Complete two problems in which you prepare a variety of financial documents (income statement, statement of stockholders' equity, and balance sheet), practice using T-accounts, and compute and analyze financial data for hypothetical companies. 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. Show Less Preparing accurate financial statements is an essential skill used as the basis for making strategic decisions. The ability to determine the financial impact of transactions is another important skill that all business professionals should possess. T-accounts provide a valuable tool for analyzing the effects of transactions. By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria: Competency 1: Apply theories, models, and practices of accounting in the construction and analysis of financial statements. Prepare a summarized income statement for a company using appropriate financial data. Prepare a statement of retained earnings for a company using appropriate financial data. Prepare a balance sheet for a company using appropriate financial data. Create T-accounts for a company using each account on the balance sheet. Accounting lies at the heart of business performance. Accounting systems classify and record the financial transactions of an organization to reflect the impact of the transactions on the organization's financial condition. Understanding the financial condition of a company, or the impact of particular transactions, requires an understanding of the accounting model and the methods used to record and analyze accounting data. Show Less As you examine the accounting model, consider the structure and purpose of its elements as well as the approaches and methods used to discern information from it. Develop an understanding of the structure of financial statements and the important information that they communicate to the knowledgeable reader. 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, complete Problems 1 and 2. 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. Templates for both problems are linked in the Suggested Resources under the Capella Resources heading. Problem 1: Preparing an Income Statement, a Statement of Retained Earnings, and a Balance Sheet At the end of its first year of operations (December 31, 2012), the Acme Company released the financial data shown in Table 1 below: Tab.

1. Complete two problems in which you prepare a variety of
financial documents (income statement, statement of
stockholders' equity, and balance sheet), practice using T-
accounts, and compute and analyze financial data for
hypothetical companies.
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.
Show Less
Preparing accurate financial statements is an essential skill used
as the basis for making strategic decisions. The ability to
determine the financial impact of transactions is another
important skill that all business professionals should possess. T-
accounts provide a valuable tool for analyzing the effects of
transactions.
By successfully completing this assessment, you will
demonstrate your proficiency in the following course
competencies and assessment criteria:
Competency 1: Apply theories, models, and practices of
accounting in the construction and analysis of financial
statements.
Prepare a summarized income statement for a company using
appropriate financial data.
Prepare a statement of retained earnings for a company using
appropriate financial data.
Prepare a balance sheet for a company using appropriate
financial data.
Create T-accounts for a company using each account on the
balance sheet.
Accounting lies at the heart of business performance.
Accounting systems classify and record the financial
transactions of an organization to reflect the impact of the

2. transactions on the organization's financial condition.
Understanding the financial condition of a company, or the
impact of particular transactions, requires an understanding of
the accounting model and the methods used to record and
analyze accounting data.
Show Less
As you examine the accounting model, consider the structure
and purpose of its elements as well as the approaches and
methods used to discern information from it. Develop an
understanding of the structure of financial statements and the
important information that they communicate to the
knowledgeable reader.
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, complete Problems 1 and 2. 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.
Templates for both problems are linked in the Suggested
Resources under the Capella Resources heading.
Problem 1: Preparing an Income Statement, a Statement of
Retained Earnings, and a Balance Sheet
At the end of its first year of operations (December 31, 2012),
the Acme Company released the financial data shown in Table 1
below:
Table 1: Acme Company Financial Data
Account
Amount
Cash

3. $25,000
Receivables from customers (no allowance for doubtful
accounts is needed)
$20,300
Inventory of merchandise
$81,000
Equipment owned, at cost of $60,700 net of A/depreciation of
$20,000
$40,700
Accounts payable owed to supplies
$66,140
Salary payable for 2012 (to be paid on January 4, 2013)
$1,800
Total sales revenue
$126,000
Operating expenses, including the cost of the merchandise sold
$80,200
Income taxes expense at 30% of pretax income; all paid during
2012
?
Contributed capital 10,000 shares outstanding
$87,000
Dividends declared and paid during 2012
$20,000
Using knowledge from prior courses, work experience,
textbooks, or Internet sources, as well as the financial data
provided in Table 1, prepare the following financial statements
for the Acme Company:
Summarized income statement for the year 2012.
Statement of retained earnings for the year 2012.
Balance sheet at December 31, 2012.
Liquidity ratios and an explanation of what those ratios tell us.
You may choose to use the
Preparing Financial Statements Template
, which is linked in the Suggested Resources under the Capella
Resources heading, to complete this problem.

