JWI 530: Financial Management I_Danny’s Security Systems, Inc. (DSSI)

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JWI 530: Financial Management I 

 

 

©2014 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary 

information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written 

permission of Strayer University. 

 

 

JWMI 530– Spring 2014

Assignment 1: Creating Financial Statements 

Due Week 3, Day 7 (100 points) 

 

The specific course learning outcomes associated with this assignment are: 

 

• Analyze how business transactions are recorded in the financials records of an 

organization. 

• Identify the accounting principles used to create the Income Statement, Balance Sheet, 

and Statement of Cash Flows. 

 

Similar to the exercise used in the course to introduce how business transactions are recorded in 

the financial records of an organization and used to produce financial statements, Assignment 1 

presents you with an organization’s opening financial position and a series of transactions that 

take place over a year. You should determine the appropriate manner in which to record these 

transactions and then produce three financial statements for the organization at the end of the 

year. 

 

Assignment: 

 

Danny’s Security Systems, Inc. (DSSI) offers its clients security systems and alarm monitoring 

services on a retail basis. DSSI specializes in offering the most up-to-date services with the most 

technologically advanced equipment. For example, the high-end alarm system, called DAS59, is 

widely recognized as an industry leader. All of the balance sheet items from December 31, 2012, 

are shown below along with the events that occurred during 2013. Please ignore all taxes 

(income and sales) in preparing your answer. 

 

Danny’s Security Systems, Inc. 

Balance Sheet Items 

As of December 31, 2012 

0.5 points Accounts payable $380,000 

0.5 points Accounts receivable $611,000 

1.0 points Accumulated depreciation $1,245,000 

0.5 points Cash $267,000 

0.5 points Common shares $1,152,000 

0.5 points Short-term bank loan $125,000 

0.5 points Plant, property, and equipment $2,111,000 

0.5 points Interest payable $37,000 

0.5 points Inventory $850,000 

1.0 points Licenses (net) $180,000 

0.5 points Long-term bank loan $525,000 

0.5 points Goodwill $80,000 

0.5 points Retained earnings $304,000 

1.0 points Advances from customers $340,000 

0.5 points Salaries payable $180,000 

0.5 points Short-term investments (trading 

securities) 

$180,000 

0.5 points Office supplies $9,000 

 

The following events occurred during 2013:  

JWI 530: Financial Management I 

 

 

©2014 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary 

information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written 

permission of Strayer University. 

 

 

JWMI 530– Spring 2014

 

(a) New credit sales for the year were $1,910,000. (2 points) 

(b) Sales of $272,000 were earned from prior period cash advances from customers. (3 

points) 

(c) Old equipment, which had originally cost $147,000 and was fully depreciated, was 

scrapped on the first day of business of the year. (3 points) 

(d) New cash sales for the year were $333,000. (2 points) 

(e) DSSI acquired all of the assets and liabilities of Smith Alarms, LLC for $555,000 cash. 

The assets included equipment valued at $425,000 (this equipment was carried on the 

books of Smith Alarms, LLC at $300,000 net), accounts receivable of $230,000, accounts 

payable of $250,000, and a demand loan of $52,000. There were no intangible assets. (6 

points) 

(f) DSSI acquired office supplies on credit for $32,000. (2 points) 

(g) DSSI paid salaries to employees of $390,000 in cash. (2 points) 

(h) Cash collections from credit sales were $1,720,000. (2 points) 

(i) Cash payments for items purchased on credit during the year were $344,000. (2 points) 

(j) Paid $363,000 for administrative expenses during the year. (2 points) 

(k) Paid the bank $58,000 cash towards interest payments during the year. (2 points) 

(l) At the end of the year, owed the bank $19,000 in interest. (2 points) 

(m) At the end of the year, the market value of the short-term investments was $157,000. (3 

points) 

(n) A total of $3,000 in office supplies remained on hand at the end of the year. (2 points) 

(o) Depreciation on plant, property, and equipment for 2013 was determined to be $123,000. 

