Southern New Hampshire University

ACC 308 - Intermediate Accounting II

Note: This workbook contains instructions and

financial information you will need to complete the
Workbook portions of Milestones One and Two. For
full instructions for the milestone and final project
assignments, refer to the guidelines and rubric
documents.

You can use the links below to navigate from this

HOME tab to additional instructions and the
worksheets for each milestone.

MILESTONE ONE
(Due in Module Three)

Milestone OneWorkbook Instructions

1. Trial Balance

Using the Peyton Approved financial data, create:

Adjusting Entries
Adjusted Trial Balance

2. Revised Financial Statements

Using the trial balance and preliminary financial

statements, prepare:

Revised Balance Sheet

 Revised Income Statement
Revised Retained Earnings Statement
Revised Statement of Cash Flows

3. Ratio Analysis
Note: Refer to the Final Project Scenario for Peyton's ratio
formulas.

Using the financial statements from 2015, 2016, and

revised 2017, calculate the following ratios:

Current Ratio (Working Capital)

Quick Ratio

A/R Turnover
Inventory Turnover
Gross Margin
Return on Sales
Return on Equity
Return on Assets

4. Management Analysis Brief

Note: This part of the project is submitted as a separate
Word document. Refer to the Milestone One Guidelines
and Rubric document for submission guidelines.

Your management analysis brief should explain financial

information to management. Provide evidence from your
accounting workbook to support your ideas where
applicable.

A. Assess the company’s financial health based on

ratio analyses presented in the accounting workbook.
B. Compare ratio analysis to trends in financial ratios
over time for illustrating their impact, providing
examples to support your claims.
C. Summarize the effects of different compounding
periods and interest rates on future value of money.
D. Explain how alignment to relevant regulations and
ethical reporting influenced your accounting practices
and notes, providing examples to support your claims.
 MILESTONE TWO
(Due in Module Five)

Milestone TwoWorkbook Instructions

1. Pro Forma Financial Statements

Using the given pro forma information, create:

Pro Forma Income Statement
Pro Forma Balance Sheet

2. Notes to the Financial Statements

Note: This part of the project is submitted as a separate
Word document. Refer to the Milestone Two Guidelines
and Rubric document for submission guidelines.

Your notes must contain the following:

A. Create appropriate notes as year-to-year
documentation for managing depreciation, supplies,
and inventory.
 B. Create appropriate notes for long-term debt.

3. Management Analysis Brief

Note: This part of the project is submitted as a separate
Word document. Refer to the Milestone Two Guidelines
and Rubric document for submission guidelines.

Your management analysis brief should explain financial

information to management. Provide evidence from your
accounting workbook to support your ideas where
applicable.
A. Discuss the impact of the pro forma financial
statements for predicting ability to meet future
expansion goals.
B. Describe the implications of inventory costing,
contingent liabilities, and revenue recognition.
C. Identify potential issues in interpretation of
financial information, providing examples to support
your ideas.
 FINAL PROJECT
(Due in Module Seven)

Note: The final project consists of corrected work from

Milestone One and Milestone Two. Incorporate the
feedback you received from your instructor.
 ReturnHOME

INSTRUCTIONS FOR MILESTONE ONE

(Due in Module Three)

Note: Make sure to completely review the Milestone One

Guidelines and Rubric document.

Use the data from this milestone and begin working on your
final project, due in Module Seven.

ITEMS TO COMPLETE FOR MILESTONE ONE:

The tabs to complete are linked below and colored blue for
convenience.

GENERAL

You just began a position as a financial accountant at

Peyton Approved. In this role, your first task is to prepare
the company’s financials for the year-end audit.
Additionally, the company is interested in expanding its
business within the next year. They would like your
support in assessing their ability to meet their goals.

