ACC 308 Milestone One Guidelines and Rubric
Overview: For Milestone One, which is due in Module Three, you will create adjusting entries for various situations, prepare annual financial reports, calculate
ratios, and develop a brief report for management explaining accounting ratios and the effects of interest rates on the future value of money. You will build on
this milestone in subsequent modules leading up to the final project.
Prompt: First, review the Final Project Scenario document and the accompanying Final Project Workbook. Follow the instructions below and complete the
workbook with the information provided in the scenario. Using your review of the scenario, develop a management analysis brief that addresses the critical
elements indicated below. Use information from your accounting workbook to support your claims in the management analysis brief.
Note: Milestone One is a draft of some critical elements of the final project. Note that the management analysis brief corresponds to the m anagement analysis
memo in the final project.
Specifically, the following critical elements must be addressed:
I. Accounting Workbook: Your accounting workbook must include appropriate calculations, ratios, and notes:
A. Create adjusting entries for financial statement preparation.
B. Create an adjusted trial balance for financial statement preparation.
C. Prepare financial statements for determining the company’s financial position.
D. Calculate ratios for determining the company’s financial health. Refer to the Final Project Scenario for the ratio formulas.
II. Management Analysis Brief: Your management analysis brief should explain financial information to management. Provide evidence from your
accounting workbook to support your ideas when 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.
Rubric
Guidelines for Submission: You will submit two files for this milestone. Your accounting workbook must be submitted as a Microsoft Excel document. Your
management analysis brief should be a 1- to 2-page Microsoft Word document with double spacing, 12-point Times New Roman font, and one-inch margins.
Critical Elements Proficient (100%) Needs Improvement (75%) Not Evident (0%) Value
Accounting Workbook:
Adjusting Entries
Creates adjusting entries for financial
statements preparation
Creates adjusting entries, but entries
are inaccurate
Does not create adjusting entries 12
Critical Elements Proficient (100%) Needs Improvement (75%) Not Evident (0%) Value
Accounting Workbook:
Adjusted Trial Balance
Creates an adjusted trial balance for
financial statement preparation
Creates an adjusted trial balance, but
balances are inaccurate
Does not create an adjusted trial
balance
12
Accounting Workbook:
Financial Statements
Prepares financial statements for
determining the company’s financial
position
Prepares financial statements, but
calculations are inaccurate
Does not prepare financial statements 12
Accounting Workbook:
Ratios
Calculates ratios for determining the
company’s financial health
Calculates ratios but calculations are
inaccurate
Does not calculate ratios 12
Management Analysis Brief:
Company’s Financial Health
Assesses the company’s financial health
based on ratio analyses presented in the
accounting workbook
Assesses the company’s financial health,
but assessment is cursory or contains
inaccuracies
Does not assess the company’s financial
health
12
Management Analysis Brief:
Ratio Analysis and Ratios
Over Time
Compares ratio analysis to trends in
financial ratios over time for illustrating
their impact, providing examples to
support claims
Compares ratio analysis to trends over
time for illustrating their impact, but
examples are cursory, or response
contains inaccuracies
Does not compare ratio analysis to
trends in financial ratios over time
12
Management Analysis Brief:
Compounding Periods and
Interest Rates
Summarizes the effects of different
compounding periods and interest rates
on future value of money
Summarizes the effects of different
compounding periods and interest rates
on future value of money, but summary
is cursory or contains inaccuracies
Does not summarize the effects of
different compounding periods and
interest rates on future value of money
12
Management Analysis Brief:
Regulations and Ethical
Reporting
Explains how alignment to relevant
regulations and ethical reporting
influenced accounting practices and
notes, and provides examples to
support claims
Explains how alignment to relevant
regulations and ethical reporting
influenced accounting practices and
notes, but explanation or examples are
cursory or illogical
Does not explain how alignment to
relevant regulations and ethical
reporting influenced accounting
practices and notes
12
Articulation of Response Submission has no major errors related
to citations, grammar, spelling, syntax,
or organization
Submission has major errors related to
citations, grammar, spelling, syntax, or
organization that negatively impact
readability and articulation of main
ideas
Submission has critical errors related to
citations, grammar, spelling, syntax, or
organization that prevent understanding
of ideas
4
Total 100%
ACC 308 Milestone One Guidelines and Rubric
Rubric
HOME
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 TWO
(Due in Module Five) FINAL PROJECT
(Due in Module Seven)
Milestone One
Workbook Instructions Milestone Two
Workbook Instructions Note: The final project consists of corrected work from Milestone One and Milestone Two. Incorporate the feedback you received from your instructor.
