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1 BUS 320 Financial Reporting Green Dog Products Inc. Requirements: Step 1: Footnote 1, Summary of Significant Accounting Policies Step 2: Adjusting...

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BUS 320 Financial Reporting Green Dog Products Inc. Requirements: Step 1 : Footnote 1, Summary of Significant Accounting Policies Step 2: Adjusting and correcting journal entries as of 7-31-12 (the fiscal year end). Note: Enough information is provided to prepare the financial statements and footnotes. Consider whether an item should be adjusted with a journal entry, disclosed in the footnotes, or is general business information that does not need to be disclosed. If the company would have already recorded a transaction during the year do not record it again. (Adjusting entries never involve cash. Cash is a highly liquid asset that the company needs to safeguard so the company does not wait until year end for this account.) Step 3 : 12 column spread sheet. (See Blackboard for Excel spreadsheet.) Step 4 : Income Statement. (Include Earnings per Share.) Footnote 2. Step 5: Statement of Retained Earnings. Footnote 3. Step 6: Balance Sheet. (Classified statement.) Footnotes 4 and 5. Step 7: Finished Product: All corrected statements, footnotes, worksheet and entries. Assume that you are the level of the senior in-charge external auditor on the current audit of a company has been a client for the past 5 fiscal years. Prior audits have resulted in the issuance of unqualified opinions, after some adjustments agreed to by management have been posted. Green Dog Products Inc. is a San Francisco-based retailer of organic dog food products. These products are sold in the company's own retail outlets and other retailers. The company was founded by Patricia Hopland in 1982 and went public in 1994. The company has a distinguished reputation in its field and is a valued client. The fiscal year end is July 31 and the accounts for the year ended 7-31-12 are unaudited. The company's routine adjusting procedures have been completed. The available information consists of the preliminary adjusted accounts and additional information about the company's accounting policies. Information about the company's accounting policies and unresolved issues: 1
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A. Employees are paid every Friday. July 31, 2012, is a Tuesday. Salaries total $10,000 for a five day work week. B. Inventory is accounted for using the last in, first out method. 20,000 cases of Green Dog’s peanut butter dog cookies were not included in the physical inventory count because they were on consignment at various pet food retailers. The cases have a cost of $50,000. Total inventory at August 1, 2011 was $450,000. Consignment transactions involve another company having our inventory at their locations but our company retains ownership. The other company tries to sell the inventory for us and when the inventory is sold the other company sends our company the cash. The inventory should be on the books of the company that owns the inventory. C. Included in the Operating Expenses is $120,000 for a one year insurance policy purchased on April 1, 2012. D. Bad Debt Expense is estimated at 2% of credit sales. During 2012, 75% of sales were on credit and the other 25% of sales were for cash. E. Depreciation on the Building is on the straight line basis. During account analysis it was discovered that the bookkeeper forgot to record $40,000 depreciation in 2009. F. Depreciation on the Equipment is on the straight line basis and was correctly recorded by the bookkeeper. G. The Common Stock has a $10 par value and there are no treasury shares. 200,000 shares are authorized. A $30,000 dividend was declared and paid during the year. H. Sales are primarily made on a trade account basis, with no prompt payment discount (such as 2/10, n/30) offered. Ordinarily, inventory items are delivered on an f.o.b. shipping point basis. I. The Company started selling Gift Cards at the beginning of fiscal 2012. The gift cards are stored valued cards that have no expiration dates or service charge fees. The gift cards may be purchased in amounts from $25 to $100 per card and may be redeemed for any product on the Green Dog website. $350,000 gift cards were sold and at year end $180,000 were outstanding (not redeemed yet). J. Green Dog sold all the assets related to its running shoe segment on August 2, 2011. The company no longer has any involvement in this type of business. The Loss on Sale was $400,000. K. The note payable has 5% interest. Only the interest is payable monthly and the principal of $500,000 is due July 31, 2015. L. The income tax rate for all fiscal year ends since 7-31-00 has been 25%. 2
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Green Dog Products Inc.
Income Statement
7/31/2012 Sales
Less: Cost of Goods Sold
Gross Profit
Less Other Expenses: $7,370,000.00
$2,740,000.00 Bad Debt Expense
Depreciation Expense...

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