Simulation 5
Narrative:
You have been hired as a Junior Accountant to work for Plants from Paradise (Plants) a
garden centre in the city of Victoria, BC. Your role reports directly to Plants' Controller Miranda
Cornell. Each week you are emailed a series of tasks that are Miranda has aligned to match
your current accounting class schedule. Each week tasks are laid out for you to assist Miranda
in both operations and accounting decision making. Miranda is hoping to help you see the
broader application that accounting has on operating a business and hopes that the weekly
tasks help to identify how accounting impacts operations.
Plants from Paradise reports under ASPE, and has a December 31, 2021, year end. All work
that you are preparing is for their financial statements dated as such.
Additional Information:
Note from Miranda: “
We have purchased and disposed of some equipment this year; I realize now I never recorded
those entries. Can you please help me with the accounting for PP&E? I also had a conversation
with our attorney (Appendix B), can you please draft a preliminary assessment describing what
our options are as well as what your recommendation is for us for an accounting treatment? We
also received the underlying payroll information from our third-party supplier, but for some
reason your payroll figures are not coming through properly can you please review your own
payroll to see where the calculations are wrong?
1. Please prepare the following draft financial statements:
a. Income Statement (20 marks)
b. Statement of Owners Equity (15 marks)
c. Balance Sheet (20 marks)
2. Ratio Analysis (Appendix B) (30 marks)
Appendix A: Financial Statements
Tasks:
Note from Miranda: using the provided adjusted trial balance and templates, can you please
prepare the financial statements so that next week we can analyze and present the statements?
Adjusted Trial Balance:
Plants From Paradise
Adjusted Trial Balance
December 31, 2021
Account Account Name Debit Balance Credit Balance
Number
1000 Cash 12,200
1010 Accounts Receivable 18,859
1015 Allowance for Doubtful -500
Accounts
1020 Interest Receivable 3,000
1030 Inventory - Plants 12,500
1040 Inventory – Soil 15,500
1050 PPE – Equipment 45,500
1055 Acc. Amortization – -19,500
Equipment
1060 PPE – Building 145,000
1065 Acc. Amortization - Building -22,000
2000 Accounts Payable 19,576
2010 Salaries Payable 7,875
2020 Line of Credit 2,000
2025 Interest Payable 515
2030 Unearned Revenue 7,600
3000 Miranda Cornell, Capital 112,853
4000 Sales Revenue – Plants 167,894
4010 Sales Revenue – Soil 45,673
4020 Sales Revenue – Delivery 12,345
5000 Cost of Goods Sold 106,784
5020 Salaries Expense 29,154
5040 Bad Debt Expense 4,500
5050 Utilities 2,275
5060 Amortization Expense 15,500
5060 Repairs Expense 4,699
5070 Interest Expense 2,860
Total Balance $0
Templates:
Income Statement:
(Company)
(Statement)
(Date)
Revenues
Less: Cost of Goods Sold
Gross Profit
Operating Expenses
Total Operating Expenses
Profit/Loss
Statement of Owner’s Equity:
(Company)
(Statement)
(Date)
(capital)
Balance Sheet:
(Company)
(Statement)
(Date)
Assets
Current Assets
Total Current Assets
Property, plant and equipment
Total Assets
Liabilities and Owner’s Equity
Current Liabilities
Total Current Liabilities
Appendix B: Ratio Analysis
Tasks:
1) Prepare Ratio Analysis – Appendix B (30 marks)
Background:
Miranda has requested that from the above draft statements you prepare and analyze the
following ratios. For each ratio she has requested that you provide a brief explanation of what it
measures and your thoughts on any insights it presents about the company by comparing to
any standard metrics for the ratio. For any ratio that requires an average, use the same value
for the current year as the previous year (meaning no need to average, take the current years
value)
a. working capital
b. current ratio
c. Profit Margin
d. Receivable turnover ratio
e. Asset Turnover Ratio
f. Return on Assets
