McPhee Distillers: Accounting Policy Choices in the Preparation of Financial Statements
McPhee Distillers: Accounting
Policy Choices in the
Preparation of Financial
Statements
1. Prepare the multi-year balance sheets, income statements, and
cash flow statements for McPhee Distillers.
Find attached excel sheets (McPhee Distillers.xlsx)
All the transactions have been recorded and explained in a yearly journal.
1/14
, McPhee Distillers: Accounting Policy Choices in the Preparation of Financial Statements
rodoctlon Equipment Is boucht for a total lnstillled cost of SS00.000
ercy !Xitiller! booight US b.mels It• disccuu:ed p,lce cl $7,SOO (•Sl0,000 • B"I
se barrels curled ii (QU per unit cf $6,000, H they Cclllffll!! from b.itth l (FIFOI
H barrels came from batdlo 1 whh, cost al $6.000 PH unit (FlfO)
.ilnil'l!i 75 barrels came rrom !);itch 2 with ,1 cost ol S,6,500 per unit (FIFO)
From the yearly journals, the transactions were pulled into a ledger. It summarizes all
debits and credits of the individual accounts and calculating the changes within the
year. All sales were treated as revenue and paid in cash.
All costs from Exhibit 3 (e.g., Lease, Salaries & Wages, etc.) were treated as Sales,
General, and Administrative expenses (SG&A).
The Cost of Goods Sold (COGS) was calculated using the first-in, first-out method. So
barrels from batch 1 were sold before barrels from batch 2 could be sold.
Examples:
In 2015, Elsa spent $25,000 on supplies. This transaction was paid in cash. The journal
has an entry, which debits SG&A with $25,000 and credits cash with an equal amount.
On November 15, Elsa produces batch 3 with 100 barrels at a cost per unit of $7,000.
Inventory is debited with $700,000, and Accounts Payable is credited with the same
amount. However, in this case, the credit on Accounts Payable is carried over as she
does not pay it off until 90 days later (so in 2016).
2/14
McPhee Distillers: Accounting
Policy Choices in the
Preparation of Financial
Statements
1. Prepare the multi-year balance sheets, income statements, and
cash flow statements for McPhee Distillers.
Find attached excel sheets (McPhee Distillers.xlsx)
All the transactions have been recorded and explained in a yearly journal.
1/14
, McPhee Distillers: Accounting Policy Choices in the Preparation of Financial Statements
rodoctlon Equipment Is boucht for a total lnstillled cost of SS00.000
ercy !Xitiller! booight US b.mels It• disccuu:ed p,lce cl $7,SOO (•Sl0,000 • B"I
se barrels curled ii (QU per unit cf $6,000, H they Cclllffll!! from b.itth l (FIFOI
H barrels came from batdlo 1 whh, cost al $6.000 PH unit (FlfO)
.ilnil'l!i 75 barrels came rrom !);itch 2 with ,1 cost ol S,6,500 per unit (FIFO)
From the yearly journals, the transactions were pulled into a ledger. It summarizes all
debits and credits of the individual accounts and calculating the changes within the
year. All sales were treated as revenue and paid in cash.
All costs from Exhibit 3 (e.g., Lease, Salaries & Wages, etc.) were treated as Sales,
General, and Administrative expenses (SG&A).
The Cost of Goods Sold (COGS) was calculated using the first-in, first-out method. So
barrels from batch 1 were sold before barrels from batch 2 could be sold.
Examples:
In 2015, Elsa spent $25,000 on supplies. This transaction was paid in cash. The journal
has an entry, which debits SG&A with $25,000 and credits cash with an equal amount.
On November 15, Elsa produces batch 3 with 100 barrels at a cost per unit of $7,000.
Inventory is debited with $700,000, and Accounts Payable is credited with the same
amount. However, in this case, the credit on Accounts Payable is carried over as she
does not pay it off until 90 days later (so in 2016).
2/14