1. TRIAL BALANCE

Using the Peyton Approved financial data provided below:

A. Create the necessary adjusting journal entries. Use
the REF column to reference the entry to each event.
B. Complete the adjusted trial balance.
Trial Balance 2017

2. REVISED FINANCIAL STATEMENTS

Peyton Approved's preliminary financial statements are
provided in the yellow tabs.
Balance Sheet 2017

Income Statement 2017

Retained Earnings 2017

Cash Flow 2017

 Using the preliminary financial statements and the Trial
Balance 2017, prepare the following statements:
Balance Sheet 2017 Revised

Income Statement 2017 Revised

Retained Earnings Statement 2017 Revised

Statement of Cash Flows 2017 Revised

Note: Refer to Module Three resources for a refresher on

statement of cash flows.

Peyton Approved's previous years' financial statements

are provided in the orange tabs.

Balance Sheet 2015

Balance Sheet 2016

Income Statement 2016

3. RATIO ANALYSIS
Using the revised 2017 financial statements, 2016 financial
statements, and 2015 financial statements, prepare a ratio
analysis for Peyton Approved.

Note: Refer to the Final Project Scenario for Peyton's ratio

formulas.
Ratio Analysis

PEYTON APPROVED FINANCIAL DATA

Preliminary financial statements have already been

prepared (2017 statements in the Final Project Workbook).
Final adjusting entries have not yet been made. See table
for possible adjustments that indicate what will be recorded
at 12/31/17 (fiscal year end). Use the following to complete
year-to-year documentation and notes for managing
depreciation, inventory, and long-term debt.
1. A supplier shipped $3,000 of ingredients on 12/29/17.
Peyton receives an invoice for $3,175—goods of $3,000 and
freight of $175—all dated 12/29/17. Goods were shipped
FOB supplier’s warehouse.

2. At 12/31/17, Peyton has $200 worth of merchandise on

consignment at Bruno’s House of Bacon.

3. On 12/23/17, Peyton received a $1,000 deposit from Pet

Globe for product to be shipped by Peyton in the second
week of January.

4. On 12/03/2017, a mixer with cost of $2,000, accumulated

depreciation $1,200, was destroyed by a forklift. As of
12/23/17, insurance company has agreed to pay $700 in
January 2018, for accidental destruction.

4. MANAGEMENT ANALYSIS BRIEF

Note: This part of the project is submitted as a separate
Word document. Refer to the Milestone One Guidelines and
Rubric document for submission guidelines.

Your management analysis brief should explain financial

information to management. Provide evidence from your
accounting workbook to support your ideas where
applicable.
A. Assess the company’s financial health based on ratio
analyses presented in the accounting workbook.
B. Compare ratio analysis to trends in financial ratios
over time for illustrating their impact, providing
examples to support your claims.
C. Summarize the effects of different compounding
periods and interest rates on future value of money.

D. Explain how alignment to relevant regulations and

ethical reporting influenced your accounting practices
and notes, providing examples to support your claims.
Milestone OneWorkbook Instructions

Unadjusted trial balance

Dr
Cash 67,520.04
Accounts Receivable 68,519.91
Other Receivable - Insurance
Baking Supplies 15,506.70
Merchandise Inventory 1,238.07
Consignment Inventory
Prepaid Rent 2,114.55
Prepaid Insurance 2,114.55
Misc. Supplies 170.49
Baking Equipment 14,000.00
Accumulated Depreciation
Customer Deposit
Accounts Payable
Wages Payable
Interest Payable
Notes Payable
Common Stock
Beginning Retained earnings
Dividends 105,000.00
Bakery Sales
Merchandise Sales
Cost of Goods Sold - Baked 105,834.29
Cost of Goods Sold - Merchandise 859.77
Rent Expense 24,549.19
Wages Expense 10,670.72
Misc. Supplies Expense 3,000.46
Business License Expense 2,045.77
Misc. Expense 1,363.84
Depreciation Expense 677.86
Insurance Expense 1,091.08
Advertising Expense 1,549.74
Interest Expense 818.31
Telephone Expense 490.98
Loss on Disposal of Fixed Asset
429,136.32
 PEYTON APPROVED
TRIAL BALANCE
As of December 31, 2017

justed trial balance Adjusting entries Adjusted trial balance

Cr ref Dr Cr ref Dr
1,000.00 68,520.04
68,519.91
700.00 700.00
3,175.00 18,681.70
200.00 1,438.07
200.00 (200.00)
2,114.55
2,114.55
170.49
2,000.00 12,000.00
1,606.44 1,200.00
1,000.00
20,262.11 3,175.00
3,383.28
211.46
5,000.00
20,000.00
50,144.84
105,000.00
327,322.55
1,205.64
105,834.29
859.77
24,549.19
10,670.72
3,000.46
2,045.77
1,363.84
677.86
1,091.08
1,549.74
818.31
490.98
100.00 100.00
429,136.32 6,375.00 6,375.00 432,111.32
usted trial balance
Cr

