ACC308 Milestone Two Guidelines and Rubric

ACC 308 Milestone Two Guidelines and Rubric

Overview: For Milestone Two, which is due in Module Five, you will create pro forma financial statements, notes to the financial statements, and develop a report for management explaining the impact of pro forma financial statements on the company’s expansion plans, implications of inventory costing, contingent liabilities, and revenue recognition. In your management analysis brief, you will also identify potential issues in interpreting financial statements.

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 bri ef.

Note: Milestone Two is a draft of some critical elements of the final project. Note that the management analysis brief informs the management analysis memo in the final project.

Specifically, the following critical elements must be addressed:

I. Accounting Workbook: Your accounting workbook must include appropriate calculations and statements: A. Create pro forma financial statements for predicting ability to meet future expansion goals. 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?

II. Notes to the Financial Statements: You will find an example for how to format these notes located in the module 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.

III. Management Analysis Brief: 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.

Rubric Guidelines for Submission: You will submit three files for this milestone. Your accounting workbook must be submitted as a Microsoft Excel document. Your notes to the financial statement must be submitted in a Microsoft Word document. Your management analysis brief should be a separate 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: Pro Forma Financial

Statements

Creates pro forma financial statements for predicting ability to meet future expansion goals

Creates pro forma financial statements but calculations contain inaccuracies

Does not create pro forma financial statements

15

Notes to the Financial Statements: Year-to-Year

Documentation

Creates appropriate notes as year-to- year documentation for managing depreciation, supplies, and inventory

Creates appropriate notes as year-to- year documentation for managing depreciation, supplies, and inventory, but notes are cursory or illogical

Does not create appropriate notes as year-to-year documentation for managing depreciation, supplies, and inventory

15

Notes to the Financial Statements:

Long-Term Debt

Creates appropriate notes for long-term debt

Creates appropriate notes for long-term debt, but notes are cursory or illogical

Does not create appropriate notes for long term debt

15

Management Analysis Brief: Pro Forma Financial

Statements

Discusses the impact of pro forma financial statements for predicting ability to meet future expansion goals

Discusses the impact of pro forma financial statements for predicting ability to meet future expansion goals, but explanation is cursory or contains inaccuracies

Does not discuss the impact of pro forma financial statements

15

Management Analysis Brief: Inventory Costing,

Contingent Liabilities, and Revenue Recognition

Describes the implications of inventory costing, contingent liabilities, and revenue recognition

Describes the implications of inventory costing, contingent liabilities, and revenue recognition, but description is cursory or illogical

Does not describe the implications of inventory costing, contingent liabilities, and revenue recognition

15

Management Analysis Brief: Issues in Interpretation

Identifies potential issues in interpretation of financial information, providing examples to support ideas

Identifies potential issues in interpretation of financial information, but identification or examples provided are cursory or illogical

Does not identify potential issues in interpretation of financial information

15

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

10

Total 100%

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				3	1,000.00					68,520.04
		Accounts Receivable		68,519.91										68,519.91
		Other Receivable – Insurance						4	700.00					700.00
		Baking Supplies		15,506.70				1	3,175.00					18,681.70
		Merchandise Inventory		1,238.07							200.00	2		1,038.07
		Consignment Inventory						2	200.00					200.00
		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							2,000.00	4		12,000.00
		Accumulated Depreciation				1,606.44		4	1,200.00							406.44
		Customer Deposit									1,000.00	3				1,000.00
		Accounts Payable				20,262.11					3,175.00	1				23,437.11
		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						4	100.00					100.00
				429,136.32		429,136.32			6,375.00		6,375.00			432,111.32		432,111.32

