BUS 5110: Managerial Accounting

Written Assignment Unit 1

Analysis of Polly Pet's Product Financial Statement

University of the People

April 2021
Written Assignment Unit 1
Submit a paper which is 2-3 pages in length (no more than 3-pages), exclusive of the reference
page. Your paper should be double spaced in Times New Roman (or its equivalent) font, which
is no greater than 12 points in size. Cite at least three sources in APA format.
In this paper, in addition to presenting the computed answers, please also discuss how you
arrived at each answer the accounting problem asks. The accounting problem presents a
company’s balance sheet, income statement, and statement of cash flows for a theoretical
company, Polly’s Pet Products. Each of these statements has blank lines. Determine the values
that would be appropriate for each blank line. Provide a narrative of how you arrived at each
value. Include in this narrative an explanation of:

1. the financial statement being completed;

2. the account being valued;
3. its relationship to the other financial data.

For example, if the accounts payable (AP) line was missing, describe what a balance sheet is
and explain that you can derive the AP value based on knowing all the other values of the
current liabilities section. Then explain what an account liability is, as well as why it would belong
in the current liabilities section of the balance sheet. Finally, analyze, evaluate, and develop a
conclusion about the company’s performance based on the completed statements.
Please refer to the income statement, balance sheet, and statement of cash flows of Polly’s Pet
Products.
Superior papers will mention and explain the following elements when responding to the
assignment question:

• Provide correct balances for the blank financial account lines.

• Define the financial statement being completed.
• Discuss how the values were determined.
• Define and explain each account line that was completed.
• Analyze, evaluate, and develop conclusions about the company’s performance
based on the financial information.

Be sure to use APA formatting in your paper. Purdue University’s Online Writing LAB (OWL) is a
free website that provides excellent information and resources for understanding and using the
APA format and style. The OWL website can be accessed
here: http://owl.english.purdue.edu/owl/resource/560/01/
Kulkarni & Mahajan (2015) stated that financial statements are the end product of the financial
accounting process. Financial statements reflect a mixture of recorded facts, accounting
conventions, and judgments of the preparer. A financial statement is crucial to the successful
conduct of any enterprise; it summarizes financial and economic activities but also determines
the quality of each company's relations (Gapsalamov et. al., 2017).

According to Murphy (2020), a financial statements include:

• Balance sheet
• Income statement
• Cash flow statement.

This paper will respond to the accounting problem in the Financial Statement by providing the
appropriate values for each blank line. Furthermore, it will evaluate and draw conclusions
about the company's financial status based on the financial information.

The accounting problem presents a company’s balance sheet, income statement, and statement
of cash flows for a theoretical company, Polly’s Pet Products. Each of these statements has
blank lines.

Missing values in the balance sheet and cash flow statement can only be defined once the
income statement is complete. In this case, we will complete the income statement first.

Income Statement

The income statement presents an overview of net income and earnings per share, along with
a breakdown of expenses (Murphy, 2020).

The income statement for Polly's Pet Products contains 12 rows of calculations, six of which
are missing. In order to calculate operating costs, the difference between revenues and gross
profit must be calculated. [650,000-205,000 = 445,000].

The operating income (the profit left over after operating expenses like wages have been
deducted) is calculated by subtracting the general and administrative expenses from the gross
profit. [205,000-75,000 = 130,000].

The income before provision for income taxes value found by taking the operating income and
subtracting other expenses [130,000-60,000 = 70,000].

The net income is calculated by subtracting The income before provision for income taxes
from provision for income taxes [70,000-5,000 = 65,000].

The retained earnings, ending balance is summation of retained earnings, beginning balance
and net income. [103,500+65,000=168,500].

Cash flow statement

Murphy (2020) pointed out that CFS measures how effectively companies generate cash to
meet debt obligations and pay for expenses, and invest.
As seen in Polly Pet's Product Statement of Cash Flow, one of the cash flows from operating
activities is cash paid out to suppliers and employees.

To calculate the value of cash paid out to suppliers and employees, add the interest paid, taxes
paid, and net cash from operating activities. Then subtract this from the cash received from
customers. [(5,000 + 10,000 + 185,000) – 600,000 = 400,000]

In net cash provided by financing activities, we must subtract the sum of new loans and
issuance of common shares of stock to repayments on loans. [(50.000+5,000)-45,000 = 10,000]

To calculate the net change in cash, find the sum of net cash provided by operating activities,
net cash used in investing activities, and net cash provided by financing activities [185,000-
25,000+10,000 = 170,000].

The cash balance, end of year is calculated by adding the beginning of year balance to the net
change in cash. [170,000+30,000 = 200,000].

Balance Sheet
Balance sheets are snapshots of a company's assets, liabilities, and stockholders' equity taken
at the end of its fiscal year (Murphy, 2020).

The cash balance figure on the cash flow statement is transferred to the balance sheet, which is
then used to fill the cash asset [200,000].

Total current assets is calculated by finding the sum of cash, accounts receivable, and other
assets [200,000+50,000+25,000 = 275,000].

Total assets are then calculated by adding total current assets to long-term fixed assets.
[275,000+75,000 =350,000]

Accrued expenses was calculated by finding the difference between the total current liabilities
and the sum of accounts payable, income tax payable, current portion of notes payable, and
deferred income taxes. [123,500-(75,000+5,000+12,000+1,500) = 30,000).

Long term notes payable is calculated by finding the difference between total liabilities and
total current liabilities [161,500-123,500 = 38,000].

Stockholder equity is calculated by finding the difference between total assets and total
liabilities [350,000-161,500= 188,500].

Then, subtract common stock and additional paid-in capital from total stockholder equity to
calculate retained earnings [188,500-5,000-15,000 = 168,500]

Lastly, total liabilities and stockholder equity are determined by adding those two values.
[161,500+188,500 =350,000].

Analysis
Polly’s Pet Product’s balance sheet shows a zero balance at December 31, 2018. In addition,
they had an end-of-year cash balance of 200,000 which grew from 30,000 and the enterprise
was profitable with a net income of 65,000..

Conclusion
The financial statements available reveal that Polly's Pet Products is a financially healthy
enterprise.

References:

Gapsalamov, A.R., Vasilev, V.L., Ilyin, A.G. (2017). State planning of the Russian economy:
Past and present. International Journal of Economic Perspectives, 11(1), 474-480.

Kulkarni, M. A., & Mahajan, S. (2015). Management Accounting - I. (V. V. Morajkar, Ed.).
Nashik: Yashwantrao Chavan Maharashtra Open University.

Murphy, C. (2020, October 27). How to interpret financial statements. Retrieved April 13,
2021, from https://www.investopedia.com/terms/f/financial-statements.asp