FINAL
GROUP PROJECT

ACCTG 3600

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SUMMER 2012

VERSION A

INSTRUCTIONS

Form
groups of 2 people to complete this project; alternatively, you can complete
the project individually.

Name
your company and pick the products and services that you sell

Complete
each of the requirements listed below in Part I and Part II

PART I Record Entries and Build the Financial Statements

Company Introduction and
Overview

Give
me quick overview of your company. What is your company’s name? What products
and services do you sell?

Journal Entry List

Record
entries from the transaction and event list provided below in proper journal
entry format.

NOTE:You are recording entries
for the fiscal year 2011 (Jan 1 – Dec 31). This list must beorganized.
Make sure that I can easily identify the journal entry with the related
transaction/event. Show your work if the entry requires you to make a
calculation (i.e. depreciation, interest expense, etc.).

Chart of T-Accounts

Create
a chart of T-Accounts and post each journal entry to the appropriate accounts.

Financial Statements

Build
an income statement and balance sheet for the year ending December 31, 2011.
Create a statement of cash flows for 2011.

PART II Analyze the Company

Ratio Analysis

Compute
the following using the information from the financial statements you have
produced for 2011. Show your work. Explain to me what
every calculation means (i.e. explain the answer to me in non-book language).

?

Earnings Per Share

?

Inventory Turnover

?

Price-earnings ratio

?

Gross Profit

?

Return on Equity

?

Gross Profit Ratio

?

Working Capital

?

Operating Income

?

Current Ratio

?

Operating Margin

?

Quick Ratio

?

Debt-to-equity ratio

?

AR Turnover

? Book value per
share

Page 1 of 6

Business Analysis

Perform
an analysis of your business using your results from the required calculations
listed above and any other trend information you deem to be relevant. Use these
calculations to determine how the company is doing overall. Hint:
Consider creating graphs/tables to support your conclusions NOTE:
Before you prepare your response to this question, you need to come up to me
and ask from which “point of view” you are to analyze the company. You will
either be a banker, an investor (stockholder), or the CEO of this company. This
is not for you to choose. I will assign this (once you ask).

Projected Income Statement
for 2012

Build
a projected income statement for next year based on forecasted sales that equal
$3,250,000. Use the results of the analysis you performed in the preceding
question and any other information you deem to be relevant to build this income
statement. Provide a brief explanation of the method(s) your group used to
determine the projected numbers.

Actual vs. Predicted Earnings
Per Share Evaluation

Analysts
predicted earnings per share (EPS) for your company to be $0.12 at the close of
2011. How does this compare to actual EPS for 2011? If actual EPS is higher
than the analysts’ prediction, what factors contributed to the success? If
actual EPS is lower than the prediction, how will you explain the shortfall to
your investors? Is there anything you could have done to meet the prediction? NOTE:
Assume that you are the CEO of the company when preparing your response
to this question.

SUBMIT THE
FOLLOWING

The
package you submit must be in the following order:

1.
Company
Introduction and Overview

2.
Financial
Statements in the following order:? Income Statement

? Balance Sheet

? Statement of Cash Flows for 2011

3.
Ratio
Analysis

4.
Business
Analysis

5.
Projected
Income Statement for 2012 – Remember to include a discussion of the methods
used by your group to create this income statement

6.
Actual
vs. Predicted Earnings Per Share Evaluation

7.
Journal
Entry List

8.
Chart
of T-Accounts

I expect the package
that you turn in to be professional in every way. Your project will be compared
to your classmate’s projects.

Good
Luck! -Melissa
Page 2 of 6

COMPANY
INFORMATION

Your
company began operations on January 1, 2009.

Your
company’s stock is traded on the NYSE with 4,000,000 common shares outstanding.

At
the close of December 31, 2011, your company’s stock was trading at $5 per
share. At the end of 2010 and 2009, the value of your stock was $3.80 and $2.90
per share, respectively.

BALANCE
SHEET

December
31,

2010

2009

Assets

Cash

$

785,000

$

675,000

Marketable
securities

75,000

15,000

Accounts receivable

455,000

525,000

Allowance
for Bad Debt

(25,000)

(105,000)

Prepaid
Insurance

Prepaid Rent

Office supplies

Inventory

975,000

775,000

Current Assets

2,265,000

1,885,000

Office furniture

Equipment

5,000,000

5,000,000

Accumulated
depreciation

(2,000,000)

(1,500,000)

Long-term notes
receivable

285,000

Land

1,450,000

1,450,000

Patent

Non-current Assets

4,735,000

4,950,000

Total Assets

$

7,000,000

$

6,835,000

Liabilities

Accounts payable

$

450,000

$

570,000

Wages payable

150,000

185,000

Interest Payable

Short-term Note
Payable

Deferred
Revenue

Dividends
payable

155,000

135,000

Current Liabilities

755,000

890,000

Long-term
notes payable

1,250,000

1,250,000

Total Liabilities

2,005,000

2,140,000

Stockholders’
Equity

Contributed
capital

3,000,000

3,000,000

Retained
earnings

1,995,000

1,695,000

Total Liabilities and SE

$

7,000,000

$

6,835,000

Page 3 of 6

Prior Income Statement Account
Balances

2010

2009

Sales,
net

$
2,435,000

$

2,500,000

Cost of goods sold

850,000

780,000

Wages expense

565,000

785,000

Interest income

52,000

56,000

Interest expense

56,250

56,250

Bad debt expense

60,750

45,000

Depreciation expense

500,000

500,000

2011 TRANSACTION AND
EVENT LIST VERSION A

HINT: Before booking an
entry, remember to evaluate the substance of each transaction/event. Do
accounting standards require the event or transaction to be booked into your
company’s accounting records? NOTE: All interest rates included in the
transaction list are stated at an annual rate.

