Accounting Project

Financial Reporting – 3rd Marking Period The Balance Sheet (200 pts.)

Name ________________________________________________________

Due Monday, April 3rd (five points off for each late day). This assignment must be typed & printed.

This assignment focuses on your company’s balance sheet. It will be broken into two sections: Current Assets & Current Liabilities and Long-term Assets. Upon completion, you should understand your company’s holdings of current assets and current liabilities and how well your company manages them. You will also have reviewed and evaluated decisions which your company’s management has made regarding long-term assets.

Section 1: Current Assets and Current Liabilities

Briefly describe the properties of current assets: _______________________________________________________________

_______________________________________________________________________________________________________________________

Briefly describe the properties of current liabilities: ____________________________________________________________

_______________________________________________________________________________________________________________________

Identify the changes in current asset and current liability accounts that occurred during the most recent accounting period. Blank spaces have been provided for you to write in any additional items that appear on your company’s balance sheet.

Current Assets	Amount on most recent Balance Sheet	Amount at end of prior year	Net Change in Dollars	Net Change in Percent (difference / previous year #)
Cash & Cash Equivalents
Temporary Assets (short-term investments, marketable securities, etc.)
Accounts Receivable, net
Other Receivables, net
Inventories


Total Current Assets

These two numbers should match what is on the B/S

Current Liabilities	Amount on most recent Balance Sheet	Amount at end of prior year	Net Change in Dollars	Net Change in Percent (difference / previous year #)
Accounts Payable
Other Payables
Accounts Payable, net
Accrued Salaries & Wages
Deferred Tax Liabilities
Accrued Interest
Current maturities of long-term debt
Other: (tell me what they are)
Total Current Liabilities

These two numbers should match what is on the B/S

What significant changes (in amount or percentage) occurred during the most recent year among the current assets and current liabilities? Are any of the changes troubling? Are there any that you would want to investigate further if you were an owner or creditor of your firm? Discuss.

___________________________________________________________________________________________________________________________________

Effective management of receivables is critical for most firms. They must be able to collect their receivables in a timely manner! Generally, if there is a change in receivables, there should be a similar change in sales. Provide the following information regarding sales, accounts receivables. In addition, show the amount for allowance for bad debts (may also be called allowance for doubtful accounts). This account provides an estimate of how much of the accounts receivable the company believes might never be collected. Your balance sheet may say “Accounts Receivable, net”. The “net” represents the amount of receivables less the allowance for bad debt. This amount might be listed on the statement or in the notes to the financial statements.

	End of most recent year	End of Previous Year	Percent Change (difference / previous year #)
Sales Revenues
Gross Accounts Receivable
Less: Allowance for Bad Debt
Net Accounts Receivable

Are the percentage changes in accounts receivable and allowance for bad debts similar to the changes in Sales or are they different? Analyze and discuss the meaning or implications of any differences you may observe.

___________________________________________________________________________________________________________________________________

Effective management of inventory is also critical for most firms. They must be able to sell what they buy! Changes in the level of inventory should be consistent with changes in the level of cost of goods sold. For example, if the balance of inventory increases sharply and there is not the same change in cost of goods sold, it may be a signal of poor inventory management or sales expectations that did not happen (they spent too much on inventory that they never sold). Provide the following detailed information regarding cost of goods sold and the various categories of inventory. Note that for some of this information you may have to look to the notes to the financial statements. Blank spaces have been provided for you to write in any additional items that appear on your company’s balance sheet.

	End of most recent year	End of Previous Year	Percent Change (difference / previous year #)
Cost of Goods Sold
Merchandise Inventory
*Raw Materials Inventory
*Work in Process Inventory
*Finished Goods Inventory
Total Inventories

*Companies that manufacture goods may have these types of inventory. If your company has them, please note them here.

Is the change in total inventories similar to the change in cost of goods sold or different? Discuss the implications of any differences that you observe.

___________________________________________________________________________________________________________________________________

Which inventory valuation methods are used by your firm? This information usually provided in the first few notes to the financial statements.

List all inventory methods and describe how that method calculates the value of ending inventory:

Are inventories reported using lower-of-cost-or-market? What does this mean?

___________________________________________________________________________________________________________________________________

The following four ratios provide information about how well a firm manages its current assets and current liabilities. For each one, calculate the ratio for the most recent year and the one before it. Compare the two and discuss what conclusions can be drawn from the ratios and the trend of the change.

1. Current Ratio (current assets / current liabilities)
2. Quick (acid-test) ratio (quick assets / current liabilities)
3. Accounts Receivable turnover ratio (sales revenue / *average accounts receivable)
4. Inventory turnover ratio (cost of goods sold / *average inventory)

*average = beginning balance + ending balance / 2

In prior assignments, you were asked to discuss the financials of your firm’s strongest competitor. Compute the ratios listed above for that firm and discuss how it compares to your firm’s findings.

Section 2: Long-term Assets

Long-term assets include plant (or fixed) assets, intangible assets and long-term investments. Identify the changes in your firm’s long term asset accounts that occurred during the most recent accounting period. You may have to search the footnotes and notes to the financial statements for some of this information. Note that this chart summarizes all accumulated depreciation onto one line. You may find it easier to show each asset’s accumulated depreciation separately. Blank spaces have been provided for you to write in any additional items that appear on your company’s balance sheet.

Long-term Assets	Amount on most recent Balance Sheet	Amount at end of prior year	Net Change in Dollars	Net Change in Percent
Machinery & Equipment
Building/Leasehold Improvements
Land


Less: Accumulated Depreciation
Net Property, Plant & Equipment
Deferred Tax Assets
Long-term Investments
Goodwill
Patents, copyrights & Trademarks

These two numbers should match what is on the B/S

Based on the information, briefly summarize the significant changes in long-term asset accounts, if any, that occurred during the most recent year.

___________________________________________________________________________________________________________________________________

Which depreciation valuation methods are used by your firm? Check all that apply:

_____ Straight-line

_______ Units of Production

______ Declining Balance

______ Other (specify) ___________________________________

If they use more than one, which is used most often? _________________________________________

Does your firm disclose the estimated useful lives it assumes for depreciating its tangible fixed assets. If yes, describe them. Note that for some of this information you may have to look to the notes to the financial statements.

___________________________________________________________________________________________________________________________________

Does your firm report any intangible assets on the balance sheet? If yes, describe the policies (method and estimated life) your firm uses to compute amortization expense. Note that for some of this information you may have to look to the notes to the financial statements.

___________________________________________________________________________________________________________________________________

Does your firm report any natural resource assets on the balance sheet? If yes, describe the policies (method and estimated life) your firm uses to compute depletion expense. Note that for some of this information you may have to look to the notes to the financial statements.

___________________________________________________________________________________________________________________________________

Did your firm acquire or dispose of any long-term assets during the most recent year? If so, describe.

___________________________________________________________________________________________________________________________________