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Accounting policy choices in financial statements

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Reference no: EM132777714

Read Highland Malt: Accounting Policy Choices in Financial Statements.

Prepare balance sheets, income statements, and cash flow statements for 2018 and 2019 only, and then briefly discuss Highland Malt's financial health and make recommendations for improvements.

This task will require you to make certain assumptions about the firm's business operations and to prepare all required journal entries and T-accounts (you do not need to submit these). Note that the main component of this case study is the successful creation of the financial statements. The discussion section should be no more than one, single-spaced page, and should be limited to:

- Key assumptions you made.
- Financial ratio analyses you performed.
- Recommendations you are making to improve the financial health of the company.

Accounting Case Study

Learning Objectives
1. Prepare journal entries, T-accounts, multi-year balance sheets, income statements, and cash flow statements.
2. Analyse and critique financial statements and use ratio analysis to propose recommendations to improve the financial health of a business.

Project Description
Read Highland Malt: Accounting Policy Choicesin Financial Statements. Prepare balance sheets, income statements, and cash flow statements for 2018 and 2019 only, and then briefly discuss Highland Malt's financial health and make recommendations for improvements. This task will require you to make certain assumptions about the firm's business operations and to prepare all required journal entries and T-accounts (you do not need to submit these). Note that the main component of this case study is the successful creation of the financial statements. The discussion section should be no more than one, single-spaced page, and should be limited to:
? Key assumptions you made,
? Financial ratio analyses you performed.
? Recommendations you are making to improve the financial health of the company.

Assumptions
When preparing the financial statements, add the following assumptions to your own:
1. Revenue recognition. Treat sales of whisky as revenue (not deferred revenue nor any
other liability).
2. Inventory/production costing methods. Inventory production began in 2018, but no sales took place in 2018. Use the first-in, first out method (FIFO) when calculating the Cost of Goods Sold (COGS). Do not include any of the expenses in Exhibit 4 in COGS.
3. Income taxes. On the income statement, ignore taxes. Present EBI (Earnings Before Interest) to reflect the bank loan interest for 2018 and 2019 and then net income of net loss.
4. Expense categories. Include all costs listed in Exhibit 4 as fixed costs that fall under Selling, General and Administrative expenses (SG&A). Do not include any of these costs in COGS.
5. Bank loan. Assume the loan was obtained Jan 1, 2018 and since the case states it
"was extended in 2019," assume the full amount of the principal is repaid on January 1, 2020 ("the next fiscal year").

Attachment:- KB Project.rar

Reference no: EM132777714

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