Company Background & ScenarioThe AC Speed Company is a well-established, publicly-held corporation, operating as a wholesaler in the auto parts industry. Specifically, AC Speed purchases auto parts from manufacturers and sells them to large business customers. Most purchases and sales are on account, with trade credit terms (specified below).You’re a Davenport University student pursuing a bachelor’s degree in business and employed at the AC Speed Company this semester as an intern. You’ve worked in various departments and on several projects so far, learning a lot about the company’s business operations. Management seems impressed with your enthusiasm and the quality of your work.The company’s accountant has just been called away for a family emergency and will likely be absent for a month or so. The General Manager asks you to take over the accountant’s regular duties on an interim basis. You’re nervous about doing so, but are confident that what you’ve learned in accounting class, plus your personal problem-solving skills, will make this a successful experience. What a great learning opportunity, not to mention an enhancement to your resume!Project Overview & InstructionsA. Overviewa. Part 1 is a financial accounting activity that requires you to record various business transactions during the month, close the accounting records at the end of the month, and prepare the financial statements. These tasks relate to the steps in the accounting cycle that you learned in your first accounting course.`b. Part 2 is an activity that requires you to analyze the company’s year-end financial statements to assist management in assessing the company’s position and making decisions about its future direction.c. This is an individual, not a team, project. While you may discuss this project with others, you must prepare and submit your own work. Refer to the academic integrity statement in the project workbook.d. Before starting work, review the entire project: all instructions, business transactions descriptions, workbook sections, check figures, due dates, and submission requirements.B. General Instructionsa. The parts of this project, including specific business transactions and steps in the accounting cycle, must be completed in sequence. This is particularly important with business transactions relating to purchases and sales of inventory.b. You are also encouraged to use your textbook’s table of contents (front) or index (back) to locate helpful references.c. These project instructions will not address every detail of every task. If you have questions, ask your instructor.d. Most of your work for this project will be accomplished in Excel. A basic skill level in this application is expected. That is, you should be able to such things as move around in a workbook, enter data in cells, use the sum function, compose basic formulas, and save your work.e. If rounding is required, round to the nearest cent. For example, $96.835 would be entered as $96.84.f. Use the check figures provided to check your work as you progress through the project. Investigate any discrepancies and correct them as you go along.g. Refer to the project rubric to determine how components of the project will be assessed.h. Appearance counts! Pay attention to the format, to spelling, and to other details of appearance. This reflects on management’s perception of you as a professional.C. Submission Requirementsa. Final submission of all parts of this project must be in electronic (not paper) form. That is, you will submit your completed work via an assignment link in a Blackboard course site or via an email attachment. Follow your instructor’s directions.b. Save backup copies of your work. If you have multiple versions of the project, clearly label them for your own reference and to ensure that you submit the appropriate version to your instructor.c. You must read the academic integrity statement in the project workbook and enter your student ID number on the form to signify your agreement with and adherence to that statement. Final project submissions will not be accepted without this.d. Due dates for the parts of this project will be provided by your instructor in the course syllabus, in the Blackboard course site, or in a designated handout. Be sure to enter these on your personal calendar and plan your work on this project accordingly.D. Credit Terms & Inventory Accountinga. When AC Speed purchases merchandise (inventory only) from a supplier or vendor on account, they receive credit terms of 2/15, net 30.b. When AC Speed sells merchandise to a customer on account, they offer that customer credit terms of 2/30, net 45.c. AC Speed accounts for the specific types of merchandise in their inventory with a set of subsidiary ledgers (inventory control cards). The balances in these subsidiary ledger records, in total, must equal the balance in the Merchandise Inventory account in the general ledger.d. AC Speed uses a perpetual inventory accounting system and a last-in, first-out (LIFO) inventory costing method.e. Subsidiary ledger records are kept for each customer and for each vendor. The balances in the customer subsidiary ledger records, in total, must equal the Accounts Receivable account balance in the general ledger. The balances in the vendor subsidiary ledger records, in total, must equal the Accounts Payable account balance in the general ledger.E. Financial Accounting Steps:a. Record each business transaction, in