Only for Lady Taylor PhD






The submission is to be one Excel file including text submission on current ratio and a memo.  You can type your text submission in Word and copy it into your Excel spreadsheet or type the text submission directly into a text box in Excel.  All parts should be included on one sheet.  

  • If any calculations are required, they must be shown.  I will be able to review the Excel formulas in your worksheet.
  • Utilize Excel formulas to the fullest extent possible.
  • Formatting counts.  Use the examples provided in Chapters 1 through 4 for correct formats.
  • The case study answers must be clearly marked and easy to follow.
  • Please title your excel file with your last name & "Case Study 1".





MBA 5850 Spring 2017 Block 2







Case Study 1




You have been hired by a company that offers design services and sells household goods, My Best






Friend’s House. The company has been in business for several years but does not have a good






accounting system in place. The owner of the company, Mr. Erie, has provided you with the following




account balances as of January 31, 2017. Income and expense amounts are for the month of January








Cash 8,350




Accounts payable 900




Accounts receivable 3,500




Accumulation depreciation 2,700




Additional paid-in capital 6,000




Common stock 1,200




Depreciation expense 900




Income tax expense 700




Income tax payable 250




Insurance expense 1,800




Interest expense 600




Interest payable 700




Inventory 12,000




Land 17,000




Note payable - current portion 3,000




Note payable - long-term 8,000




Office equipment 4,500




Rent expense 6,000




Retained earnings 7,875




Salary expense 12,000




Salaries payable 800




Service revenue 35,000




Travel expense 1,275




Unearned revenue 2,200




The president has told you that although the accounts are shown with a positive balance, they have the





normal debit or credit balance that accounts in their account type have (e.g. assets have a debit







balance, liabilities have a credit balance).




There are six shareholders and Mr. Erie reports financial information to them on a monthly basis.








(1) Prepare a trial balance, income statement and balance sheet using the account balances




provided to you. Set up your financial statements so that going forward, the president can enter




the account balances in the trial balance and the amounts flow to the correct financial









(2) Calculate the current ratio for My Best Friend’s House. What does this tell you about the











(3) After you have completed your financial statements, Mr. Erie tells you that he believes a couple





of mistakes have been made but he is not certain and doesn’t want to change any amounts on


the trial balance because “eventually it will all wash out.$500 of the $1,275 travel expenses







are for a sales trip that he has planned for March 2017. A utility bill in the amount of $650 was





received on February 10th for January usage. Mr. Erie received a deposit of $5,000 in January







2017 for an engagement scheduled for February 2017. He recorded this amount as Service




Revenue when he received the deposit.




Prepare a memo to Mr. Erie detailing what journal entries, if any, need to be recorded for these




items and include the total effect of any adjustments on the income statement. Include a brief




explanation of why it is important to report accurate financial amounts.




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