406.44
1,000.00
23,437.11
3,383.28
211.46
5,000.00
20,000.00
50,144.84

327,322.55
1,205.64
432,111.32
 Preliminary

Peyton Approved
Balance Sheet
As of December 31, 2017

Assets Liabilities and Owners' Equity

Current Assets: Current Liabilities:
Cash $ 67,520.04 Accounts Payable
Accounts Receivable 68,519.91 Wages Payable
Baking Supplies 15,506.70 Interest Payable
Merchandise Inventory 1,238.07
Prepaid Rent 2,114.55
Prepaid Insurance 2,114.55
Misc. Supplies 170.49

Total Current Assets $ 157,184.31 Total Current Liabilities

Long Term Liabilities:

Long Term/Fixed Assets: Notes Payable
Baking Equipment 14,000.00 Total Long Term Liabilities:
Accumulated Depreciation -1,606.44
Net Fixed assets 12,393.56 Total Liabilities:

Common Stock
Retained Earnings

Total Equity

Total Assets: $ 169,577.87 Total Liabilities & Equity

nd Owners' Equity
Liabilities:
$ 20,262.11
3,383.28
211.46

rrent Liabilities $ 23,856.85

rm Liabilities:
5,000.00
ng Term Liabilities: 5,000.00

28,856.85

20,000.00
120,721.02

140,721.02

bilities & Equity $ 169,577.87

 Milestone OneWorkbook Instructions
Revised
Peyton Approved
Balance Sheet
As of December 31, 2017

Assets
Current Assets:
Cash $ 68,520.04
Accounts Receivable 68,519.91
Other Receivables-Insurance 700.00
Baking Supplies 18,681.70
Merchandise Inventory 1,438.07
Confignment Inventory -200.00
Prepaid Rent 2,114.55
Prepaid Insurance 2,114.55
Misc. Supplies 170.49

Total Current Assets $ 162,059.31

Long Term/Fixed Assets:

Baking Equipment 12,000.00
Accumulated Depreciation -406.44
Net Fixed assets 11,593.56

Total Assets: $ 173,652.87

 ton Approved
alance Sheet
ecember 31, 2017

Liabilities and Owners' Equity

Current Liabilities:
Accounts Payable $ 23,437.11
Wages Payable 3,383.28
Interest Payable 211.46
Incurred Liability 1,000.00

Total Current Liabilities $ 28,031.85

Long Term Liabilities:

Notes Payable 5,000.00
Total Long Term Liabilities: 5,000.00

Total Liabilities: 33,031.85

Common Stock 20,000.00

Retained Earnings 120,621.02

Total Equity 140,621.02

Total Liabilities & Equity $ 173,652.87

Preliminary

Peyton Approved
Income Statement
for Year Ended 12/31/2017

Bakery Sales $ 327,322.55

Merchandise Sales 1,205.64
Total Revenues 328,528.19
Cost of Goods Sold - Baked 105,834.29
Cost of Goods Sold - Merchandise 859.77
Total Cost of Goods Sold 106,694.06
Gross Profit 221,834.13

Operating Expenses:

Rent Expense 24,549.19

Wages Expense 10,670.72
Misc. Supplies Expense 3,000.46
Business License Expense 2,045.77
Misc. Expense 1,363.84
Depreciation Expense 677.86
Insurance Expense 1,091.08
Advertising Expense 1,549.74
Interest Expense 818.31
Telephone Expense 490.98
Total Operating Expenses: 46,257.95

Net Income 175,576.18

Milestone OneWorkbook Instructions

Revised

Bakery Sales $ 327,322.55

Merchandise Sales 1,205.64
Total Revenues
Cost of Goods Sold - Baked 105,834.29
Cost of Goods Sold - Merchandise 859.77
Total Cost of Goods Sold
Gross Profit

