ACCT4111 Project: Accounting Data Analyses , I need help


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ACCT4111 Project: Accounting Data Analyses , I need help Instruction for the assignment.pdf ACCT4111 Project: Accounting Data Analyses Students as Business Advisors: Preparing financial statements and analyzing the implications for a business INTRODUCTION The transition from principles of accounting to intermediate level of difficulty can be abrupt for students, and instructors can wrongly assume that all the skills learned in the prior courses are available for new intermediate tasks. This practice set provides a transition from introductory to intermediate level of difficulty, while reinforcing or alerting students to the foundational skills they need for future coursework. The practice set is half traditional accounting cycle basics (journal entries and adjusting entries) in a more authentic setting than typical textbook practice sets, and then extends beyond the introductory level to have students study the resulting financial data and give the client advice about the financial status of their small plumbing business. CLIENT BACKGROUND Your professional career has commenced! You just finished a meeting with Jag and Elk, two plumbers that merged their start-up plumbing businesses two years ago. Jag’s residential customers are all on prepaid service contract basis – for a fixed fee paid in advance, customers get three years of plumbing services (total $648, $18 per month) regardless of the number of calls, nature of the service, or materials needed. Elk’s commercial business is a parts delivery service known for having every part in stock and delivered “same day” so your labor crew doesn’t stall out for lack of a part. Both have agreed not to take any salaries from the business and just split dividends after they have paid off all debt. They both have simple lifestyles, so their part-time job on the weekend with a plumbing business in the next town pays their bills until their business is big enough to throw off a living wage. Upon merging their businesses into Jag & Elk Pipes, Jag and Elk obtained a loan and bought a 2014 Nissan truck equipped with plumbing tools and rented a small warehouse in midtown. They pay one part-time worker at the warehouse to manage inventory and customer service. On days when they are on-site for a residential client, they deliver to commercial clients either before work, on their lunch hour, or after the residential jobs each day. Neither Jag nor Elk have any financial background but have kept basic records of activity for tax purposes. Their banker requires a set of accrual basis financial statements annually. They have asked you to help, given your new found accounting expertise. In addition to creating the financial statements for the bank, they have requested that you analyze the profitability and liquidity of their company. THE CLIENT MEETING Jag: “Here are balances in our accounts at the beginning of the year (Appendix A). We have two sets of records other than the checkbook. We keep a job log of all our trips, one for residential clients and one for commercial clients (Appendix B). We keep track of who has paid us on this log along with noting the date and the materials used on each trip. We also have a listing of all our residential contracts since inception (Appendix C).” Elk: “We don’t write that many checks but I have summarized all the checks written during 2015 and the inventory details for you on this schedule (Appendix D). When we bought the Nissan truck last year, we estimated it will last about six years and be worth about $5,000 at the end of the sixth year. When we bought the tools for the truck last year, we estimated they will last about three years and be worth about $500 at the end of the three years. We use the straight line method of depreciation.” Jag: “Our note is at 9.5% annual interest and matures on June 1, 2020 but we hope we can pay it off earlier. Our effective tax rate is 15%. We have one thing that we haven’t paid for

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