The Importance of Long-Term Debt, Equity, and Cash Flow in Financial Reporting

The Importance of Long-Term Debt, Equity, and Cash Flow in Financial Reporting

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Competency

In this project, you will demonstrate your mastery of the following competency:

• Apply accounting principles and methods to long-term liabilities and equity
• Analyze the inflows and outflows of cash for an organization

Overview

Organizations use debt and equity to be able to fund their operations and purchase necessary property, plant, and equipment for the business. As an organization grows it will become essential for it to gain more capital either from financing or equity arrangements. Professional accountants may encounter varying degrees of debt depending on the companies they work for. Regardless of how much debt a company has, it is important to be able to manage long-term liabilities and equity to avoid insolvency.

As with any financial records, accuracy is key. It is imperative to keep accurate and complete records. You now have the opportunity to correct any errors from the previous Project One Milestone Journal Entries and Ledger Accounts tabs in the Corrected Journal Entries and Corrected Ledger Accounts tabs.

Scenario

You are a professional accountant who is working with an established office supply manufacturer, Sharper! Enterprises Inc., to prepare their financial statements for the current fiscal year. You have been given the accounts and information you need to prepare their financial statements. For this, you will need to use your understanding of the balance sheet accounts for long-term liabilities and equity to report accurate information to the finance department.

For a large company, they would more than likely use a software program to manage their finances. For purposes of this assignment, the information has been provided in Microsoft Excel.

Directions

Using the scenario provided, complete the following in the same Project One Workbook Template you used for Project One Milestone. Use the Chart of Accounts tab in the workbook for account names.

Note: You may choose to complete an assignment using a desktop program instead of SNHU’s virtual desktop (VDI); however, technical support will not be provided by SNHU if you select this option.

Project One Workbook

1. Correct all milestone journal entries and milestone ledger accounts from Project One Milestone using the Corrected Journal Entries and Corrected Ledger Accounts tabs.
2. Highlight the corrected errors in green.
3. Complete the Income Statement, Balance Sheet, Statement of Retained Earnings, Cash Flow Worksheet, Statement of Cash Flows, and Ratios tabs in the same workbook based on the Corrected Journal Entries and Corrected Ledger Accounts tabs.
4. Upload the completed Project One Workbook Template for submission.

Note: If you received a perfect score on the Project One Milestone and do not need to correct any errors, simply note it in the designated section within the Corrected Journal Entries tab. You will receive full points for that specific criterion for this assignment.

Project One Analysis Paper

1. Complete an analysis of the information contained in the completed Project One Workbook Template including your revisions.
2. It will need to be formatted in APA style; specific formatting can be found in the What to Submit section.
3. It will need to address all of the rubric criteria listed below for the Project One analysis paper.

Specifically, you must address the following rubric criteria:

Project One Workbook

1. Correct all errors from the Milestone Journal Entries and Milestone Ledger Accounts tabs and enter the correct information on the Corrected Journal Entries and Corrected Ledger Accounts tab of the workbook. Highlight corrections in green.
2. Prepare the Income Statement, Balance Sheet, and Statement of Retained Earnings tabs accurately and completely in the workbook.
3. Prepare the Cash Flow Worksheet tab accurately and completely in the workbook.
4. Prepare the Statement of Cash Flowstab accurately and completely in the workbook.
5. Identify data variances in long-term liabilities, equity, and cash flows on the Ratios tab.

Project One Analysis Paper

1. Explain the importance of the company having long-term debt on its balance sheet. Include the following details in your response:
   1. Explain the characteristics of notes payable and bonds payable.
   2. Explain how long-term debt impacts the financial statements.
2. Explain the alternative accounting methods for situations relating to long-term liabilities and equity. Include the following details in your response:
   1. Why would a bond sell at a different price than the face amount?
   2. What are the two methods of amortizing premium and discount?
3. Explain the importance of the company having equity on its balance sheet. Consider the following questions to guide your response:
   1. How do companies obtain common stock?
   2. Describe the purpose and structure of additional paid-in capital.
   3. How do dividends paid or dividends payable impact the equity and income statement?
4. Explain the importance of cash flow in the overall financial health of the organization.
5. Explain how cash flow data connects to the income statement and balance sheet components.

If you need writing support, access the Academic Support module of your course.

What to Submit

To complete this project, you must submit the following:

Project One Workbook Template
Submit the Project One Workbook Template with the following tabs completed: Milestone Journal Entries, Corrected Journal Entries, Milestone Ledger Accounts, Corrected Ledger Accounts, Income Statement, Balance Sheet, Statement of Retained Earnings, Cash Flow Worksheet, Statement of Cash Flows, and Ratios. The Income Statement, Balance Sheet, Statement of Retained Earnings, Cash Flow Worksheet, Statement of Cash Flows, and Ratios tabs should be based on the Corrected Journal Entries and Corrected Ledger Accounts tabs.

Project One Analysis Paper
Submit your analysis as a 3- to 4-page Microsoft Word document with double spacing, 12-point Times New Roman font, and one-inch margins. Sources should be cited according to APA style.

Supporting Materials

The following resource(s) may help support your work on the project:

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