Reference no: EM13486795
Question
Computer question
Frank Well Work Ltd. (FWWL) offers oilfield operation services to the oil and gas industry in Alberta and Texas. FWWL owns no natural resource properties itself, but assists in exploration activities through cementing and stimulation services. The company prepares its financial statements in accordance with ASPE.
The company has prepared draft financial statements (Exhibit 1-1). However, some transactions during the year have not been properly reflected in the financial statements (Exhibit 1-2). Additional information on financial statement elements is provided in Exhibit 1-3.
FWWL is required, as part of its bond agreement, to maintain a minimum level of retained earnings of $120 million, and a maximum debt-to-equity ratio of 1.3-to-1. In the debt-to-equity ratio, the numerator is "total liabilities."
Since a number of the transactions that have not been processed affect debt and/or equity, the CFO is concerned that these key financial targets continue to be met.
Requirements:
1. Record journal entries to account for the transactions and information described in Exhibits 1-2and 1-3.
2. Using Accpac, prepare the balance sheet, the statement of income, and the statement of retained earnings.
Procedure:
a. In Accpac, select Frank Well Work Ltd. All data in Exhibit 1-1 is already recorded.
b. Record the transactions from Requirement 1 as journal entries in a batch. Post the batch.
c. Prepare the financial statements. For the report, use the following files:
Balance sheet: quikbal3_fa3.xls
Statement of income: quikinc3_fa3.xls
Statement of retained earnings : re_state_fa3.xls
d. Print each report into a file.
3. Evaluate the key financial targets and suggest action for the coming year if there are concerns.
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