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Simulation 5    Narrative: You have been hired as a Junior Accountant to work for Plants from Paradise (Plants) a garden centre in the city of Victoria, BC

Accounting

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Simulation 5 

 

Narrative:

You have been hired as a Junior Accountant to work for Plants from Paradise (Plants) a garden centre in the city of Victoria, BC.  Your role reports directly to Plants' Controller Miranda Cornell.  Each week you are emailed a series of tasks that are Miranda has aligned to match your current accounting class schedule.  Each week tasks are laid out for you to assist Miranda in both operations and accounting decision making.  Miranda is hoping to help you see the broader application that accounting has on operating a business and hopes that the weekly tasks help to identify how accounting impacts operations.

Plants from Paradise reports under ASPE, and has a December 31, 2021, year end. All work that you are preparing is for their financial statements dated as such.

 

Additional Information: 

Note from Miranda: "

We have purchased and disposed of some equipment this year; I realize now I never recorded those entries. Can you please help me with the accounting for PP&E?  I also had a conversation with our attorney (Appendix B), can you please draft a preliminary assessment describing what our options are as well as what your recommendation is for us for an accounting treatment?  We also received the underlying payroll information from our third-party supplier, but for some reason your payroll figures are not coming through properly can you please review your own payroll to see where the calculations are wrong?

 

1. Make the following draft financial statements:
   1. Income Statement
   2. Statement of Owners Equity
   3. Balance Sheet

 

1. Ratio Analysis (Appendix B)

 

Appendix A: Financial Statements 

Tasks:

 

Note from Miranda: using the provided adjusted trial balance and templates, can you please prepare the financial statements so that next week we can analyze and present the statements? 

 

Adjusted Trial Balance: 

 

Plants From Paradise
Adjusted Trial Balance
December 31, 2021
Account Number	Account Name	Debit Balance	Credit Balance
1000	Cash	12,200
1010	Accounts Receivable	18,859
1015	Allowance for Doubtful Accounts	-500
1020	Interest Receivable	3,000
1030	Inventory - Plants	12,500
1040	Inventory - Soil	15,500
1050	PPE - Equipment	45,500
1055	Acc. Amortization - Equipment	-19,500
1060	PPE - Building	145,000
1065	Acc. Amortization - Building	-22,000
2000	Accounts Payable		19,576
2010	Salaries Payable		7,875
2020	Line of Credit		2,000
2025	Interest Payable		515
2030	Unearned Revenue		7,600
3000	Miranda Cornell, Capital		112,853
4000	Sales Revenue - Plants		167,894
4010	Sales Revenue - Soil		45,673
4020	Sales Revenue - Delivery		12,345
5000	Cost of Goods Sold	106,784
5020	Salaries Expense	29,154
5040	Bad Debt Expense	4,500
5050	Utilities	2,275
5060	Amortization Expense	15,500
5060	Repairs Expense	4,699
5070	Interest Expense	2,860
Total Balance		$0

 

Templates: 

 

Income Statement: 

 

(Company)
(Statement)
(Date)
Revenues
Less: Cost of Goods Sold
Gross Profit
Operating Expenses
Total Operating Expenses
Profit/Loss

 

Statement of Owner's Equity: 

 

(Company)
(Statement)
(Date)
(capital)

 

 

 

 

Balance Sheet: 

 

(Company)
(Statement)
(Date)
Assets
Current Assets
Total Current Assets
Property, plant and equipment
Total Assets
Liabilities and Owner's Equity
Current Liabilities
Total Current Liabilities

 

 

Appendix B: Ratio Analysis    

Tasks:

1. Make Ratio Analysis - Appendix B 
    

Background: 

Miranda has requested that from the above draft statements you make and analyze the following ratios. For each ratio she has requested that you provide a brief explanation of what it measures and your thoughts on any insights it presents about the company by comparing to any standard metrics for the ratio. For any ratio that requires an average, use the same value for the current year as the previous year (meaning no need to average, take the current years value) 

 

             a. working capital

            b. current ratio 

            c. Profit Margin

            d. Receivable turnover ratio

            e. Asset Turnover Ratio

           f. Return on Assets