4. Problem 2: Using T-Accounts, Preparing the Balance Sheet, and
Computing and Interpreting the Current Ratio
Johnson Company has been operating for several years. At
December 31, 2012, the accounting records reflected the
following data, shown in Table 2 below:
Table 2: Johnson Company Financial Data
Account
Amount
Cash
$9,000
Investments (short-term)
$4,000
Accounts receivable
$13,000
Inventory
$22,000
Notes receivable (long-term)
$1,000
Equipment
$48,000
Factory building
$90,000
Intangibles
$3,000
Accounts payable
$15,000
Accrued liabilities payable
$2,000
Notes payable (short-term)
$7,000
Long-term notes payable
$46,000
Contributed capital
$90,000
Retained earnings
$30,000

5. During the year 2013, Johnson Company had the following
summarized activities:
a. Purchased short-term investments for $10,000 cash.
b. Lent $8,000 to a supplier who signed a three-year note.
c. Purchased equipment that cost $28,000; paid $4,000 cash and
signed a one-year note for the balance.
d. Hired a new president at the end of the year. The contract
was for $110,000 per year plus options to purchase company
stock at a set price based on company performance.
e. Issued an additional 1,000 shares of capital stock for $12,000
cash.
f. Borrowed $20,000 cash from a local bank, payable in three
months.
g. Purchased a patent (an intangible asset) for $4,000 cash.
h. Built an addition to the factory for $45,000; paid $10,000 in
cash and signed a three-year note for the balance.
i. Returned defective equipment to the manufacturer, receiving
a cash refund of $1,000.
Using knowledge from prior courses, work experience,
textbooks, or Internet sources, as well as the financial data
provided above, complete the following:
Create T-accounts for each of the accounts on a balance sheet
and enter the balances at the end of 2012 as beginning balances
for 2013. Prepare a trial balance for 12/31/12.
Record each of the events for 2013 in T-accounts and determine
the ending balances. For each recording (posting), include the
identifying letter (a through i). Prepare a trial balance for
12/31/12.
Explain why you did or did not record item d, the hiring of the
president, in a T-account.
Prepare a balance sheet at December 31, 2013. Classify the
balance sheet as appropriate (into current assets, fixed assets,
and so on).
Compute the current ratio for 2013. The current ratio measures
the ability of the organization to pay their current obligations.
Interpret this ratio as it applies to Johnson Company at

6. December 31, 2013, as compared to December 31, 2012.
To complete this problem, you may choose to use the
T-Account Transactions Template
, which is linked in the Resources under the Capella Resources
heading.
Financial Statements and T-Account Transactions Scoring
Guide
Financial Statements and T-Account Transactions Scoring
Guide
Financial Statements and T-Account Transactions Scoring
Guide Grading Rubric
Criteria
Non-performance
Basic
Proficient
Distinguished
Prepare a summarized income statement for a company using
appropriate financial data.
Does not prepare a summarized income statement for a
company.
Prepares a summarized income statement for a company with
errors in the financial data.
Prepares a summarized income statement for a company using
appropriate financial data.
Prepares a summarized income statement for a company using
the correct financial data and computations.
Prepare a statement of retained earnings for a company using
appropriate financial data.
Does not prepare a statement of retained earnings for a
company.
Prepares a statement of retained earnings for a company with
errors in the financial data.
Prepares a statement of retained earnings for a company using
appropriate financial data.
Prepares a statement of retained earnings for a company using

7. the correct financial data and computations.
Prepare a balance sheet for a company using appropriate
financial data.
Does not prepare a balance sheet for a company.
Prepares a balance sheet for a company with errors in the
financial data.
Prepares a balance sheet for a company using appropriate
financial data.
Prepares a balance sheet for a company using the correct
financial data and computations.
Create T-accounts for a company using each account on the
balance sheet.
Does not create T-accounts for a company.
Creates T-accounts for a company using each account on the
balance sheet, but enters incorrect financial data.
Creates T-accounts for a company using each account on the
balance sheet.
Creates T-accounts for a company using each account on the
balance sheet and entering correct financial data and
computations
ASSESSMENT TWO
Overview
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.
Show Less

8. The financial reporting process collects, processes, and
distributes financial information to various users, such as
management, creditors, and investors. It is important for users
to understand the terminology and accounting process. This
assessment provides you with the opportunity to analyze
transactions with the use of T-accounts, interpret the
information found in financial statements, and communicate
those findings in a professional manner.
By successfully completing this assessment, you will
demonstrate your proficiency in the following course
competencies and assessment criteria:
Competency 1: Apply theories, models, and practices of
accounting in the construction and analysis of financial
statements.
Prepare a variety of financial statements (income statement,
statement of stockholders' equity, and balance sheet).
Analyze financial information to develop conclusions regarding
a company's performance.
Competency 3: Integrate accounting theories, models, and
practices across the organization.
Analyze the effects of transactions using T-accounts for each
account on a balance sheet.
Competency 5: Communicate in a manner that is professional
and consistent with expectations for members of the business
professions.
Communicate in a manner that is professional and consistent
with expectations for members of the business professions.
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, 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

9. 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.