1. Trial Balance 1. Pro Forma Financial Statements
Using the Peyton Approved financial data, create: Using the given pro forma information, create:
Adjusting Entries Pro Forma Income Statement
Adjusted Trial Balance Pro Forma Balance Sheet
2. Revised Financial Statements 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.
Using the trial balance and preliminary financial statements, prepare: Your notes must contain the following:
Revised Balance Sheet A. Create appropriate notes as year-to-year documentation for managing depreciation, supplies, and inventory.
Revised Income Statement B. Create appropriate notes for long-term debt.
Revised Retained Earnings Statement
Revised Statement of Cash Flows
3. Ratio Analysis 3. Management Analysis Brief
Note: Refer to the Final Project Scenario for Peyton’s ratio formulas. 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.
Using the financial statements from 2015, 2016, and revised 2017, calculate the following ratios: Your management analysis brief should explain financial information to management. Provide evidence from your accounting workbook to support your ideas where applicable.
Current Ratio (Working Capital) A. Discuss the impact of the pro forma financial statements for predicting ability to meet future expansion goals.
Quick Ratio B. Describe the implications of inventory costing, contingent liabilities, and revenue recognition.
A/R Turnover C. Identify potential issues in interpretation of financial information, providing examples to support your ideas.
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 One Instructions
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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.
Trial Balance 2017
Milestone One
Workbook Instructions
PEYTON APPROVED
TRIAL BALANCE
As of December 31, 2017
Unadjusted trial balance Adjusting entries Adjusted trial balance
Dr Cr ref Dr Cr ref Dr Cr
Cash 67,520.04 67,520.04
Accounts Receivable 68,519.91 68,519.91
Other Receivable – Insurance – 0
Baking Supplies 15,506.70 15,506.70
Merchandise Inventory 1,238.07 1,238.07
Consignment Inventory – 0
Prepaid Rent 2,114.55 2,114.55
Prepaid Insurance 2,114.55 2,114.55
Misc. Supplies 170.49 170.49
Baking Equipment 14,000.00 14,000.00
Accumulated Depreciation 1,606.44 1,606.44
Customer Deposit – 0
Accounts Payable 20,262.11 20,262.11
Wages Payable 3,383.28 3,383.28
Interest Payable 211.46 211.46
Notes Payable 5,000.00 5,000.00
Common Stock 20,000.00 20,000.00
Beginning Retained earnings 50,144.84 50,144.84
Dividends 105,000.00 105,000.00
Bakery Sales 327,322.55 327,322.55
Merchandise Sales 1,205.64 1,205.64
Cost of Goods Sold – Baked 105,834.29 105,834.29
Cost of Goods Sold – Merchandise 859.77 859.77
Rent Expense 24,549.19 24,549.19
Wages Expense 10,670.72 10,670.72
Misc. Supplies Expense 3,000.46 3,000.46
Business License Expense 2,045.77 2,045.77
Misc. Expense 1,363.84 1,363.84
Depreciation Expense 677.86 677.86
Insurance Expense 1,091.08 1,091.08
Advertising Expense 1,549.74 1,549.74
Interest Expense 818.31 818.31
Telephone Expense 490.98 490.98
Gain/Loss on disposal of equipment
429,136.32 429,136.32 – 0 – 0 429,136.32 429,136.32
Balance Sheet 2017
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 $ 20,262.11
Accounts Receivable 68,519.91 Wages Payable 3,383.28
Baking Supplies 15,506.70 Interest Payable 211.46
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 $ 23,856.85
Long Term Liabilities:
Long Term/Fixed Assets: Notes Payable 5,000.00
Baking Equipment 14,000.00 Total Long Term Liabilities: 5,000.00
Accumulated Depreciation -1,606.44
Net Fixed assets 12,393.56 Total Liabilities: 28,856.85
Common Stock 20,000.00
Retained Earnings 120,721.02
Total Equity 140,721.02
Total Assets: $ 169,577.87 Total Liabilities & Equity $ 169,577.87
Balance Sheet 2017 Revised
Milestone One
Workbook Instructions Revised
Peyton Approved
Balance Sheet
As of December 31, 2017
Income Statement 2017
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
Income Statement 2017 Revised
Milestone One
Workbook Instructions
