Final Project Peyton Approved Instructions
For this deliverable, you will complete the accounting cycle and prepare financial statements that will provide the result you need to assess the success of business operations.
Below you will find the data required to make entries in your accounting workbook. Remember that you are following the business transactions for a three-month period from the initial stage of analysis and recording, through the reporting process. These transactions will include:
- the initial setup of the business
- cash and credit sales
- 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.
There will be two checkpoints, along the way, at which time you will submit your progress in this workbook to your instructor for review and feedback toward correction and successful demonstration of this accounting cycle as a whole. Your first check point will cover steps 1 through 4 of this workbook. The first checkpoint is in Module 3.
The second checkpoint will have you submit your workbook completed through step 7 in Module 4. You will integrate the feedback, suggestions, and guidance your instructor provides on these steps in the cycle to ensure your success with completion of this cycle. The following steps are included:
Step 1: Complete the following in the "July Journal Entries" tab 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 - You take $15,000 from your personal savings account and buy common stock in Peyton Approved.
July 1-Purchase $8500 in baking supplies from vendor, on account
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 - Pay $3000 toward lease agreement for bakery space. The agreement is for 1 year. The rent is $1,500 per month, last month's rent was required at time of lease agreement. Lease period is effective July 1st 2014 through June 30th, 2015.
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 equipment-use misc. exp.).
July 13 - You have baking equipment, including an oven and mixer, which 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 $300 for miscellaneous (use misc. supplies).
July 15 - 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 month with paydays being the 20th for the first pay period and the 5th of the following month for the second pay period. (No entry required on this date; for informational purposes only)
July 30 - Received telephone bill for July in amount of $45. Payment is due on August 10th
July 31 - Pay $1,200 for a 12-month insurance policy. Policy effective dates August 1, 2014 through July 31st, 2015
July 31- Accrue wages earned for employee for period of 16th through 31st of July
(Wage calculations table is provided for you, below)
Total July bakery sales were $15,000. $5000 of these sales on accounts receivable
Step 2: Complete the following transactions in the August Journal Entries tab in your workbook
August 5-paid employee for period ending 7/31
August 8-Receive payments from customers towards accounts receivable in amount of $3200.
August 10 - paid July telephone bill
August 15- Purchase additional baking supplies in amount of $5000 from vendor, on account.
August 15 - Accrue wages earned for employee from period of 1st through 15th of August
(Wage calculations table provided below)
August 15-Pay rent on bakery space $1500
August 18-Receive payments from customers towards accounts receivable in amount of $1000
August 20- paid $8500 toward baking supplies vendor payable
August 20- pay employee for period ending 8/15
August 22- $300 in misc. supplies purchased
August 31- received telephone bill for August in amount of $45. Payment is due on September 10th.
August 31- Accrue wages earned for employee for period of August 16th through August 31st
(Wage calculations table provided below)
August bakery sales total $20,000. $7,500 of this total on accounts receivable.
Step 3: Many customers have been asking for more hypo-allergenic products, so in September 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 use-FIFO, LIFO, or weighted average, so you calculate inventory using all three and then decide which one you would like to choose.
Please see the Inventory Valuation tab in your workbook, to review application of costs using the FIFO, LIFO, and average methods based on purchase and sales information. You will choose the method you feel most appropriate, and bring the journal entries from the inventory valuation page into your journal for the month of September, to ensure the impact of merchandising is reflected in your reporting.
Complete the following transactions in the September Journal Entries tab in your workbook.
September 1- paid dividends to self in amount of $3000
September 5-pay employee for period ending 8/31
September 7-Purchase merchandise for resale. See inventory valuation tab for details.
September 8- Receive payments from customers toward accounts receivable in amount of $4000
September 10- pay August telephone bill
September 11-purchase baking supplies in amount of $ 7,000 from vendor on account.
September 13- Paid on supplies vendor account in amount of $5000
September 15- Accrue employee wages for period of September 1st through September 15th
September 15- Pay rent on bakery space $1500
September 15-Record merchandise sales transaction. See inventory valuation tab for details.
September 15-Record impact of sales transaction on COGS and the inventory asset.
See inventory valuation tab for details.
September 20- Pay employee for period ending 9/15
September 20-Purchase merchandise inventory for resale to customers.
See inventory valuation tab for details.
September 24- Record sales of merchandise to customers.
See inventory valuation tab for details.
September 24- Record impact of sales transaction on COGS and the inventory asset.
See inventory valuation tab for details.
September 30-Purchase merchandise inventory for resale to customers.
See inventory valuation tab for details.
September 30-Accrue employee wages for period of September 16th through September 30th
Total September bakery sales $25,000. $6,000 of these sales on accounts receivable.
Step 4: Post entries to t accounts.
Use the t accounts page in your workbook to post all journal entries to the appropriate ledger account and calculate account balances as of September 30th.