10. 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.
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.
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.
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?
Write a short memo to Audrey offering your opinion on the
results of operations during the first month of business.
After three years in business, you are being evaluated for a
promotion. One measure is how efficiently you have managed

11. 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
Financial Performance Analysis Scoring Guide
Financial Performance Analysis Scoring Guide Grading Rubric

12. Criteria
Non-performance
Basic
Proficient
Distinguished
Analyze the effects of transactions using T-accounts for each
account on a balance sheet.
Does not identify the effects of transactions using T-accounts
for each account on a balance sheet.
Identifies the effects of transactions using T-accounts for each
account on a balance sheet.
Analyzes the effects of transactions using T-accounts for 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).
Does not prepare a variety of financial statements.
Prepares a variety of financial statements with incorrect
financial data.
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 develop conclusions regarding
a company's performance.
Does not identify financial information to develop conclusions
regarding a company's performance.
Identifies financial information to develop conclusions
regarding a company's performance.
Analyzes financial information to develop conclusions
regarding a company's performance.
Interprets financial information using correct financial data and
computations to develop conclusions regarding both short-term

13. and long-term performance for a company.
ASSESSMENT THREE
Overview
Complete two problems in which you prepare adjusting entries
for transactions in a hypothetical company and then analyze the
effects of adjusting entries on the company's financial
statements.
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.
Show Less
This assessment addresses the impact of adjusting entries on
financial statements. You will demonstrate your understanding
of deferred revenue, deferred expense, accrued revenue, and
accrued expense, as well as your understanding of the
accounting entries that record these items in the accounting
system.
By successfully completing this assessment, you will
demonstrate your proficiency in the following course
competencies:
Competency 3: Integrate accounting theories, models, and
practices across the organization
Record adjusting entries for each transaction at the end of an
annual accounting year using appropriate financial data.
Analyze the impact of adjusting entries on financial statements.
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, complete Problems 1 and 2. You may use

14. 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.
Templates for both problems are linked in the Suggested
Resources under the Capella Resources heading.
Problem 1: Adjusting the Books Using Adjusting Entries
Huntington Company's annual accounting year ends on
December 31. It is December 31, 2012, and all of the 2012
entries except the following adjusting entries have been made:
a. On September 1, 2012, Huntington collected six months of
rent worth $9,000 on storage space. At that date, cash was
debited and unearned rent revenue was credited for $9,000.
b. On October 1, 2012, the company borrowed $30,000 from a
local bank and signed a 12 percent note for that amount. The
principal and interest are payable on the maturity date,
September 30, 2012.
c. Depreciation of $5,000 must be recognized on a service truck
purchased on July 1, 2012, at a cost of $30,000.
d. Cash of $4,800 was collected on November 1, 2012, for
services to be rendered evenly over the next year beginning on
November 1. Unearned service revenue was credited when the
cash was received.
e. On November 1, 2012, Huntington paid a one-year premium
for fire insurance of a total of $12,000 for one year of coverage
starting on that date. Cash was credited and prepaid insurance
was debited for this amount.
f. The company earned service revenue of $6,000 on a special
job that was completed December 24, 2012. Collection will be
made during January 2012. No entry has been recorded.
g. At December 31, 2012, wages earned by employees totaled
$17,500. The employees will be paid on the next payroll date,
January 15, 2012.
h. On December 31, 2012, the company estimated it owed

15. $16,000 for 2012 property taxes on land. The tax will be paid
when the bill is received in January 2012.
Using the information above, prepare the adjusting entry
required for each transaction at December 31, 2012.
To complete this problem, you may choose to use the
Assessment 3, Problem 1 Template
, which is linked in the Suggested Resources under the Capella
Resources heading.
Problem 2: Analyzing the Effects of Adjusting Entries on the
Accounting Model
To complete this problem, you will need to refer to Problem 1.
Indicate in a table format the effect of each adjusting entry in
Problem 1 (a through h) and the amount of the effect. Use + for
increase, − for decrease, and NE for no effect.
This problem is built around the following formulas and
concepts:
Assets = Liabilities + Stockholders' Equity.
Revenues − Expenses = Net Income.
Net Income accounts are closed to Retained Earnings, a part of
Shareholders' Equity.
It is recommended that you use the
Assessment 3, Problem 2 Template
linked in the Suggested Resources under the Capella Resources
heading.
https://courserooma.capella.edu/bbcswebdav/institution/MBA-
FP/MBA-
FP6014/161000/Course_Files/cf_assessment_3_problem_1_temp
late.xls
https://courserooma.capella.edu/bbcswebdav/institution/MBA-
FP/MBA-
FP6014/161000/Course_Files/cf_assessment_3_problem_2_temp
late.xls