6-1 Final Project Milestone Three: Ratio Analysis Report Draft

ACC 307 Final Project Scenario I

Scenario for adjusting entries: Year end is December 31, 2017. Peyton Baking Company uses the following accounting practices:

 Inventory: Periodic, FIFO for both baking and merchandise

o Baking supplies: $27,850 ending inventory  Equipment: Straight line method used for equipment

o Mixing machine: $5,000 initial cost, $500 salvage value, 3rd year of use of 7 total ($642.86 per year)

o Ovens: $8,000 initial cost, $1,000 salvage value, 3rd year of use of 7 total ($1,000 per year)

o Other depreciable equipment: $4,000 initial cost, $0 salvage value, 1st year of use of 4 total ($1,000 per year)

o Bakery Leasehold Improvements: $10,000, 2nd year of use ($2,000 per year) o Trademark for company name: Initial cost, $2,300, 3rd year of use

 Office supplies: Periodic, FIFO. Ending balance is $250.  Pay period is every 2 weeks. Last pay period ended December 27.

o 60 employees with a daily pay of $5,700. All receive pay through December 31.  Financing:

o 6% interest note payable was made on January 31, 2017, and is due February 1, 2019. o 5-year loan was made on June 1, 2017. Terms are 7.5% annual rate, interest only until

due date.  Insurance: Annual policy covers 12 months, purchased in February, covering March 2017–

February 2018. No monthly adjustments have been made. Other information: An employee slipped and fell in the baking area and has filed a lawsuit. The company lawyer indicates that it is probable that the company will be found liable. No additional information is available.