Expert answer:Financial Performance Analysis
Expert answer:For this assessment, complete the problem below. 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.
assessment_2.doc
cf_assessment_2_problem_template.xls
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Financial Performance Analysis
Create T-accounts, prepare a variety of financial statements (income statement, statement of
stockholders’ equity, and balance sheet), and assess the results of operations based upon
transactions in a hypothetical company.
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.
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, complete the problem below. 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 assessment, you may choose to use the Assessment 2 Problem Template
linked in the Suggested Resources under the Capella Resources heading.
Transactions
Audrey Jhingree opened an ice cream parlor in a university town. The parlor specializes in ice
cream combinations named after popular professors in the business department of the university.
You have been hired as a manager. Your duties include maintaining the store’s financial records.
The following transactions occurred in April 2012, the first month of operations:
• a. Received cash of $40,000 total ($10,000 each) from four investors. Each investor
received 100 shares of common stock. This took place on April 1.
• b. Paid three months’ rent for the store on April 1 at $2,000 per month (recorded as
prepaid expenses).
• c. Purchased ice cream and cones for $6,000 on account payable, due in 60 days. This
took place on April 2.
• d. Purchased supplies for $1,000 cash on April 2.
• e. Received a two-year $11,000 loan at the bank. The note payable is dated April 2.
• f. Used the money from (e) to purchase a computer for $3,000 (for record keeping and
inventory tracking) and to purchase $8,000 of used furniture and fixtures for the store.
• g. Placed a grand opening advertisement in the local paper for $600 cash.
• h. Made sales in the first half of the month totaling $5,000: $4,250 was in cash and the
rest was on accounts receivable. The cost of the ice cream sold was $2,000.
• i. Made a $600 payment on accounts payable on April 18.
• j. Incurred and paid employee wages of $2000 for the month of April.
• k. Collected accounts receivable of $700 from customers.
• l. Made a repair to one of the refrigerators for $300.
• m. Made sales in the last half of the month for $6,000, all for cash. The cost of the ice
cream sold was $2,400.
Recording Transactions, Posting to T-Accounts, Preparing Financial Statements, and
Commenting on What Financial Statements Tell Potential Investors
Using the information provided above, complete the following for Audrey Jhingree’s ice cream
parlor. To complete this problem, you may choose to use the Assessment 2 Problem Template,
which is linked in the Suggested Resources under the Capella Resources heading.
1. Set up appropriate T-accounts for cash, accounts receivable, supplies, inventory, prepaid
expenses, equipment, furniture and fixtures, accounts payable, notes payable, contributed
capital, sales revenue, cost of goods sold (expense), advertising expense, wage expense,
and repair expense. All accounts begin with zero balances.
2. Record in the T-accounts the effects of each transaction for Audrey’s shop in April,
referencing each transaction in the accounts with the transaction letter. Show the ending
balances in the T-accounts. Note that transactions (h) and (m) require two types of
entries, one for sales and one for cost of goods sold. Prepare trial balances for 4/30/12.
3. Prepare financial statements at the end of the month ended April 30, 2012. Hint: Do the
income statement first, followed by the statement of stockholders’ equity, and then the
balance sheet. Properly label each statement: Does it cover a period of time or just a point
in time?
4. Write a short memo to Audrey offering your opinion on the results of operations during
the first month of business.
5. After three years in business, you are being evaluated for a promotion. One measure is
how efficiently you have managed the assets of the business. Using the data in the
following table, compute the total asset turnover ratio for 2014 and 2013 and evaluate the
results. Also compute the return on invested capital (net income divided by total
stockholders’ equity). Do you think you should be promoted? Why or why not?
Audrey’s Ice Cream Parlor: Financial Data
Account
2014
2013
2012
Total assets
$93,000
$78,000
$61,000
Total liabilities
$23,000
$23,000
$16,500
Total contributed
capital plus retained
earnings
$70,000
$55,000
$44,500
Total sales
$100,000
$82,500
$57,250
Net income
$15,000
$10,500
$4,500
Financial Performance Analysis Scoring
Guide
Criteria
Proficient
Distinguished
Criteria
Proficient
Distinguished
Analyze the effects of transactions Analyzes the effects of
using T-accounts for each account transactions using T-accounts for
on a balance sheet.
each account on a balance sheet.
Interprets the effects
of transactions using
T-accounts for each
account on a balance
sheet. Uses the
correct financial data
and computations.
Prepare a variety of financial
statements (income statement,
statement of stockholders’ equity,
and balance sheet).
Prepares a variety of financial
statements (income statement,
statement of stockholders’ equity,
and balance sheet).
Prepares a variety of
financial statements
(income statement,
statement of
stockholders’ equity,
and balance sheet)
with correct financial
data and
computations.
Analyze financial information to Analyzes financial information to
develop conclusions regarding a develop conclusions regarding a
company’s performance.
company’s performance.
Interprets financial
information using
correct financial data
and computations to
develop conclusions
regarding both shortterm and long-term
performance for a
company.
Communicate in a manner that is
professional and consistent with
expectations for members of the
business professions.
Communicates in a
manner that is
professional,
scholarly, and
consistent with
expectations for
members of the
business professions.
