must be completed on excel template
Microsoft Word - 2022 EvMBA Project 20221011.docx —Financial Accounting— 2022 CREATING FINANCIAL STATEMENTS PROJECT Instructions for Project 1. You are allowed to use outside materials in completing this project (e.g., text, notes, class and help session materials, Internet). Once you begin the project, you are not allowed to: a. Discuss the project with any other human until after it is due. b. Use any of my prior exams/projects other than the practice ones posted on Canvas. Please indicate your agreement with these instructions by signing the Code of Conduct statement on the first tab of the Project Template. 2. The following pages and associated Excel Template on Canvas contain all of the information you need to complete the project. If after thinking about a question you still feel that something is missing, send me an e-mail. 3. Please use the Excel Solution Template for your answers. 4. The project must be submitted on Canvas by 11:59pm on October 23, 2022. Please upload your completed Excel Solution Template to Canvas. Suggestions: • Review the entire project, then formulate a strategy (and timeline) for completing it. • Some questions are easy and some are hard. Don’t assume you are missing something if a question seems easy. If something seems really hard, move on to easier things and return later if you have time. • Assume that all transactions are material unless specifically noted otherwise. TGQ Inc. (100 points) The Great Quest Inc. (TGQ hereafter) is a boutique outdoor company in New Zealand that produces immersive backpacking adventures through “Middle Earth.” Its adventures are typically three-nights long and involve backpacking through immersive outdoor sets built to resemble famous locations from Tolkien novels. Participants hike through towering trees, traverse mountain cliffs, sleep under the stars, run from orcs, steal Smaug’s gold, and if they are lucky, keep the One Ring out of evil hands until they reach Mount Doom. TGQ does all of this while not compromising on luxury. TGQ’s staff do all the hard work, including carrying the heavy packs, setting up camp, cooking, and making sure that all participants have a fantastic time. TGQ was founded by a wealthy Lord of the Rings fan on 1 January 2019. Its balance sheet for 31 December 2021 is provided in the Excel file. Footnote Details relating to the 2021 Balance Sheet Inventory – TGQ advertises that participants can show up with just the clothes on their backs and outfit themselves at TGQ’s store. TGQ’s inventory consists of everything one might want to purchase for a weekend backpacking trip. Much of its inventory is customized to fit the LOTR theme; for example, zero-degree down sleeping bags appear to look like a canvas bedroll. TGQ constructs this gear at a small production facility near its headquarters. Prepaid Promotions –The balance of prepaid promotions as of 31 December 2021 relates to marketing promotions that TGQ paid for in 2021 and that a third party will run during 2022. PP&E – Of TGQ’s Gross PP&E at 31 December 2021, $500,000 relates to assets at its production facility, and $4,000,000 relates to its outdoor sets used in the trips (i.e., non- production). All of these assets were purchased on 1 January 2019. They are expected to last for twelve years, after which they will have no resale value. (Note that corporate headquarters has no assets because all items are included in the rental price.) Accounts Payable – The balance of accounts payables as of 31 December 2021 relates entirely to the purchase of inventory-related materials from suppliers. License Payable – TGQ must pay license fees to a firm called Third Age Enterprises, which owns the artistic and intellectual property rights to the LOTR books and movies. The license fee is $200 per customer that takes a trip. The fees are paid on January 15th of each year, for all customers who took a trip in the prior calendar year. page 3 Unearned Revenue – TGQ starts selling tickets for trips exactly two years before the date of the trip. Holiday weekends often book up within days. Customers must fully pay for their adventures at the time of booking. Loan – TGQ took out a bank loan of $5,000,000 on 1 January 2019. TGQ must repay $1,000,000 of the loan principal on 1 January of each year. At the same time, TGQ must pay annual interest of 8% on the principal outstanding during the trailing year. Transactions for 2022 TGQ is a private corporation but follows U.S. GAAP and reports on a calendar-year basis. Below is a summary of its transactions for the year ending 31 December 2022. All transactions are for cash unless otherwise noted. 