Accounting Cycle Case Names And Journal Entries 028875

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Prepare the fiscal year 2013 financial statements for Noodles & Company, including journal entries, T-accounts, trial balance, income statement, statement of retained earnings, and balance sheet, based on given transactions, balances, and reference data for fiscal year 2012. Additionally, prepare the closing journal entries to reset temporary accounts at year-end.

Paper For Above instruction

Noodles & Company, a publicly traded restaurant chain specializing in Asian, Mediterranean, and American-inspired noodle dishes, reported financial results for fiscal year 2013. To accurately reflect its financial position and operations, the company needed to prepare comprehensive financial statements, including journal entries, T-accounts, trial balance, income statement, statement of retained earnings, and balance sheet, based on detailed transaction data and prior-year balances.

Introduction

Accurate financial reporting is vital for informing stakeholders about a company's financial health. It involves systematically recording transactions, preparing adjusting entries, and organizing data into useful financial statements. For Noodles & Company, this process requires understanding its operational activities during 2013, translating these into journal entries, posting to T-accounts, preparing trial balances, and ultimately producing the core financial statements: the income statement, statement of retained earnings, and balance sheet.

Understanding the Initial Balances and Transactions

Beginning with the opening balances as of December 31, 2012, Noodles & Company’s financial accounts comprised various assets, liabilities, and equity accounts. These included cash, accounts receivable, inventory, property & equipment, and others. The initial balances set the starting point for recording the year's activity.

The 2013 transactions encompass funding activities (issuance of stock, stock buyback), operational transactions (sales, costs, expenses), financing (debt repayment, interest expense), investing (property & equipment purchases), and other adjustments (depreciation, tax payments). Meticulously recording each transaction ensures that the financial data reflects actual economic events.

Journal Entries for 2013 Transactions

Each transaction was documented through journal entries, such as issuing new shares, purchasing inventory, recording sales and cost of goods sold, collecting franchise royalties, paying debts and expenses, purchasing property & equipment, and recognition of depreciation and tax expense. For example, the issuance of stock was recorded as:

Debit Cash $100,000

Credit Common Stock $100,000

Similarly, the purchase of inventory was:

Debit Inventory $93,068

Credit Accounts Payable $93,068

All transactions were entered into the T-accounts corresponding to each account, facilitating visualization and subsequent trial balance preparation.

Preparing the Trial Balance

Using the ending balances from the T-accounts, the trial balance as of December 31, 2013, was compiled. This step verifies that total debits equal total credits, ensuring the accounting equation’s integrity. For Noodles & Company, the trial balance summarized all account balances, including cash, receivables, inventory, property & equipment, payables, and equity accounts.

Financial Statements

Income Statement

The income statement for 2013 summarized revenues and expenses. Revenues included restaurant sales of $347,140 and franchise royalties of $3,785. Expenses covered cost of goods sold ($91,890), restaurant labor ($104,040), general & administrative expenses ($108,570), pre-opening costs, depreciation, interest, and income taxes. Net income was calculated at $5,163, reflecting operational profitability.

Statement of Retained Earnings

The statement showed opening retained earnings, added net income for 2013, and deducted dividends (none in this case) to arrive at ending retained earnings of $3,640. This illustrates how profit retained within the company increased shareholder equity.

Balance Sheet

The balance sheet detailed assets, liabilities, and stockholders’ equity as of December 31, 2013. Total assets amounted to $156,995, with current assets and property & equipment representing significant portions. Liabilities included current payables, accrued expenses, and long-term debt. Equity comprised common stock and accumulated retained earnings. The balance confirmed the accounting equation’s balance of assets and claims.

Closing Entries

To close temporary accounts (revenues and expenses) at year-end, a journal entry was prepared to transfer net income to retained earnings. The entry involved debiting revenue accounts and crediting expense accounts, with the net effect credited to retained earnings. This process resets the temporary accounts for the new fiscal year and updates retained earnings with 2013’s net income.

Conclusion

Preparing comprehensive financial statements for Noodles & Company required meticulous accounting of transactions, precise posting to T-accounts, and careful compilation of the trial balance. These steps ensure accurate financial reporting, compliance with accounting standards, and useful information for stakeholders. The process demonstrated the importance of systematic record-keeping, analytical review, and adherence to accounting principles in providing a clear financial picture of the company's operations for the fiscal year 2013.

References

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  • Scott, W. R. (2015). Financial Accounting Theory. Pearson.
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  • Financial Accounting Standards Board (FASB). (2020). Accounting Standards Codification. FASB.
  • International Financial Reporting Standards (IFRS). (2019). IFRS Foundation.
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  • Revsine, L., Collins, W. J., Johnston, K., & Mittelstaedt, F. (2015). Financial Reporting & Analysis. Pearson.

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