Adheres to APA
guidelines and
produces work
appropriate for
publication.
Communicates in a manner that is
professional and consistent with
expectations for members of the
business professions.
Worksheet 1 of 6. Template for requirement 1: Set up appropriate T-accounts for cash, accounts
receivable, supplies, inventory, prepaid expenses, equipment, furniture and fixtures, accounts
payable, notes payable, contributed capital, sales revenue, cost of goods sold (expense),
advertising expense, wage expense, and repair expense. All accounts begin with zero balances.
Learner:
Audrey’s Ice Cream Parlor
Cash
Accounts Receivable
Prepaid Expenses
–
–
Inventory
–
Accounts Payable
–
Furniture & Fixtures
–
Sales Revenue
–
Advertising Expense
Wage Expense
Contribution Capital
End of worksheet
eet
Supplies
Equipment
Notes Payable
Cost of Goods Sold
–
Repair Expense
Worksheet 2 of 6. Template for requirement 2: Using columns A through N, record in the Taccounts the effects of each transaction for Audrey’s shop in April, referencing each transaction in
the accounts with the transaction letter. Show the ending balances in the T-accounts. Note that
transactions (h) and (m) require two types of entries, one for sales and one for cost of goods sold.
In columns P through S, prepare trial balances for 4/30/12.
Learner:
Audrey’s Ice Cream Parlor
Cash
Accounts Receivable
(a)
(e)
(h)
(k)
(m)
(b)
(d)
(f )
(g)
(i)
(j)
(l)
–
–
(h)
–
Prepaid Expenses
(b)
Inventory
Accounts Payable
(c)
(h)
(m)
–
(k)
(i)
(c )
–
–
Furniture & Fixtures
Sales Revenue
(f)
(h)
(m)
–
Advertising Expense
Wage Expense
(g)
(j)
Contribution Capital
(a)
End of worksheet
Supplies
(d)
Equipment
(f)
Notes Payable
(e)
Cost of Goods Sold
(h)
(m)
–
Repair Expense
(l)
Audrey’s Ice Cream Parlor
Trial Balance
30-Apr-12
Debit
Credit
Cash
Accounts Receivable
Supplies
Inventory
Prepaid Expenses
Equipment
Furniture and Fixtures
Accounts Payable
Notes Payable
Common Stock
Sales
Cost of Goods Sold
Advertising
Wages
Repairs
Totals
–
=
–
Worksheet 3 of 6. Template for requirement 3: Prepare the income statement at the end of
the month ended April 30, 2012.
Learner:
Audrey’s Ice Cream Parlor
Income Statement
For the Month Ended April 30, 2012
Sales
Less: Cost of Goods Sold
Gross Profit
Less: Expenses
Advertising
Wages
Repairs
Net Income
End of worksheet
–
$
–
#DIV/0!
Worksheet 4 of 6. Template for requirement 3: Prepare the statement of stockholders’ equity at the end
of the month ended April 30, 2012.
Learner:
Audrey’s Ice Cream Parlor
Statement of Stockholders’ Equity
For the Month Ended April 30, 2012
Contributed Capital:
Balance, April 01
Add: Issue of Common Stock
Total Contributed Capital
$
–
Retained Earnings:
Balance, April 01
Add: Net Income
Retained Earnings, April 30
$
Total Shareholders’ Equity
$
End of worksheet
#DIV/0!
–
Worksheet 5 of 6. Template for requirement 3: Prepare the balance sheet at the end of the month ended April 30,
2012.
Learner:
Audrey’s Ice Cream Parlor
Balance Sheet
April 30, 2012
Assets
Cash
Accounts Receivable
Supplies
Inventory
Prepaid Expenses
Total Current Assets
Equipment
Furniture and Fixtures
Total Equipment, Furniture and Fixtures
–
–
Total Assets
$
Current Ratio =
#DIV/0!
End of worksheet
–
Liabilities
Accounts Payable
Total Current Liabliites
Notes Payable
Total Long-Term liabliites
Total Liabilities
–
Stockholders’ Equity
Shareholders’ Equity
Total Liabilities and Owner’s Equity
$
–
Worksheet 6 of 6. Template for requirements 4 and 5: Write a short memo to Audrey offering your opinion on the results of operations
during the first month of business. Then, using the financial data from the assessment, compute the total asset turnover ratio for 2014 and
2013 and evaluate the results. Also compute the return on invested capital (net income divided by total stockholders’ equity). Evaluate
whether you should be promoted based on how efficiently you have managed the assets of the business.
Learner:
(4) Memo to Audrey on the results of operations during the first month of business.
(5) Compute the total asset turnover ratio and the return on invested capital and evaluate the results. Based
on this measure, do you think you should be promoted? Why or why not?
Audrey’s Ice Cream Parlor
Account
Total assets
Total liabilities
Total contributed capital
plus retained earnings
2014
$93,000
$23,000
$70,000
2013
$78,000
$23,000
$55,000
2012
$61,000
$16,500
$44,500
Total sales
Net income
$100,000
$15,000
$82,500
$10,500
$57,250
$4,500
2014
2013
Average Assets
85500
69500
Average Capital
62500
49750
…
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