Question

Overview: 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.

Refer to the data below and use the Final Project Workbook that includes the income statement, balance sheet, retained earnings statement and cash flow statement to complete the final project and associated milestones.

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.

A supplier shipped $3,000 of ingredients on 12/29/17. Peyton receives an invoice for the goods, as well as a bill for freight for $175, all dated 12/29/17. Goods were shipped FOB supplier’s warehouse.

At 12/31/17, Peyton has $200 worth of merchandise on consignment at Bruno’s House of Bacon.

On 12/23/17, Peyton received $1,000 deposit from Pet Globe for product to be shipped by Peyton in the second week of January.

On 12/03/2017, a mixer with a 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.

Note about later borrowing - financials will show loan from parents repaid and use of bank financing.

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

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

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.

Cost of hiring and training new employees: three at $25,000 each for the first year.

Except as noted below, 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.

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.

Please help me prepare the revised Trial Balance Sheet, by entering in the adjusting entries.

PEYTON APPROVED TRIAL BALANCE As of December 31, 2017 Unadjusted trial balance Adjusting entries Cr Adjusted trial balance ref 67,520.04 Other Receivable Insurance 15,506.70 14,000.00 14,000.00 Beginning Retained eamings 105,000.00 Cost of Goods Sold Baked Cost of Goods Sold Merchandise 105,834.29 Gain/Loss on disposal of equipment 429,136 32 429,13632

Answer 1

PEYTON APPROVED
TRIAL BALANCE
AS of December 31,2017
	Unadjusted Trail balance		Adjusted Entries		Adjusted Trial balance
	Dr	Cr	Dr	Cr	Dr	Cr
Cash	67520.04		1000		68520.04
Accounts Receivable	68519.91				68519.91
Other Receivable - Insurance			700		700
Banking Supplies	15506.7				15506.7
Merchandise Inventory	1238.07		3175		4413.07
Consignment Inventory			200		200
Prepaid Rent	2114.55				2114.55
Prepaid Insruance	2114.55				2114.55
Misc Supplies	170.49				170.49
Baking Equipment	14000			2000	12000
Accumulated Depreciation		1606.44	1200			406.44
Customer Deposit						1000
Accounts Payable		20262.11		3175		23437.11
Wages Payable		3383.28				3383.28
Interest payable		211.46				211.46
Notes Payable		5000				5000
Common Stock		20000				20000
Beginning Retained earnings		50144.84				50144.84
Dividends	105000				105000
Bakery Sales		327322.55				327322.55
Merchandise Sales		1205.64				1205.64
Cost of Goods sold-Baked	105834.29				105834.29
Cost of Goods Sold-Merchandise	859.77			200	659.77
Rent Expense	24549.19				24549.19
Wages Expense	10670.72				10670.72
Misc. Supplies Expense	3000.46				3000.46
Business License Expense	2045.77				2045.77
Misc. Expense	1363.84				1363.84
Depreciation Expense	677.86				677.86
Insurance Expense	1091.08				1091.08
Advertising expense	1549.74				1549.74
Interest expense	818.31				818.31
Telephone Expense	490.98				490.98
Gain/Loss on Disposal of equipment			100		100
	429136.32	429136.32	6375	5375	432111.32	432111.32