1. Jan 1: Made all required payments on the loan. 2. Jan 15: Paid all wages payable, license payable, and accounts payable outstanding as of 31 December 2021. 3. Feb 15: Signed a contract with a local fitness center so that TGQ’s trip guides can train at the gym’s facilities. The contract lasts for twelve months and started on 1 March 2022. The cost is $8,000 per month and TGQ paid the entire amount for the year in advance on Feb 15. 4. Mar 31: Purchased an additional $300,000 of outdoor sets. Rather than paying cash, the sets supplier agreed to take TGQ common stock as a form of payment. The new outdoor sets will be depreciated over twelve years of usage, after which they will have no resale value. They were placed in a storeroom until they could be installed. 5. July 1: Spent $60,000 to install the outdoor sets purchased on 31 March 2022. The process went smoothly and TGQ started using its new equipment on July 1. A summary of additional events for 2022 are as follows, all of which still needed to be recorded: 6. TGQ leases their headquarters, production facilities, and outdoor locations of their trips. TGQ paid rent on the first day of each month in 2022 (for example, they paid on 1 January for the month of January). In total, they paid $12,000 for the production facility, $24,000 for the headquarters, and $48,000 for the outdoor locations over the entire year. 7. Purchased and received $10,000,000 of raw materials during the year. By year-end, $850,000 of inventory had not yet been paid for. 8. The pre-paid promotions from 31 December 2021 aired as planned. In addition, TGQ spent $600,000 on advertising, all of which had aired by year-end. 9. Administrative workers earned $400,000 in wages during the year, and workers producing the inventory earned $500,000 in wages during the year. $80,000 of the total $900,000 was still unpaid at year-end. 10. TGQ completed 100 backpacking trips with a total of 1,500 customers during 2022. The total sales amount for these trips was $10,000,000, all of which were booked and paid for prior to 2022. TGQ spent $5,900,000 to pay for the cost of the trips, including food, supplies (all of which were used), and wages for the trip guides. TGQ will pay the license fees in January 2023 as scheduled. page 4 11. TGQ received cash of $10,500,000 for customer bookings for trips scheduled during 2024 and $1,200,000 for trips scheduled during 2023. 12. TGQ sold $9,900,000 of gear during 2022. Customers paid immediately. TGQ uses a periodic inventory accounting system. 13. In 2021 (i.e., last year), TGQ signed a contract with Air New Zealand (ANZ) to take 55 of ANZ’s employees on a special trip. The total contract price was $700,000, and ANZ paid 50% in advance in November 2021. The trip happened as planned in September 2022, at which time ANZ paid the remaining 50%. The contract included gear provided by TGQ. TGQ determined that the trip participants would value the gear at 20% of the total contract price and the trip at 80%. - Note: this trip and gear is separate from the trips and gear mentioned in transactions 10 through 12. 14. During 2022, TGQ spent $330,000 working on a potential new product, TGQ-BIRDSEYE, which would allow trip participants to see a bird’s eye view of obstacles for brief periods of the trip. By the end of the year, TGQ’s leadership was unsure about whether they want to continue developing the product. 15. During the year-end accounting close, TGQ recorded several adjusting entries and performed an inventory count. The inventory count revealed there was $2,800,000 of inventory on hand. Your Assignment: Use the Excel template on Canvas to complete the following: 1. Assume that all transactions are material. Use the Transaction Analysts Template to record all the transactions through 31 December 2022. Do not forget adjusting entries. Then complete the t-accounts, including closing-out the temporary t-accounts at year-end. Ignore taxes. Be sure to clearly label your t-accounts and calculate ending balances. 2. Prepare the following statements for the year ended 31 December 2022: a. A classified balance sheet. b. A multiple-step income statement. c. A cash flow statement using the "direct" method d. A cash flow statement using the "indirect" method FS Project Code of Conduct CODE OF CONDUCT By submitting this project you acknowledge that you are a part of a learning community