sequence by date, in the appropriate special journal or the general journal. Also, immediately record any transaction involving inventory, a customer, or a vendor in the appropriate subsidiary ledger record.b. At the end of the month, post each entry in the general journal to the general ledger.c. At the end of the month, total each column in each special journal and post that total to the general ledger. EXCEPT for entries in the “Other” columns, which must be posted individually to the general ledger.d. When posting is completed, bring the balance in each general ledger account up to date.e. When posting is completed, bring the balance in each subsidiary ledger account up to date.f. At this point in the closing process, the balances of all subsidiary ledger accounts would be totaled and that total compared to the balance of the corresponding control account in the general ledger. That is, the total of inventory control cards would be compared to the Merchandise Inventory balance; the customer subsidiary ledger total to the Accounts Receivable balance; and the vendor subsidiary ledger total to the Accounts Payable balance. Any discrepancies would be investigated and corrected. Given the limited scope of this project scenario, reconciliation between subsidiary ledgers and control accounts is not possible.g. List all general ledger account balances in the unadjusted trial balance columns of the worksheet. Use the sum function in Excel to total the debit and credit columns. These totals should be equal.h. Prepare the end-of-month adjusting entries. Record these entries in the general journal and post them to the general ledger. Also record the adjusting entries in the designated columns in the worksheet and total the debit and credit columns. These totals should be equal.i. Update general ledger account balances after posting adjusting journal entries.j. Complete the unadjusted trial balance columns on the worksheet. Use Excel formulas to carry balances from the unadjusted trial balance columns, adjusting as necessary by entries in the adjustments columns. Check your results against the balances recorded in the general ledger.k. Sort the dollars recorded in the adjusted trial balance columns into either the income statement or the balance sheet columns. Total these columns. The entry of net income should cause the debit and credit columns to equal one another.l. Use the income statement information on the worksheet to prepare a multi-step income statement in good form. Look at examples of this income statement format in your textbook, such as the one on page 220.m. Prepare a statement of retained earnings in good form. Look at examples of this statement in your textbook. Remember that net income from your just-completed income statement is a necessary component of this statement.n. Use the balance sheet information on the worksheet to prepare a classified balance sheet, similar in format to the example on page 711. Remember that the ending retained earnings balance from the just-completed statement is a necessary component of the equity section of the balance sheet.o. Prepare the end-of-month closing entries. Record these entries in the general journal and post them to the general ledger. Update balances in the general ledger accounts.p. List the general ledger accounts that have balances other than zero on the post-closing trial balance. The totals of the debit column and the credit column should be equal.F. Part 2 of this project requires you to analyze the company’s year-end financial statements to assist the management of AC Speed in assessing the company’s financial position and making decisions about its future direction.a. Before beginning this part of the project, you will find it helpful to review Chapter 18 on financial statement analysis. Page 809, a summary of ratios, will be particularly useful.b. Tabs in the project workbook provide trial balance data for the current and two preceding years for AC Speed and a location to calculation a selection of ratios. Use the trial balance data and the formulas in Chapter 18 to compute the ratios listed for each of the three years. YOU MUST STRUCTURE YOUR RATIO CALCULATIONS AS FORMULAS AND LINKS TO APPROPRIATE CELLS ON THE TRIAL BALANCE TAB. You will lose points by simply typing the final ratio numbers or percentages.c. After you calculate the ratios, consider whether there is a trend over the three-year period. Also compare the ratios you calculated for AC Speed with those listed as industry averages. Review the information in Chapter 18 to help you determine what the ratios are telling you about various aspects of AC Speed’s business operations.d. Use Word to prepare a memo (minimum 500 words) to AC Speed’s general manager, addressing the three questions listed at the bottom of the ratios tab. This should be formatted as a business memo, not an APA paper. Be sure to include a brief introduction and conclusion in the memo. Each question should be addressed in one or two paragraphs in the body of the memo. Remember that the general manager will expect details/facts/ratios to support statements you may make about the status of the business. Your writing should be concise, clear, and readable, with a fairly formal tone (since it’s addressed to AC Speed’s general manager, who is likely to share it with other members of management). Your instructor will provide the due date and submission requirements for this part of the project.