PLEASE USE THE ATTACHED TEMPLATE

• uggested Resources

  The resources provided here are optional. You may use other resources of your choice to prepare for this assessment; however, you will need to ensure that they are appropriate, credible, and valid. They provide helpful information about the topics in this unit. The MBA-FP6014 – Financial Accounting Library Guide can help direct your research. The Supplemental Resources and Research Resources, both linked from the left navigation menu in your courseroom, provide additional resources to help support you.The following resources are assessment specific templates for completing the assessment.

  • Assessment 4, Comprehensive Problem Template.

  The following resources provide relevant financial accounting methods and practices.

  • Doran, D. T. (2012). Financial reporting standards: A decision-making perspective for non-accountants. New York, NY: Business Experts Press.
    • Chapter 1, “Overview of financial Accounting,” pages 1-25
    • Chapter 2, “Cash, Receivables, and Revenue Recognition,” pages 27-55
    • Chapter 3, “Inventory and Cost of Goods Sold,” pages 58-88
    • Chapter 4, “Operational Assets,” pages 89-124
    • Chapter 5, “Liabilities: Current Contingent, and Long Term Debt,” pages 125-161
    • Chapter 7, “Financial Instruments: Investment Securities and Derivatives,” pages 179-222
    • Chapter 9, “Stockholders’ Equity and Earnings Per Share,” pages 261-296
    • Chapter 10, “Statements of Cash Flows,” pages 297-317
  • Libby, R., Libby, P., & Hodge, F. (2017). Financial accounting (9th ed.). New York, NY: Irwin. – Available from the bookstore
    • Chapter 1, “Financial Statements and Business Decisions,” pages 2–25.
    • Chapter 2, “Investing and Financing Decisions and the Balance Sheet,” pages 42–75.
    • Chapter 3, “Operating Decisions and the Income Statement,” pages 98–131.
    • Chapter 4, “Adjustments, Financial Statements, and the Quality of Earnings,” pages 160–191.

• Assessment Instructions

  Note: Some of the assessments in this course build upon each other, so you are strongly encouraged to complete them in the order in which they are presented.For this assessment, you may use Word or Excel to complete the assessments throughout this course, but you will find Excel to be most helpful for creating spreadsheets. Tutorials for using Excel are provided in the Supplemental Resources in the left navigation menu. If you use Excel, submit the assessment in one Excel document, using separate tabs for each spreadsheet.To complete this problem, you may choose to use the Assessment 4, Comprehensive Problem Template, which is linked in the Suggested Resources under the Capella Resources heading.

  Comprehensive Problem

  Patricia Allison began an engineering consulting business on January 1, 2011, organized as a corporation (PA Engineering, Inc.) under the laws of Delaware. The annual reporting period ends December 31, 2011. The trial balance on January 1, 2012, is provided in the following table:

  PA Engineering Trial Balance, January 1, 2012

  Account Titles	Debit	Credit
  Cash	$10,000
  Accounts Receivable
  Office Supplies	$20,000
  Land
  Computers	$80,000
  Accumulated Depreciation (on computers)
  Miscellaneous Other Assets	$5,000
  Accounts Payable
  Salaries and Wages Payable
  Interest Payable
  Income Taxes Payable
  Long-Term Notes Payable
  Contributed Capital (100,000 shares)		$115,000
  Retained Earnings
  Service Revenue
  Depreciation Expense
  Supplies Expense
  Wages Expense
  Interest Expense
  Income Tax Expense
  Remaining Expenses (not detailed to simplify)
  Totals	$115,000	$115,000

  Transactions during 2012 are as follows:

  • a. Borrowed $20,000 cash on a five-year, 10 percent note payable, dated July 1, 2012.
  • b. Purchased land for a future building site; paid cash, $10,000.
  • c. Earned $200,000 in revenues for 2012, including $60,000 on credit and the rest in cash.
  • d. Sold 4,000 additional shares of capital stock for cash at $1.15 market value per share on January 3, 2012.
  • e. Incurred $120,000 in remaining expenses for 2012, including $20,000 on credit and the rest paid in cash.
  • f. Collected accounts receivable, $40,000.
  • g. Purchased other assets for $8,000 cash.
  • h. Paid accounts payable, $18,000.
  • i. Purchased office supplies on account for future use, $25,000.
  • j. Signed a three-year, $33,000 service contract to start February 1, 2013.
  • k. Declared and paid cash dividends, $10,000.

  Data for adjusting entries:

  • l. Supplies counted on December 31, 2012, $18,000.
  • m. Depreciation for the year on the equipment, $21,000.
  • n. Interest accrued on notes payable (to be computed).
  • o. Wages earned by employees since the December 24 payroll but not yet paid, $15,000.
  • p. Income tax expense, $10,000, payable in 2013.

  Complete the following for this problem:

  1. Set up T-accounts for the accounts on the trial balance and enter beginning balances.
  2. Prepare journal entries for transactions (a) through (k) and post them to the T-accounts.
  3. Journal and post the adjusting entries (l) through (p).
  4. Prepare an income statement (including earnings per share), statement of stockholders’ equity, balance sheet, and statement of cash flows.
  5. Journal closing entries.
  6. Compute the following ratios for 2012 and explain what the results suggest about the company.
     • Current ratio. (Industry average is 2.2 to 1.0.)
     • Total asset turnover. (Industry average is 3 times a year.)
     • Net profit margin. (Industry average is 5.00%.)

  Comprehensive Problem 1 Scoring Guide

  VIEW SCORING GUIDEUse the scoring guide to enhance your learning.How to use the scoring guide

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