You purchased additional
inventory at a cost of $350,000. You paid half in cash and purchased the
remainder on account.

Wage expenses for the year,
through Dec. 15th were $550,000. Pay this in full, but don’t forget about
your beg balance in wages payable. Pay your wages payable.

Wages earned between Dec.
15th and Dec 31st were $70,000. You won’t pay this until Jan 7th.

You collect $250,000 of
account payments from customers.

You pay $315,000 cash toward
your accounts payable.

Your company issued 1,000, 2
% bonds (face value of each bond is $1,000) at 95.4 on July 1, 2011. The
bonds are due on July 1, 2015, with interest payable each January 1 and
July 1. The market rate at the time of the bond issuance was 3 percent.
Use the effective-interest method to calculate both the interest expense
and the amortization of the bond discount when each interest payment is
made.

[Adjusting
Entry Required]

You calculate and book a
$500,000 depreciation expense for the year for equipment purchased before
January 1, 2011.

A customer pays you
$1,250,000 for work that you will perform in January of 2012.

On May 1, 2011, you pay the
dividends that you owe to your owners.

Your customers bought some of
your product (you decide what your company sells). The total sale amount
was $3,000,000. This cost of this product, to you, was $1,250,000.
Customers paid you 45% in cash and the remainder was on account.

Page 4 of 6

11. A piece of land that
was originally purchased for $1,450,000 was sold for $1,000,000 cash.

12. You receive interest
income based on your average cash balance. For fiscal year 2011, you earn and
receive $33,400 of interest revenue.

13. On December 31, 2011,
you declare dividends of $.25 per share to be paid at a later date.

14. Purchased $20,000 of
office supplies from Super Office Supplies with cash.

15. Purchased a parcel of
land on March 1, 2011 for $1,000,000 by paying $400,000 in cash and signing a
short-term note payable with the seller for $600,000. You must repay the
$600,000 in exactly one year on March 1, 2012. You agree to pay the seller 6
percent interest (annual rate) on a quarterly basis (June 1, September 1,
December 1, 2011, and March 1, 2012).

[Adjusting
Entry Required]

16. Purchased a filing
cabinet for $10,000 on account with California Furniture on January 1, 2011.
The new filing cabinet will be depreciated over a ten year period on a
straight-line basis. The cabinet has an estimated salvage value of $0.

[Adjusting
Entry Required]

17.
Purchased
a two-year building insurance policy on November 1st 2011 for $120,000 cash.
[Adjusting Entry Required]

18. Purchased a truck for
$200,000 cash on January 1, 2011. The truck will be depreciated over an 8 year
period. You decide to use the declining-balance depreciation method because it
is determined that the truck will be more productive when it is newer. The
truck has an estimated salvage value of $20,000.

[Adjusting
Entry Required]

19. Leased additional
warehouse space for two years on June 1, 2011. $48,000 cash was paid on this
date which covers the full rental fee for the two years.

[Adjusting
Entry Required]

20. Your top sales officer
met with a new customer to discuss a potential future contract. She informs you
that the customer is considering signing the $200,000 deal, which would become
effective next June.

21. On January 1, 2011, a 5
year, 5 percent $500,000 long-term note payable was taken from a local bank.
Interest is payable annually on December 31st.

22. At the end of the year,
$150,000 cash was paid to the local bank for the long-term note payable taken
out on January 1, 2011. Accrued interest was paid and the remaining amount was
applied towards principle.

23. $50,000 cash was paid
for an investment in Company X’s marketable securities on November 1, 2011.

Page 5 of 6

24. On December 31, 2011,
the marketable (trading) securities you purchased in the preceding transaction
had a fair market value of $60,000.

25. You contributed $30,000
of your own cash to the company.

26. On March 8, 2011, you
received a payment of $60,000 for 600 hours of service to be performed in the
future.

27. By December 31, 2011,
200 of the service hours in the preceding transaction were completed.

28. Paid cash for $20,000
worth of radio advertising on February 1st, 2011. This gives you radio
advertising space for the remainder of 2011.

29. Purchased $200,000 of
inventory for a new project. The purchase was made on account.

30. On December 31, 2011, the
utility bill was paid for the year. The amount was $50,000 and you paid in
cash.

31. A piece of equipment
was sold for $750,000 cash. The equipment was originally purchased for
$600,000. At the time of the sale, it had been depreciated by $50,000.

32. Received a $20,000 cash
payment from a customer paying on their account.

33. Paid your supplier
$15,000 cash for an inventory purchase made on account two months ago.

34. An employment contract
is signed with a new regional manager. You have offered him $150,000 per year.
He will not begin working for the company until March 2012.

35. A count of office
supplies indicated that $3,000 of office supplies had been used by December 31,
2011.

36. Purchased and used $800
worth of fuel for the delivery truck during the month of December.

37. Purchased a Patent
(Intangible Asset) for $30,000 on August 1, 2011. The patent will be amortized
over a 10 year period on a straight-line basis.

[Adjusting
Entry Required]

38. A customer that
previously bought your product on account has filed for bankruptcy. He owed you
$22,000. You expect to collect $0.

39. You believe that the
historical rate used to estimate bad debt expense is way too low. After careful
analyses, you determine that the company usually only collects 80% of
outstanding accounts receivable. Based on this information, adjust your
allowance for bad debt account. NOTE:Use your 2011
ending accounts receivable balance to make this calculation.

Page 6 of 6

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