Step 5: Prepare the Unadjusted Trial Balance
Use the t account balances completed in the previous step to prepare the unadjusted trial balance portion of the Trial Balance tab in your workbook.
Step 6:
You will use the "Adjusting Entries" tab in your workbook to complete the following entries.See sample for Depreciation of Baking Equipment. Take the adjusting entries from this worksheet and enter them into the trial balance on the Steps 5 and 7 Trial Balance tab.
On September 30, the following adjustments must be made:
- Depreciation of baking equipment transferred to company on 7/13. Assume ½ month of depreciation in July using the straight-line method.
- Accrue interest for note payable. Assume a full month of interest for July. (6% annual interest on $10,000 loan from parents.
- Record insurance used for the year.
- Actual baking supplies on-hand as of September 30th is $1100.
- Misc. supplies on-hand as of September 30th is $50.
Step 7: Apply adjusting entries to the trial balance to create the adjusted trial balance.
Adjusting entries from Step 6 will apply to affected accounts in the unadjusted trial balance to arrive at the adjusted trial balance.
Step 8: Prepare the financial statements
Use your adjusted trial balance to prepare the income statement, statement of owner's equity, and balance sheet. You must complete these statements in this order, as there are interdependencies among them.
Step 9: 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 10: You will use the Post Closing Trial Balance tab in your workbook to do the following:
Prepare the post-closing trial balance for the next accounting period.
Step 11: You will use the "Reversing Entries" tab in your workbook to do the following:
Prepare reversing entries.
This completes your workbook!
Project Guidelines -
Overview
One of the measures of success in any business is profitability. Managers and business owners must be able to assess the profitability of a company using information about its financial transactions. This is done through the use of accounting.
By working through the accounting cycle, you will understand how money flows through a company. This information can help you determine whether or not an organization can afford to stay open while employing current practices and what types of changes might be needed to allow the organization to become profitable if it is currently struggling financially. This process also helps you understand the level of attention to detail that is required in a successful business venture.
The assessment for this course consists of two major parts: an accounting workbook with supporting accounting cycle report and a memo that uses financial statements to assess whether a business is going in the right direction. In the accounting workbook, you will use course-provided information to record journal entries that document financial transactions in a business. To do this, you will follow the business transactions for a three-month period, starting from step one of the accounting cycle through the reporting process. These transactions will include the initial setup of the business, sales, and purchases, making payments to vendors, paying store employees, and managing debt. You will then create a brief report explaining the steps of the accounting cycle and the significance of those steps and the financial statements that come out of them for the business.
The accounting workbook and accounting cycle report will prepare you for the second part of final project, which consists of a memo to request funding for potential expansion. The memo will overview the company's accounting system, discuss what the financial statement suggests about the company's strengths and weaknesses, and present opportunities for future growth.
This first part of the final project addresses the following course outcomes:
- Apply the accounting cycle to business transactions for communicating financial data
- Analyze the steps of the accounting cycle for their impact on the success of a business
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 hypoallergenic. 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."
There are two components to this part of the final project: an accounting cycle workbook (submitted in Module Six) and an accounting cycle report (submitted in Module Seven).
To complete the first component, use accepted accounting principles to follow and record your business transactions for a three-month period from step one of the accounting cycle through the reporting process. Enter your transactions in the workbook provided. Your completed workbook will consist of journal entries for each transaction and postings of transactions to account ledgers. You will develop a trial balance from ledger balances and adjust revenue and expense accounts as necessary to ensure that revenues and expenses are reported in the appropriate period under the accrual accounting method. The adjusted trial balance will be used in preparation of the income statement, statement of owner's equity, balance sheet, and statement of cash flows. After preparation of financial statements, closing entries will be entered to transfer earnings to equity and prepare temporary accounts for the new accounting period.
Then, prepare a brief report that lays out the steps of the accounting cycle, explaining what each step does, why it is important to the success of a business, and what financial information is produced at the end of the cycle.
Specifically, the following critical elements must be addressed:
Accounting Cycle Workbook
a) Record all journal entries. Be sure that all information is recorded accurately.
b) Post entries to appropriate ledger accounts. Ensure all information is posted accurately.
c) Prepare unadjusted trial balance. Ensure unadjusted trial balance is prepared accurately.
d) Interpret trial balance and make appropriate end of period adjustments.
e) Post adjusted entries and prepare the adjusted trial balance.
f) Apply adjusted trial balance and prepare financial statements.
g) Close all temporary income statement accounts and create closing entries.
h) Prepare the post-closing trial balance for the next accounting period.
i) Cancel any applicable temporary adjusting entries and prepare reversing entries.
Accounting Cycle Report
a) Identify the steps of the accounting cycle and provide a description of each step.
b) What role does each step play in the success of a business?
c) How could the omission of a step impact the success of a business? What strategies could be used to avoid this?
d) What are the major financial statements that come out of the accounting cycle? Why are they important?
Attachment:- Assignment Files.rar