The Garden Spot: Year Two

Abstract

The owner and manager of a small garden shop needs to prepare the financial statements for the shop's second year of operation. These financial statements will assess the financial performance of her company during the year, as well as take stock of its financial position at the end of the year and will be important to loan officers at her bank where the company had obtained two loans, and to an equity investor in the company. Students will prepare journal entries, post this information to T-accounts, record the necessary adjusting entries and post to T-accounts, and prepare an income statement that summarizes results of operations for the year.

Excerpt

UVA-C-2379

Jul. 5, 2016

The Garden Spot: Year Two

Mary Jo Barnes found it hard to believe that she had wrapped up her second year as owner and manager of The Garden Spot, a small garden shop she had opened on January 1 of the prior year in Charlottesville, Virginia. She thought things had been going well at The Garden Spot and was excited about what the future might hold.

Before retiring for the evening, Barnes needed to prepare the financial statements for her second year of operation. A lot had happened during the year, and she wanted to make sure she captured it all accurately in preparing those financial statements. After all, she would use those financial statements to assess the financial performance of her company during the year, as well as to take stock of its financial position at the end of the year. She knew that those financial statements would be important to loan officers at National Bank, where the company had obtained two loans, and to Jake Lawrence, who had made an equity investment in the company early during its second year in operation.

Barnes began to go through her notes, receipts, and other documents, and compiled the following list of events that had occurred during the year:

. . .

Keywords: transaction analysis, income statement, balance sheet, statement of cash flow