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
Assets					Liabilities and Owners' Equity
	Current Assets:					Current Liabilities:
	Cash	$ 68,520.04				Accounts Payable	$ 23,437.11
	Accounts Receivable	68,519.91				Wages Payable	3,383.28
	Other Receivable – Insurance	700.00				Interest Payable	211.46
	Baking Supplies	18,881.70				Customer Deposit	1000.00
	Merchandise Inventory	1,038.07
	Prepaid Rent	2,114.55
	Prepaid Insurance	2,114.55
	Misc. Supplies	170.49
	Total Current Assets		$ 162,059.31			Total Current Liabilities		$ 28,031.85
						Long Term Liabilities:
	Long Term/Fixed Assets:					Notes Payable	5,000.00
	Baking Equipment	12,000.00				Total Long Term Liabilities:		5,000.00
	Accumulated Depreciation	-406.44
	Net Fixed Assets		11,593.56			Total Liabilities:		33,031.85
						Common Stock	20,000.00
						Retained Earnings	120,621.02
						Total Equity		140,621.02
	Total Assets:		$ 173,652.87			Total Liabilities & Equity		$ 173,652.87

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
			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
			Loss on Disposal of Equipment		100.00
			Total Operating Expenses:			46,357.95
			Net Income			175,476.18

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
		Beginning Balance:		$ 50,144.84
		plus Net Income		175,476.18
		less Dividends:		105,000.00
		Ending Balance		$ 120,621.02

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
	Net Income				$ 175,476.18
	Depreciation Expense				677.86
	Loss on Disposal of Equipment				100.00
						176,254.04
	Increase in Accounts Receivable					(25,886.91)
	Increase in Other Receivable – Insurance					(700.00)
	Increase in Baking Supplies					(11,562.84)
	Increase in Merchandise Inventory					(243.10)
	Increase in Prepaid Rent					(449.55)
	Increase in Prepaid Insurance					(1,004.55)
	Increase in Misc. Supplies					(114.99)
	Increase in Customer Deposit					1,000.00
	Increase in Accounts Payable					6,467.11
	Increase in Wages Payable					1,850.48
	Increase in Interest Payable					44.96
		Operating Cash Flow					145,654.65
	Cash Flow from Investments
	Equipment Purchases					(5,300.00)
		Cash Flow from Investments					(5,300.00)
	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					25,354.65
	Beginning Cash						43,165.39
	Ending Cash						68,520.04
				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			141,818.01
		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			112,745.45

Ratio Analysis

	Milestone One Workbook Instructions
			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		5.53
	Inventory Turnover		7.61		8.81
	Gross Margin		0.68		0.66
	Return on Sales		0.53		0.52
	Return on Equity		1.25		1.61
	Return on Assets		1.01		1.09

Pro Forma IS

Milestone Two Workbook Instructions
		Peyton Approved Second Location
		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

Pro Forma BS

	Milestone Two Workbook Instructions
			Peyton Approved Second Location
			Pro Forma Balance Sheet
			As of December 31, 2018
Assets				Liabilities and Owners' Equity
	Current Assets:				Current Liabilities:
	Cash	$ 7,000.00			Accounts Payable	$ 20,622.11
	Accounts Receivable	$ 65,705.64			Wages Payable	$ 2,706.62
	Baking Supplies	$ 28,222.48			Interest Payable	$ 169.17
	Merchandise Inventory	$ 229.27
	Prepaid Rent	$ 1,691.64
	Prepaid Insurance	$ 1,691.64
	Misc. Supplies	$ 136.39
	Total Current Assets:		$ 104,677.06		Total Current Liabilities:		$ 23,497.90
					Long Term Liabilities:
	Long Term/Fixed Assets:				Notes Payable	$ 20,000.00
	Baking Equipment	$ 15,000.00			Total Long Term Liabilities:		$ 20,000.00
	Accumulated Depreciation	$ (2,142.86)
	Net Fixed Assets:		$ 12,857.14		Total Liabilities:		$ 43,497.90
					Common Stock	$ – 0
					Retained Earnings	$ 74,036.30
					Total Equity:		$ 74,036.30
	Total Assets:		$ 117,534.20		Total Liabilities & Equity:		$ 117,534.20