Preparing Annual Accounting Reports Documents

Instructions Summary:
For this 6–8 page assignment (Not including the title page, abstract if included, or reference page), you will create 1) the Financial Highlights, 2) the President’s Letter to the Stockholders, and 3) the Management Discussion and Analysis reports that would be contained in a company’s annual report to the shareholders.
Note:During Units 2, 3, and 4 you developed data for “Quixote Company.” But in Unit 4, you also had a Practice Assignment based on the “Rainbow Paint Company.” The Final Project will be based on the Rainbow Paint Company Financial Statements and the ratios that you compute as practice. The Quixote Company has a limited amount of data; therefore, the Rainbow Paint Company data will offer an opportunity to create a more robust Annual Report to Shareholders.
Companies normally issue these reports to stockholders and other interested parties. These reports summarize the company’s operating activities for the past year and plans for the future. There are many variations in the order and form for presenting the major sections of the annual report. You should conduct independent research to find a variety of corporate annual reports to use as guides in the preparation of your Unit 9 project.
Each week you will be addressing a different aspect of accounting and the business planning process. In the final project, you will use the information gained from the weekly assignments, the “Rainbow Paint Company” Review/Practice data, along with information obtained through research. These reports will be completed in Microsoft Word; a title page is required, but a running head is not necessary. An abstract is also not required. However, references will be required — therefore, it is important that you use a proper title page and correct reference list formatting. See the APA Template uploaded in Course Documents for examples of a properly formatted title page and reference list. Review the writing resources on APA style and formatting available in the Writing Center located in the Academic Success Center found in the Academic Tools area in your course.
When you review the examples of corporate annual reports that you select during your independent research, you will see that they can be very long and very complex. However, your assignment is limited to only 6–8 pages (not including the title page and reference list). Therefore, you should focus on the three aspects required for the final project. You are expected to use creativity and ingenuity in developing your final project. As you will see in the example annual reports you find in your independent research efforts, there is no one perfect way to prepare corporate annual reports.
However, the following information may help you as you complete your Unit 9 project.
Assignment checklist
Financial Highlights
President’s Letter to the Stockholders
Management Discussion and Analysis
Here are some of the basic criteria that will be used to assess your final project:
Project successfully presents every item in the assignment checklist in every aspect.
The project correctly uses the Rainbow Company Data.
The project exhibits strong higher-order critical thinking and analysis.
Sentences are clear, concise, and direct; tone is appropriate.
Grammatical skills are strong with almost no errors.
Correct use of APA format where appropriate.
AC499: Bachelors Capstone in Accounting | Unit 4

Unit 4 Practice Activity: Financial Report
Analysis – Rainbow Paint Co.

Note: This is a practice activity to be performed before completing the assignment for this unit. Also, this is the
data to be used as the basis for your Unit 9 final project. The solutions for the Unit 4 practice activity are
located here.
Rainbow Paint Co.’s comparative financial statements for the years ending December 31, 2013 and 2012 are
as follows. The market price of Rainbow Paint Co.’s common stock was $30 on December 31, 1999 and $25
on December 31, 2013.
Rainbow Paint Co.
Comparative Income Statement
For the Years Ended December 31, 2013 and 2012 2013 2012
Sales $ 5,125,000$ 3,257,600
Sales returns and allowances 125,00057,600
Net sales $ 5,000,000$ 3,200,000
Cost of goods sold 3,400,0002,080,000
Gross profit $ 1,600,000$ 1,120,000
Selling expenses 650,000464,000
Administrative expenses 325,000224,000
Total operating expenses $ 975,000$ 688,000
Income from operations $ 625,000$ 432,000
Other income 25,00019,200
Income before interest & taxes $ 650,000$ 451,200
Other expense (interest) 105,00064,000
Income before income tax $ 545,000$ 387,200
Income tax expense 300,000176,000
Net income$ 245,000$ 211,200

AC499: Bachelors Capstone in Accounting | Unit 4

Rainbow Paint Co.
Comparative Retained Earnings Statement
For the Years Ended December 31, 2013 and 2012
Retained earnings, January 1 $ 723,000$ 581,800
Add net income for year 245,000211,200
Total $ 968,000$ 793,000
Deduct dividends: $ 40,000$ 40,000
On preferred stock 45,00030,000
On common stock
Total $ 85,000$ 70,000
Retained earnings, December 31 $ 883,000$ 723,000

Paint C0,
Comparative Balance Sheet
December 31, 2013 and 2012
Assets 20132012
Current assets:
Cash $ 175,000$ 125,000
Marketable securities 150,00050,000
Accounts receivable (net) 425,000325,000
Inventories 720,000480,000
Prepaid expenses 30,00020,000
Total current assets $ 1,500,000$ 1,000,000
Long-term investments 250,000225,000
Property, plant, and equipment (net) 2,093,0001,948,000
Total assets $ 3,843,000$ 3,173,000
Current liabilities $ 750,000$ 650,000
Long-term liabilities:
Mortgage note payable, 10%, due 2016 $ 410,000-
Bonds payable, 8%, due 2017 800,000$ 800,000
Total long-term liabilities $ 1,210,000$ 800,000
Total liabilities $ 1,960,000$ 1,450,000
Stockholders’ Equity
Preferred 8% stock, $100 par $ 500,000$ 500,000
Common stock, $10 par 500,000500,000
AC499: Bachelors Capstone in Accounting | Unit 4

Retained earnings 883,000723,000
Total stockholders’ equity $ 1,883,000$ 1,723,000
Total liabilities and stockholders’ equity $ 3,843,000$ 3,173,000

Instructions: Determine the following measures for 2013:
1. Working capital
2. Current ratio
3. Quick ratio
4. Accounts receivable turnover
5. Number of days’ sales in receivables
6. Inventory turnover
7. Number of days’ sales in inventory
8. Ratio of fixed assets to long-term liabilities
9. Ratio of liabilities to stockholders’ equity
10. Number of times interest charges earned
11. Number of times preferred dividends earned
12. Ratio of net sales to assets
13. Rate earned on total assets
14. Rate earned on stockholders’ equity
15. Rate earned on common stockholders’ equity
16. Earnings per share on common stock
17. Price-earnings ratio
18. Dividends per share of common stock
19. Dividend yield

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