Operating Expenses:

Rent Expense 24,549.19

Wages Expense 10,670.72
Misc. Supplies Expense 3,000.46
Business License Expense 2,045.77
Misc. Expense 1,363.84
Depreciation Expense 677.86
Insurance Expense 1,091.08
Advertising Expense 1,549.74
Interest Expense 818.31
Telephone Expense 490.98
Loss on Disposal of Fixed Asset 100.00
Total Operating Expenses:

Net Income
 Peyton Approved
Income Statement
for Year Ended 12/31/2017

328,528.19

106,694.06
221,834.13

46,357.95

175,476.18
Preliminary

Peyton Approved
Statement of Retained Earnings
for Year Ended 12/31/2017

Beginning Balance: $ 50,144.84

plus Net Income 175,576.18

less Dividends: 105,000.00

Ending Balance $ 120,721.02
Milestone OneWorkbook Instructions

Revised
Peyton Approved
Statement of Retained Earnings
for Year Ended 12/31/2017

Beginning Balance:
plus Net Income

less Dividends:
Ending Balance
$ 50,144.84
175,476.18

105,000.00
$ 120,621.02
Preliminary

Peyton Approved
Statement of Cash Flow
for Year Ended 12/31/2017

Net Income $ 175,576.18

Depreciation Expense 677.86
176,254.04

Increase in Accounts Receivable (25,886.91)

Increase in Baking Supplies (8,187.84)
Increase in Merchandise inventory (443.10)
Increase in Prepaid Rent (449.55)
Increase in Prepaid Insurance (1,004.55)
Increase in Misc. Supplies (114.99)
Increase in Accounts Payable 3,292.11
Increase in Wages Payable 1,850.48
Increase in Interest Payable 44.96

Operating Cash Flow

Cash Flow from Investments

Equipment Purchases (6,000.00)

Cash Flow from Investments

Cash Flow from Financing

Repayment of Note Payable (10,000.00)
Dividends Paid (105,000.00)

Cash Flow from Financing

Net Cash Flow

Beginning Cash

Ending Cash
145,354.65

(6,000.00)

(115,000.00)

24,354.65

43,165.39

67,520.04
Milestone OneWorkbook Instructions

Revised
Peyton Approved
Statement of Cash Flow
for Year Ended 12/31/2017

Net Income $ 175,476.18

Depreciation Expense 677.86
Loss on Disposal of Fixed Asset 100.00

Increase in Accounts Receivable

Increase in Other Receivables
Increase in Baking Supplies
Increase in Merchandise inventory
Increase in Consignment inventory
Increase in Prepaid Rent
Increase in Prepaid Insurance
Increase in Misc. Supplies
Increase in Accounts Payable
Increase in Wages Payable
Increase in Interest Payable
Increase in Customer Deposit

Operating Cash Flow

Cash Flow from Investments

Equipment Purchases

Cash Flow from Investments

Cash Flow from Financing

Repayment of Note Payable
Dividends Paid

Cash Flow from Financing

Net Cash Flow

Beginning Cash

Ending Cash

0
176,254.04

(25,886.91)
(700.00)
(11,362.84)
(243.10)
(200.00)
(449.55)
(1,004.55)
(114.99)
6,467.11
1,850.48
44.96
1,000.00

145,654.65

(6,000.00)

(6,000.00)

(10,000.00)
(105,000.00)

(115,000.00)

24,654.65
43,165.39

67,820.04
 Peyton Approved
Balance Sheet
As of December 31, 2015

Assets Liabilities and Owners' Equity

Current Assets: Current Liabilities:
Cash 31507.58 Accounts Payable
Accounts Receivable 35118.97 Wages Payable
Baking Supplies 8042.23 Interest Payable
Merchandise Inventory 580.27
Prepaid Rent 1215.32
Prepaid Insurance 810.21
Misc. Supplies 40.51

Total Current Assets 77,315.09 Total Current Liabilities

Long Term Liabilities:

Long Term/Fixed Assets: Notes Payable
Baking Equipment 6000 Total Long Term Liabilities:
Accumulated Depreci -677.79
Net Fixed assets 5,322.21 Total Liabilities:

Common Stock
Retained Earnings

Total Equity

Total Assets: 82,637.30 Total Liabilities & Equity

d Owners' Equity
iabilities:
15086.84
1118.83
121.53

rent Liabilities 16,327.20

m Liabilities:
10,000.00
g Term Liabilities: 10,000.00

26,327.20

20,000.00
36,310.10

56,310.10

bilities & Equity 82,637.30

 Peyton Approved
Balance Sheet
As of December 31, 2016

Assets Liabilities and Owners' Equity

Current Assets:
Cash 43,165.39
Accounts Receivable 42,633.00
Baking Supplies 7,318.86
Merchandise Inventory 794.97
Prepaid Rent 1,665.00
Prepaid Insurance 1,110.00
Misc. Supplies 55.50

Total Current Assets 96,742.72

Long Term/Fixed Assets:

Baking Equipment 8,000.00
Accumulated Depreciation -928.58
Net Fixed assets 7,071.42

Total Assets: 103,814.14

 on Approved
lance Sheet
ecember 31, 2016

Liabilities and Owners' Equity

Current Liabilities:
Accounts Payable 16,970.00
Wages Payable 1,532.80
Interest Payable 166.50

Total Current Liabilities 18,669.30

Long Term Liabilities:

Notes Payable 15,000.00
Total Long Term Liabilities: 15,000.00

Total Liabilities: 33,669.30

Common Stock 20,000.00

Retained Earnings 50,144.84

Total Equity 70,144.84

Total Liabilities & Equity 103,814.14

 Peyton Approved
Income Statement
for Year Ended 12/31/2016

Bakery Sales 214,256.48

Merchandise Sales 770.76
Total Revenues 215,027.24
Cost of Goods Sold - Baked 73,159.59
Cost of Goods Sold - Merchandise 549.64
Total Cost of Goods Sold 73,709.23
Gross Profit 141,318.01

Operating Expenses:

Rent Expense 15,694.23

Wages Expense 6,821.76
Misc. Supplies Expense 1,668.18
Business License Expense 1,307.85
Misc. Expense 871.9
Depreciation Expense 433.36
Insurance Expense 697.52
Advertising Expense 740.74
Interest Expense 523.14
Telephone Expense 313.88
Total Operating Expenses: 29,072.56

Net Income 112,245.45

Milestone OneWorkbook Instructions

Note: Refer to the Final

Project Scenario document
for Peyton's ratio formulas.
Peyton Approved
Ratio Analysis

2017 2016

Current Ratio (Working Capital) 5.78 5.18

Quick Ratio 4.89 4.60

A/R Turnover 5.91 5.04

Inventory Turnover 7.61 8.81

Gross Margin 68% 66%

Return on Sales 53% 52%

Return on Equity 125% 161%

Return on Assets 101% 109%

 ReturnHOME

INSTRUCTIONS FOR MILESTONE TWO

(Due in Module Five)

Note: Make sure to completely review the Milestone Two

Guidelines and Rubric document.

Use the data from Milestone One and this milestone to

complete your final project, due in Module Seven.

ITEMS TO COMPLETE FOR MILESTONE TWO:

The tabs to complete are linked below and colored green for
convenience.

GENERAL
Use information from Milestone One and the plan to open
a new location for your statements. Peyton Approved's
pro forma information is provided below.

1. PRO FORMA FINANCIAL STATEMENTS

Note: Pro forma statements are "what if" statements. If

the company opens the second location, what will the
budgeted income statement and budgeted balance sheets
be?

Using the preliminary statements as a base, prepare the

following pro forma financial statements for the proposed
new location. Pro forma statements in this case are
budgeted statements for 2018 based on the new location
scenario at the bottom of the page.
Pro Forma Income Statement

Pro Forma Balance Sheet

PEYTON APPROVED PRO FORMA INFORMATION

The company is planning to open another location in 2018.
Prepare pro forma financials for 2018 for the new location
using the following information:

1. Cost of leasing commercial space: $1,500 per month.

2. Cost of new equipment: $15,000, purchased with a long-

term note. Use straight line depreciation assuming a seven-
year life, no residual value. Use full year’s depreciation for
the first year. Equipment purchase was financed with a
long-term note.

