance:
plus Net Income
less Dividends:
Ending Balance:
102,292.39 Incorrect due to milestone one err
20,000.00
82,292.39
due to milestone one errors not being corrected
Peyton Approved
Balance Sheet
As of December 31, 2017
Assets
Current Assets:
Cash
Baking Supplies
Merchandise Inventory (FIFO)
Prepaid Rent
Prepaid Insurance
Office Supplies
Accounts Receivable
Total Current Assets
Long Term/Fixed Assets:
Baking Equipment
Accumulated Depreciation
64,713.72
27,850.00
25,750.00
7,500.00
2,000.00
250.00
30,401.00
158,464.72
17,000.00
5,928.58
11,071.42
Leasehold Improvements
Accumulated Amortization
10,000.00
4,000.00
6,000.00
Trademark
2,300.00
Total Assets:
177,836.14
Peyton Approved
Balance Sheet
As of December 31, 2017
Liabilities and Owners’ Equity
Current Liabilities:
Accounts Payable
27,325.00
Wages Payable
5,700.00
Interest Payable
1,518.75
Total Current Liabilities
34,543.75
Long Term Liabilities:
Notes Payable
Loans Payable
Total Long Term Liabilities:
Total Liabilities:
31,000.00
65,543.75
Common Stock
Retained Earnings
10,000.00
21,000.00
30,000.00
82,292.39
Total Equity
112,292.39
Total Liabilities & Equity
177,836.14
Quick Ratio
Gross Margin
Net Margin
Return on Equity
2017
2016
2015 Industry Standard
1.84
0.59
0.28
0.91
2.2
0.55
0.22
0.9
2.8
0.7
0.32
0.78
1.75
0.7
0.24
0.8
ACC 307 Final Project Part II: Ratio Analysis Report
Molly LeCompte
Southern New Hampshire University
Abstract
Ratio analysis is one quantitative tool that will be utilized to glean important information about
the profitability and liquidity of the company. Profitability ratios help to how company uses its
assets, equity, as well as, revenue to generate income. Liquidity ratios help to indicate how
company is managing its debts. In this paper, quick ratio, gross margin, net margin and return of
equity ratios of Peyton Approved Company are discussed.
Comparison Ratios:
The ratio is a conservative ratio that creditors typically use to assess a company’s short-term
liquidity. The indicator only considers assets that can be swiftly converted to cash; inventory is
not included because some inventories may take longer to convert. Cash, accounts receivable,
and marketable securities are all considered as assets. The following is the formula for
calculating it:
Quick ratio=
Current Assets?Inventory
Current Liabilities
The analysis also made use of the gross margin ratio. This ratio evaluates the difference between
the company’s net sales and gross profit. Higher ratios show that a company can acquire its stock
at a lower cost in relation to the selling price (Wahlen et al., 2017). It indicates how
advantageous an entity can sell its inventory. The following formula can be used to calculate the
ratio:
Gross Margin ratio=
Gross profit
Net sales
Thirdly, the net margin is a measure of profitability that is used to contrast a company’s net profit
to its net sales. It is possible to calculate the Peyton Approved Net Margin ratio as follows:
Net margin ratio=
net margin
Net sales
Return on equity is a profitable ratio that helps to indicate investors return from sales. It shows a
company’s capacity to make money off of shareholders’ equity.
[Return on Equity =Net Income ÷ Total Equity].
2017
Quick Ratio
1.84
Gross Margin
Net Margin
Return on Equity
0.59
0.28
0.91
Industry
Standard
2016
2015
2.2
2.8
1.75
0.55
0.22
0.9
0.7
0.32
0.78
0.7
0.24
0.8
Comparison
Over the previous two years, the company’s quick ratio has declined from 2.8 in 2015, 2.2 in
2016, and 1.84 in 2017. The company’s current liabilities have either grown in proportion to its
liquid assets. Furthermore, the ratio is higher the 1.75 industry average, showing that the firm
is managing its current obligations well. In addition, the gross margin declined from 0.7 in 2015
to 0.59 in 2017. It demonstrates that the company’s cost of acquiring items has increased. In a
similar vein, the net margin decreased over time from 0.32 to 0.28, from 2015 to 2017. The
company’s expenses have grown faster than its revenues (Easton, 2018). The ROE has increased,
supporting past conclusions that the firm’s earnings are increasing. From 0.78 in 2015 to 0.91 in
2017, the ROE increased.
Conclusions
In terms of liquidity, the company’s performance has been appalling to say the least. Its debt to
asset ratio has grown. If the pattern holds, creditors will have cause for concern in the future. The
decrease in the gross and net margins also indicates difficulties with the company’s profitability.
Although the ROE may have improved, it still cannot be depended upon to provide a clear
picture when used alone (Dance & Imade, 2018). The company can be searching for further
strategies, including selling long-term assets, to appease the shareholders.
References
Dance, M., & Imade, S. (2019). Financial ratio analysis in predicting financial conditions distress
in indonesia stock exchange. Russian Journal of Agricultural and Socio-Economic
Sciences, 86(2), 155-165.
Easton, Peter Douglas, Mary Lea McAnally, Gregory A. Sommers, and Xiao-Jun
Zhang. Financial statement analysis & valuation. Boston, MA: Cambridge Business
Publishers, 2018.
Wahlen, J. M., Jones, J. P., & Pagach, D. P. (2017). Intermediate accounting: Reporting and
analysis (2nd ed.). Boston, MA: Cengage Learning.

Purchase answer to see full
attachment