A guide to assignment on Polly's pet products financial statements including income statement, balance sheet, and cash flows. Detailed calculations with sufficient references.
In this paper, in addition to presenting the computed answers, please also discuss how you
arrived at each answer the accounting problem asks. The accounting problem presents a
company’s balance sheet, income statement, and statement of cash flows for a theoretical
company, Polly’s Pet Products. Each of these statements has blank lines. Determine the values
that would be appropriate for each blank line. Provide a narrative of how you arrived at each
value. Include in this narrative an explanation of:
1. the financial statement being completed;
2. the account being valued;
3. its relationship to the other financial data.
For example, if the accounts payable (AP) line was missing, describe what a balance sheet is and
explain that you can derive the AP value based on knowing all the other values of the current
liabilities section. Then explain what an account liability is, as well as why it would belong in the
current liabilities section of the balance sheet. Finally, analyze, evaluate, and develop a
conclusion about the company’s performance based on the completed statements.
, Polly’s Pet Products
Financial statements are written records that convey the business activities and the financial
performance of a company (Murphy, 2020). We have been provided the three key financial
statements which are the income statement, balance sheet, and cash flow statement. All the
statements are given as of December 31, 2018.
Some of the values are missing from each statement consequently, we have to find these values
and present the steps and rationale used in our calculations. These calculations will be presented
in order starting from the income statement.
Income Statement
The income statement shows the performance of the business throughout each period, displaying
sales revenue at the very top (Corporate Finance Institute, 2021). In the income statement, we
have been given the revenue to be $650,000 and the gross profit to be $205,000.
Gross profit is a profit a business makes after deducting the operational cost. The operational
costs are regular costs incurred by the business and can be found by subtracting the gross profit
from the revenue. ($650,000 - $205,000=$445,000)
Next, we can find the operating income. Operating income is an accounting figure that measures
the amount of profit realized from a business's operations, after deducting operating expenses
(Hayes, 2021). Therefore, the Operating income = Gross profit - General and Administrative
expenses. ($205,000 - $75,000 =$130,000)
Consequently, if we deduct other expenses from the operating income we will get the Income
before provision for income tax. ($130,000 - $60,000 = $70,000)
Finally, if we deduct the provision for income tax from the income before provision for income
tax we get the net income. ($70,000 - $5,000 = $65,000)
The retained earnings beginning balance has been given to us and we have calculated the net
come as presented above. Retained earnings are a certain percentage of a company's cumulative
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