3. Cost of hiring and training new employees: three at

$25,000 each for the first year.

4. Cash: $7,000. Accounts receivable amount to 4.0 turns

(accounts receivable turnover will be 4.0); inventory amount
to show 3.0 turns (inventory turnover will be 3.0). No stock
will be issued. Retained earnings are to equal net income.
Additional financing of $5,000 will be long term. Add
remaining amount needed to balance into accounts
payable.

5. Except as noted above, assets, current liabilities, sales,

costs, and expenses are expected to be 80% of the existing
store (from preliminary statements) except no stock.
Retained Earnings = Net Income

2. NOTES TO THE FINANCIAL STATEMENTS

Note: This part of the project is submitted as a separate
Word document. Refer to the Milestone Two Guidelines
and Rubric document for submission guidelines.

You will find an example for how to format these notes

located in the Module Five resources.

Your notes must contain the following:

A. Create appropriate notes as year-to-year
documentation for managing depreciation, supplies, and
inventory.
B. Create appropriate notes for long-term debt.
Peyton Approved uses the following accounting practices:
• Inventory: Periodic, LIFO for both baking and
merchandise
• Equipment: Straight line method used for equipment

3. MANAGEMENT ANALYSIS BRIEF

Note: This part of the project is submitted as a separate
Word document expanding on the work you completed
for Milestone One. Refer to the Milestone Two Guidelines
and Rubric document for submission guidelines.

Your management analysis brief should explain financial

information to management. Provide evidence from your
accounting workbook to support your ideas where
applicable.
A. Discuss the impact of the pro forma financial
statements for predicting ability to meet future
expansion goals.
B. Describe the implications of inventory costing,
contingent liabilities, and revenue recognition.
C. Identify potential issues in interpretation of financial
information, providing examples to support your ideas.
 Milestone TwoWorkbook Instructions

Peyton Approved Second Locati

Pro Forma Income Statement
for Year Ending 12/31/2018

Bakery Sales 261,858.04

Merchandise Sales 964.51
Total Revenues 262,822.55
Cost of Goods Sold - Baked 84,667.43
Cost of Goods Sold - Merchandise 687.82
Total Cost of Goods Sold 85,355.25
Gross Profit 177,467.30

Operating Expenses:

Rent Expense 18,000.00

Wages Expense 75,000.00
Misc. Supplies Expense 2,400.37
Business License Expense 1,636.62
Misc. Expense 1,091.07
Depreciation Expense 2,142.86
Insurance Expense 872.86
Advertising Expense 1,239.79
Interest Expense 654.65
Telephone Expense 392.78
Total Operating Expenses: 103,431.00

Net Income 74,036.30

Peyton Approved Second Location
Pro Forma Income Statement
for Year Ending 12/31/2018
 Milestone TwoWorkbook Instructions

Peyton Approved Second Location

Pro Forma Balance Sheet
As of December 31, 2018

Assets Liabilities and Owners' Eq

Current Assets:
Cash 7,000.00
Accounts Receivable 65,705.64
Baking Supplies 28,222.48
Merchandise Inventory 229.27
Prepaid Rent 1,691.64
Prepaid Insurance 1,691.64
Misc. Supplies 136.39

Total Current Assets 104,677.06

Long Term/Fixed Assets:

Baking Equipment 15,000.00
Accumulated Depreciat -2,142.86
Net Fixed assets 12,857.14

Total Assets: 117,534.20

Liabilities and Owners' Equity
Current Liabilities:
Accounts Payable 20,622.11
Wages Payable 2,706.62
Interest Payable 169.17

Total Current Liabilities 23,497.90

Long Term Liabilities:

Notes Payable 20,000.00
Total Long Term Liabilities: 20,000.00

Total Liabilities: 43,497.90

Common Stock -
Retained Earnings 74,036.30

Total Equity 74,036.30

Total Liabilities & Equity 117,534.20