Financial Accounting

• Suggested Resources

  The resources provided here are optional. You may use other resources of your choice to prepare for this assessment; However, you will need to ensure that they are appropriate, credible, and valid. They provide helpful information about the topics in this unit. The MBA-FP6014 – Financial Accounting Library Guide can help direct your research. The Supplemental Resources and Research Resources, both linked from the left navigation menu in your courseroom, provide additional resources to help support you.The following resources are assessment specific templates for completing the assessment.

  • Preparing Financial Statements Template.
  • T-Account Transactions Template.

  The following resources provide relevant financial accounting methods and practices.

  • Doran, D. T. (2012). Financial reporting standards: A decision-making perspective for non-accountants. New York, NY: Business Experts Press.
    • Chapter 1, “Overview of Financial Accounting,” Pages 2-25
  • Libby, R., Libby, P., & Hodge, F. (2017). Financial accounting (9th ed.). New York, NY: Irwin. – Available from the bookstore
    • Chapter 1, “Financial Statements and Business Decisions,” pages 2–25.
    • Chapter 2, “Investing and Financing Decisions and the Balance Sheet,” pages 42–75.

• Assessment Instructions

  Note: Some of the assessments in this course build upon each other, so you are strongly encouraged to complete them in the order in which they are presented.For this assessment, complete Problems 1 and 2. You may use Word or Excel to complete the assessments throughout this course, but you will find Excel to be most helpful for creating spreadsheets. Tutorials for using Excel are provided in the Supplemental Resources in the left navigation menu. If you use Excel, submit the assessment in one Excel document, using separate tabs for each spreadsheet.Templates for both problems are linked in the Suggested Resources under the Capella Resources heading.

  Problem 1: Preparing an Income Statement, a Statement of Retained Earnings, and a Balance Sheet

  At the end of its first year of operations (December 31, 2012), the Acme Company released the financial data shown in Table 1 below:

  Table 1: Acme Company Financial Data

  Account	Amount
  Cash	$25,000
  Receivables from customers (no allowance for doubtful accounts is needed)	$20,300
  Inventory of merchandise	$81,000
  Equipment owned, at cost of $60,700 net of A/depreciation of $20,000	$40,700
  Accounts payable owed to supplies	$66,140
  Salary payable for 2012 (to be paid on January 4, 2013)	$1,800
  Total sales revenue	$126,000
  Operating expenses, including the cost of the merchandise sold	$80,200
  Income taxes expense at 30% of pretax income; all paid during 2012	?
  Contributed capital 10,000 shares outstanding	$87,000
  Dividends declared and paid during 2012	$20,000

  Using knowledge from prior courses, work experience, textbooks, or Internet sources, as well as the financial data provided in Table 1, prepare the following financial statements for the Acme Company:

  1. Summarized income statement for the year 2012.
  2. Statement of retained earnings for the year 2012.
  3. Balance sheet at December 31, 2012.
  4. Liquidity ratios and an explanation of what those ratios tell us.

  You may choose to use the Preparing Financial Statements Template, which is linked in the Suggested Resources under the Capella Resources heading, to complete this problem.

  Problem 2: Using T-Accounts, Preparing the Balance Sheet, and Computing and Interpreting the Current Ratio

  Johnson Company has been operating for several years. At December 31, 2012, the accounting records reflected the following data, shown in Table 2 below:

  Table 2: Johnson Company Financial Data

  Account	Amount
  Cash	$9,000
  Investments (short-term)	$4,000
  Accounts receivable	$13,000
  Inventory	$22,000
  Notes receivable (long-term)	$1,000
  Equipment	$48,000
  Factory building	$90,000
  Intangibles	$3,000
  Accounts payable	$15,000
  Accrued liabilities payable	$2,000
  Notes payable (short-term)	$7,000
  Long-term notes payable	$46,000
  Contributed capital	$90,000
  Retained earnings	$30,000

  During the year 2013, Johnson Company had the following summarized activities:

  • a. Purchased short-term investments for $10,000 cash.
  • b. Lent $8,000 to a supplier who signed a three-year note.
  • c. Purchased equipment that cost $28,000; paid $4,000 cash and signed a one-year note for the balance.
  • d. Hired a new president at the end of the year. The contract was for $110,000 per year plus options to purchase company stock at a set price based on company performance.
  • e. Issued an additional 1,000 shares of capital stock for $12,000 cash.
  • f. Borrowed $20,000 cash from a local bank, payable in three months.
  • g. Purchased a patent (an intangible asset) for $4,000 cash.
  • h. Built an addition to the factory for $45,000; paid $10,000 in cash and signed a three-year note for the balance.
  • i. Returned defective equipment to the manufacturer, receiving a cash refund of $1,000.

  Using knowledge from prior courses, work experience, textbooks, or Internet sources, as well as the financial data provided above, complete the following:

  1. Create T-accounts for each of the accounts on a balance sheet and enter the balances at the end of 2012 as beginning balances for 2013. Prepare a trial balance for 12/31/12.
  2. Record each of the events for 2013 in T-accounts and determine the ending balances. For each recording (posting), include the identifying letter (a through i). Prepare a trial balance for 12/31/12.
  3. Explain why you did or did not record item d, the hiring of the president, in a T-account.
  4. Prepare a balance sheet at December 31, 2013. Classify the balance sheet as appropriate (into current assets, fixed assets, and so on).
  5. Compute the current ratio for 2013. The current ratio measures the ability of the organization to pay their current obligations. Interpret this ratio as it applies to Johnson Company at December 31, 2013, as compared to December 31, 2012.

  To complete this problem, you may choose to use the T-Account Transactions Template, which is linked in the Resources under the Capella Resources heading.

  Financial Statements and T-Account Transactions Scoring Guide

  View Scoring GuideUse the scoring guide to enhance your learning.How to use the scoring guide

• [u01a1] Financial Statements And T-Account Transactions

  Complete two problems in which you prepare a variety of financial documents (income statement, statement of stockholders’ equity, and balance sheet), practice using T-accounts, and compute and analyze financial data for hypothetical companies

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