Preparing A Trial Balance Spreadsheet With The Given Financial Statement 2710741

MBA 5850 Spring 2018 Block 2 Case Study #2 WHD Goods, Inc. has prepared the following financial statements: WHD Goods, Inc. has hired you to review the financial statements and make any necessary corrections/adjustments before the financial statements are presented to the board of directors. The President of the Company, Ms. Thimble has provided the following information to help you adjust the financial statements. (1) Inventory is costed using the first-in first out method. Inventory at December 31, 2015 was comprised of: 3,000 units at $12.75 per unit. 2016 purchases included: 2/4/2016: 600 units @ $12.50 per unit 4/8/16: 400 units @$13.00 per unit 6/20/16: 800 units @ $12.25 per unit 9/6/16: 500 units @ $12.75 per unit 11/22/16: 700 units @ $12.25 per unit 5,180 units were sold in 2016. (2) Equipment includes two assets. a. Asset #1 was purchased on June 1, 2016 for a cost of $20,000. This asset has a salvage value of $2,000 and an expected useful life of 5 years. The asset is depreciated using the straight-line method. b. Asset #2 was purchased on December 1, 2016 for a cost of $54,000. This asset has no salvage value and an expected useful life of 3 years. The asset is depreciated using the straight-line method. (3) Accounts receivable detail is as follows: The allowance for doubtful accounts is based on the aging of accounts receivable method. The estimated percentage of uncollectible amounts is as follows: Current amounts (not yet due) = 1% 1 – 30 days past due = 2% 31 – 60 days past due = 3% Over 60 days past due = 5% Invoices are billed at net 30 days. (4) There were two loans with activity during 2016. a. Note amount #1, $18,000. Annual interest rate of 6%. Interest was accrued monthly. Loan date: June 1, 2011. The loan and all accrued loan interest was paid off on June 1, 2016. b. Note amount #2, $36,000. Annual interest rate of 5%. Interest is accrued monthly. Loan date: May 1, 2016. The loan and all accrued interest is due on May 1, 2021. (5) It has been discovered that $4,500 of product that was paid for and was to be shipped on December 27, 2016 has not been shipped. The product was actually shipped on January 2, 2017. (6) A physical count of supplies at the end of the year reflected $2,000 of supplies on hand at December 31, 2016. (7) Total rent for the year should reflect 12 payments of $2,100 per month. Prepaid rent is included in the Prepaid Expenses account. (8) The Corporate net income tax rate is 15%. Requirements: (1) Prepare a trial balance spreadsheet for the year ended December 31, 2016 as demonstrated in Exhibit 4.5 of the text. You should use the accounts included on the preliminary financial statements provided above. All necessary accounts are included on the preliminary financial statements. (2) Record the adjustments required based on the eight items of information presented above. Be sure to include all calculations used to determine adjustment amounts. These calculations should be made on separate sheets (tabs) in your one Excel file. (3) Using your adjusted trial balance, prepare a properly formatted income statement, balance sheet, and statement of stockholders’ equity for the calendar year 2016. (4) Prepare a memo to Ms. Thimble detailing what problems you found on her preliminary financial statements. In addition to the issues with the preliminary financial statement, provide Ms. Thimble with: current ratio, working capital, net profit margin, receivable turnover ratio, average collection period, inventory turnover ratio, average days to sell inventory. Additional information to assist you with your memo is: a. Average net profit margin for WHD Goods’ competitors is 7.5%. b. Accounts receivable at 12/31/2015, $40,000 c. Product inventory at 12/31/2015, $38,250



Prof. Angela


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