Final Project Scenario
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.
1. 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.
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 $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
5. 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.
For notes to the financial statements and Management Analysis Memo, consider the following:
Peyton Approved uses the following accounting practices:
Inventory: Periodic, LIFO for both baking and merchandise
Baking supplies: $27,850 ending inventory
Equipment: Straight line method used for equipment
Business Financing Information: Use this information to calculate interest rates and insurance information, and to
assess their impact on the company's financial obligations:
6% interest note payable was made on Jan 31, 2017, and is due Feb 1, 2019.
5-year loan was made on June 1, 2016. Terms are 7.5% annual rate, interest only until due date.
Insurance: Annual policy covers 12 months, purchased in February, covering March 2017 to February 2018. No
monthly adjustments have been made.
These solutions may offer step-by-step problem-solving explanations or good writing examples that include modern styles of formatting and construction
of bibliographies out of text citations and references. Students may use these solutions for personal skill-building and practice.
Unethical use is strictly forbidden.