(2 points) 

(p) DSSI collected $327,000 of cash advances from customers. (2 points) 

(q) DSSI acquired $212,000 of inventory on credit. (2 points) 

(r) DSSI’s policy is to write off all intangible assets over 3 years using straight-line 

amortization. 2013 is the second year for amortizing licenses. (2 points) 

(s) DSSI offers a “satisfaction guarantee” to its clients for security services. If clients are 

unhappy with the services they purchased, they are eligible for free additional security 

services (i.e., this is a form of “after sales warranty” service). The company estimates that 

future expenditures of approximately $67,000 will be required to perform these “after 

sales warranty” activities to keep clients satisfied for services originally rendered to 

clients in 2013. (3 points) 

(t) DSSI spent $125,000 during 2013 on research and development activities related to new 

services the company could offer clients. It is expected that some of these products 

would be marketable within one or two years, but nobody is sure which products will be 

successful. (2 points) 

(u) At the end of the year, the accountant estimated that $22,000 of accounts receivable 

owed to the firm would not likely be collected. (2 points) 

(v) On the last day of business in 2013, DSSI declared an $80,000 dividend, which will be 

paid sometime in the next year. (2 points) 

(w) At the end of the year, DSSI owed its employees a total of $66,000. (2 points) 

(x) DSSI paid down the long-term loan by $140,000. (2 points) 

(y) At the end of the year, it was determined that $513,000 of inventory remained on-hand. 

(2 points) 

(z) At the end of the year, it was determined that the carrying value of goodwill had declined 

by $28,000. (2 points) 

 

  

JWI 530: Financial Management I 

 

 

©2014 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary 

information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written 

permission of Strayer University. 

 

 

JWMI 530– Spring 2014

 

Required: 

 

Using the Super-T approach discussed in class, prepare an Income Statement, Balance Sheet, 

and Statement of Cash Flows (using the direct method) for DSSI as of December 31, 2013, 

following the generally accepted accounting principles (GAAP) covered in the course to date. 

 

Your submission for this assignment should include the following documents: 

 

1. A Super-T worksheet showing all opening balances and how the transactions (a) through 

(z) were recorded. (Note: the purpose of submitting this document is to be able to see 

how you recorded the transactions necessary to prepare the three financial statements 

listed below.) 

2. A Balance Sheet for DDSI as of December 31, 2013. 

3. An Income Statement for DDSI for the year ending December 31, 2013. 

4. A Statement of Cash Flows for DSSI for the year ending December 31, 2013. 

 

Grading: 

 

Assignment Points Percentage Grade 

90 – 100 90% – 100% A 

80 – 89 80% – 89% B 

70 – 79 70% – 79% C 

0 – 69 0% – 69% F 

 

Points: 100 Assignment 1: Creating Financial Statements 

Criteria Explanation of Grading 

1. Use the information provided in the 

assignment to create and use the necessary 

account to prepare the three required financial 

statements. 

Weight: 70% 

Use a Super-T worksheet to record the opening balance sheet 

values provided and record transactions (a) through (z). There 

are 10 points available for correctly recording the opening values. 

There are 60 points available for correctly recording transactions 

(a) through (z). 

2. Prepare a Balance Sheet for DDSI as of 

December 31, 2013. 

Weight: 10% 

Prepare a Balance Sheet as a separate document. Use all of the 

appropriate formatting and presentation norms necessary to 

create a Balance Sheet. (10 points) 

3. Prepare an Income Statement for DSSI for the 

year ending December 31, 2013. 

Weight: 10% 

Prepare an Income Statement as a separate document. Use all 

of the appropriate formatting and presentation norms necessary 

to create an Income Statement. (10 points) 

4. Prepare a Statement of Cash Flows (using the 

direct method) for DSSI for the year ending 

December 31, 2013. 

Weight: 10% 

Prepare a Statement of Cash Flows as a separate document. 

Use all of the appropriate formatting and presentation norms 

necessary to create a Statement of Cash Flows. (10 points) 

 

 

 

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