Revised
Peyton Approved
Income Statement
for Year Ended 12/31/2017
Retained Earnings 2017
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
Retained Earnings 2017 Revised
Milestone One
Workbook Instructions
Revised
Peyton Approved
Statement of Retained Earnings
for Year Ended 12/31/2017
Cash Flow 2017
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 145,354.65
Cash Flow from Investments
Equipment Purchases (6,000.00)
Cash Flow from Investments (6,000.00)
Cash Flow from Financing
Repayment of Note Payable (10,000.00)
Dividends Paid (105,000.00)
Cash Flow from Financing (115,000.00)
Net Cash Flow 24,354.65
Beginning Cash 43,165.39
Ending Cash 67,520.04
Cash Flow 2017 Revised
Milestone One
Workbook Instructions
Revised
Peyton Approved
Statement of Cash Flow
for Year Ended 12/31/2017
0
Balance sheet 2015
Peyton Approved
Balance Sheet
As of December 31, 2015
Assets Liabilities and Owners’ Equity
Current Assets: Current Liabilities:
Cash 31507.58 Accounts Payable 15086.84
Accounts Receivable 35118.97 Wages Payable 1118.83
Baking Supplies 8042.23 Interest Payable 121.53
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 16,327.20
Long Term Liabilities:
Long Term/Fixed Assets: Notes Payable 10,000.00
Baking Equipment 6000 Total Long Term Liabilities: 10,000.00
Accumulated Depreciation -677.79
Net Fixed assets 5,322.21 Total Liabilities: 26,327.20
Common Stock 20,000.00
Retained Earnings 36,310.10
Total Equity 56,310.10
Total Assets: 82,637.30 Total Liabilities & Equity 82,637.30
Balance Sheet 2016
Peyton Approved
Balance Sheet
As of December 31, 2016
Assets Liabilities and Owners’ Equity
Current Assets: Current Liabilities:
Cash 43,165.39 Accounts Payable 16,970.00
Accounts Receivable 42,633.00 Wages Payable 1,532.80
Baking Supplies 7,318.86 Interest Payable 166.50
Merchandise Inventory 794.97
Prepaid Rent 1,665.00
Prepaid Insurance 1,110.00
Misc. Supplies 55.50
Total Current Assets 96,742.72 Total Current Liabilities 18,669.30
Long Term Liabilities:
Long Term/Fixed Assets: Notes Payable 15,000.00
Baking Equipment 8,000.00 Total Long Term Liabilities: 15,000.00
Accumulated Depreciation -928.58
Net Fixed assets 7,071.42 Total Liabilities: 33,669.30
Common Stock 20,000.00
Retained Earnings 50,144.84
Total Equity 70,144.84
Total Assets: 103,814.14 Total Liabilities & Equity 103,814.14
Income Statement 2016
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
Ratio Analysis
Milestone One
Workbook Instructions
Note: Refer to the Final Project Scenario document for Peyton’s ratio formulas.
Peyton Approved
Ratio Analysis
2017 2016
Current Ratio (Working Capital)
Quick Ratio
A/R Turnover
Inventory Turnover
Gross Margin
Return on Sales
Return on Equity
Return on Assets
Milestone Two Instructions
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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.
Pro Forma IS
Milestone Two
Workbook Instructions
Peyton Approved Second Location
Pro Forma Income Statement
for Year Ending 12/31/2018
Pro Forma BS
Milestone Two
Workbook Instructions
Peyton Approved Second Location
Pro Forma Balance Sheet
As of December 31, 2018
Journal Entry Help for Milestone 1:
Customer Deposits
https://www.wikihow.com/Account-for-Customer-Deposits
Consignment inventory:
Your pulling the inventory out of inventory and putting it into consignment inventory:
http://simplestudies.com/accounting-for-consigned-goods.html/page/2
Disposal of fixed assets: See examples in book for this week’s lesson (week 3) and the videos I post on Tuesday. Your hint is other receivables should be a debit of $700 dollars.
Buying the inventory with shipping costs:
Note: Where does the shipping cost go in the example below……
Other comments: Interest Expense and Insurance Expense are not part of your journal entries. They are information that will be used in your management letter.
You will submit an excel spreadsheet and a word document with this assignment. To get the detailed questions for the management letter look at the grading rubric.
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