Menu Management 210 Course Project Requirement Description

Menumgmt210 Course Projectrequirementrequirement Descriptionworksheet

Prepare the journal entries in the General Journal, post them to the General Ledger, prepare a Trial Balance, create Adjusting Entries, post them, prepare an Adjusted Trial Balance, and then produce financial statements for Howard's Flight Radio Management Corporation based on provided transactions, accounts, and scenarios. Complete closing entries, post-closing trial balance, compute and interpret ratios, and ensure all steps follow standard accounting procedures with accurate account usage and balanced debits and credits.

Paper For Above instruction

Howard's Flight Radio Management Corporation (HFRM) has recently commenced operations, providing flight management systems. As a new client, the goal is to accurately record all financial transactions for March, perform the necessary adjustments, and generate the essential financial statements to present a clear picture of the company's financial health. This paper will systematically document each step in the accounting cycle, beginning with journal entries, proceeding through ledger posting, trial balances, adjusting entries, and culminating in financial statement preparation and ratio analysis.

Introduction

Accurate financial reporting is vital for new businesses to communicate their financial position to stakeholders. The accounting cycle encompasses recording transactions, posting to ledgers, adjusting entries, preparing financial statements, closing temporary accounts, and analyzing financial ratios. This process ensures transparency, compliance, and informed decision-making.

Step 1: Recording Journal Entries

On March 1, HFRM started its operations with an initial investment of $20,000, issuing 2,000 shares of common stock at par value. The company paid premiums for a year's insurance ($2,400), and rent for the month ($1,900). Additional transactions include equipment purchases, supplies, receipts from flight management system repairs, and payments for expenses and dividends. Each transaction requires a well-prepared journal entry, ensuring debits equal credits.

For example, the initial cash deposit results in a debit to Cash ($20,000) and a credit to Common Stock ($20,000). Insurance expense is recorded with a debit to Prepaid Insurance and a credit to Cash. Repair equipment purchase involves debiting Repair Equipment and crediting Cash and Accounts Payable for the balance and down payment.

Step 2: Posting to the General Ledger

Following journal entries, the amounts are posted to the respective T-accounts: Cash, Prepaid Insurance, Repair Supplies, Repair Equipment, Accounts Payable, and others. This step involves transferring each journal entry to the ledger accounts, calculating ending balances, and ensuring debits equal credits across all accounts. For example, the Cash account’s ending balance reflects all receipts and disbursements during March, adjusted for transactions like payments and receipts.

Step 3: Preparing the Trial Balance

A Trial Balance is compiled by listing all accounts with their balances, segregated into debits and credits. This step checks the arithmetical accuracy of postings. Based on the ledger, the trial balance confirms total debits equal total credits, thus verifying the recording process's integrity.

Step 4: Making Adjusting Entries

Adjustments are required for expired insurance, supplies used, depreciation, and accrued taxes. For example, one month’s insurance costs $2,400 annually, so an adjusting entry records $200 as Insurance Expense and reduces Prepaid Insurance. Supplies remaining are valued at $200, leading to an expense adjustment. Estimated depreciation on the equipment is recorded as depreciation expense with accumulated depreciation credited accordingly. Income tax payable is accrued based on estimated taxes.

Step 5: Posting Adjusting Entries and Preparing the Adjusted Trial Balance

Post these adjustments to the ledger accounts, updating balances. The Adjusted Trial Balance incorporates these changes, providing a more accurate basis for financial statements. For example, the Cash account balance might still be $18,060, with adjustments to supplies, accumulated depreciation, and taxes reflected.

Step 6: Preparing Financial Statements

The core statements include the Income Statement, reflecting revenues and expenses; the Statement of Retained Earnings, summarizing retained earnings after net income and dividends; and the Balance Sheet, listing assets, liabilities, and equity. For March, the Income Statement will reveal net income of $2,025, with revenues from FMS repair and appropriate expenses. The Balance Sheet will show assets such as Cash, Prepaid Insurance, Repair Supplies, and Repair Equipment, alongside liabilities like Accounts Payable and Income Tax Payable, and stockholders’ equity components.

Step 7: Closing Entries

At month-end, temporary accounts—revenues, expenses, dividends—are closed to Retained Earnings. Revenue accounts are debited, expenses credited; the net effect is transferred to Retained Earnings. Dividends are also closed out, reducing retained earnings accordingly. For instance, FMS repair revenue of $5,350 and expenses totaling $3,325 lead to net income of $2,025, which increases retained earnings. Dividends of $1,000 decrease retained earnings.

Step 8: Post-Closing Trial Balance

Post-closing entries are posted to ledger accounts, and a final trial balance is prepared to confirm that only permanent accounts remain. The ending balances should reflect assets, liabilities, and equity components, with all temporary accounts closed.

Step 9: Ratio Analysis and Interpretation

Financial ratios provide insights into liquidity, leverage, asset utilization, profit margins, and return on assets. Calculations involve dividing relevant financial statement figures, such as current ratio = current assets/current liabilities; leverage ratio = total assets/shareholders’ equity; asset turnover = revenue/average total assets; net profit margin = net income/revenue; and return on assets = net income/average total assets. Interpreting these ratios informs stakeholders of the company's operational efficiency, profitability, liquidity, and financial stability.

Conclusion

The comprehensive application of the accounting cycle—from recording transactions through financial analysis—ensures HFRM can report its financial position accurately. Proper documentation, posting, adjustments, and analysis are essential skills for effective financial management and compliance. This systematic approach fosters transparency, allows for performance evaluation, and supports informed decision-making for Howard Allan’s fledgling enterprise.

References

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  • Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2019). Introduction to Financial Accounting. Pearson.
  • Kieso, D., Weygandt, J., & Warfield, T. (2019). Intermediate Accounting (16th ed.). Wiley.
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  • Williams, J. (2020). Principles of Accounting. SAGE Publications.
  • Weygandt, J. J., Kieso, D. E., & Kimmel, P. D. (2018). Financial Accounting. Wiley.

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