Accounting Policy Choices in Financial Statements – Accounting and Finance Assignment Help

Project Description:

Read Highland Malt:

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Accounting Policy Choices in Financial Statements. Prepare balance sheets, income statements, and cash flow statements for the Years 2018 and 2019 only, and then briefly discuss Highland Malt’s financial health and make recommendations for improvements. Note that the main component of this case study is the successful creation of the three financial statements (Balance Sheet, Income Statement, and Cash Flows Statement).

This task will require you to make certain assumptions about the firm’s business operations, and to prepare all required journal entries and T-accounts (you do not need to submit journal entries and T-accounts).

  • The discussion section should be no more than one, single-spaced page, and should be limited to:
  • Key assumptions you made
  • Financial ratio analyses you performed
  • Recommendations you are making to improve the financial health of the company.
  • You are required to show your calculations for the following: Cash, Inventory, Retained Earnings, Sales Revenues, COGS, and Operating Expenses. Additionally, you are required to show how you calculated the financial ratios. You may show your calculations in a separate part at the end of your project. This proof is not to be counted as part of the one page discussion requirement.

Learning Outcomes:

When completed successfully, this project will enable you to:

Prepare journal entries, T-accounts, multi-year balance sheets, income statements, and cash flow statements.

Analyze and critique financial statements, and use financial ratio analysis to propose recommendations to improve the financial health of a business.


When preparing the financial statements, add the following assumptions to your own:

1. Revenue recognition. Treat sales of whisky as revenue (not deferred revenue nor any other liability).

2. Inventory/production costing methods. Inventory production began in 2018, but no sales took place in 2018. Use the first-in, first out method (FIFO) when calculating the Cost of Goods Sold (COGS). Do not include any of the expenses in Exhibit 4 in COGS.

3. Income taxes. On the income statement, ignore taxes. Reflect the bank loan interest for 2018 and 2019. Present EBI (Earnings Before Interest). Then, present net income or net loss.

4. Expense categories. Include all costs listed in Exhibit 4 as fixed costs and as operating expenses that fall under Selling, General and Administrative expenses (SG&A).

5. Bank Loan. Assume the loan was obtained on Jan. 1, 2018 and since the case states it “was extended in 2019,” assume the full amount of the principal will be repaid on January 1, 2020.

The following list provides examples of the three categories of errors:

 Minor errors include, but are not limited to:

  • Miscalculations of the balance of any account. For example, miscalculation of the cash balance, revenues, operating expenses, inventory, interest expense, accounts receivables, bank loan, or COGS.
  • The sections in the Balance Sheet are out of order. Cash Flows Statement does not have all sections
  • Miscalculated ratios.

 Major errors include, but are not limited to:

  • Misclassification of accounts, such as recording bank loans as equity, or recording accounts receivables as a non-current asset.
  • Ending cash in the Cash Flows Statement does not agree with the cash balance in the Balance Sheet (regardless of whether the figure is correct or not).

 The following are disqualifying errors resulting in an automatic failure:

  • The cash account has a credit balance.
  • Not submitting any of the three financial statements (Balance Sheet, Income Statement, or Cash Flows statement).
  • The Balance Sheet does not balance (regardless of whether the total of each side of the Balance Sheet is correct or not).

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