Only for Lady Taylor PhD

The submission is to be one Excel file including text submission on current ratio and a memo.  You can type your text submission in Word and copy it into your Excel spreadsheet or type the text submission directly into a text box in Excel.  All parts should be included on one sheet.  If any calculations are required, they must be shown.  I will be able to review the Excel formulas in your worksheet.Utilize Excel formulas to the fullest extent possible.Formatting counts.  Use the examples provided in Chapters 1 through 4 for correct formats.The case study answers must be clearly marked and easy to follow.Please title your excel file with your last name & “Case Study 1”.MBA 5850 – Spring 2017 Block 2Case Study 1You have been hired by a company that offers design services and sells household goods, My BestFriend’s House. The company has been in business for several years but does not have a goodaccounting system in place. The owner of the company, Mr. Erie, has provided you with the followingaccount balances as of January 31, 2017. Income and expense amounts are for the month of January2017.Cash 8,350Accounts payable 900Accounts receivable 3,500Accumulation depreciation 2,700Additional paid-in capital 6,000Common stock 1,200Depreciation expense 900Income tax expense 700Income tax payable 250Insurance expense 1,800Interest expense 600Interest payable 700Inventory 12,000Land 17,000Note payable – current portion 3,000Note payable – long-term 8,000Office equipment 4,500Rent expense 6,000Retained earnings 7,875Salary expense 12,000Salaries payable 800Service revenue 35,000Travel expense 1,275Unearned revenue 2,200The president has told you that although the accounts are shown with a positive balance, they have thenormal debit or credit balance that accounts in their account type have (e.g. – assets have a debitbalance, liabilities have a credit balance).There are six shareholders and Mr. Erie reports financial information to them on a monthly basis.Required:(1) Prepare a trial balance, income statement and balance sheet using the account balancesprovided to you. Set up your financial statements so that going forward, the president can enterthe account balances in the trial balance and the amounts flow to the correct financialstatements.(2) Calculate the current ratio for My Best Friend’s House. What does this tell you about thecompany?(3) After you have completed your financial statements, Mr. Erie tells you that he believes a coupleof mistakes have been made but he is not certain and doesn’t want to change any amounts onthe trial balance because “eventually it will all wash out.” $500 of the $1,275 travel expensesare for a sales trip that he has planned for March 2017. A utility bill in the amount of $650 wasreceived on February 10th for January usage. Mr. Erie received a deposit of $5,000 in January2017 for an engagement scheduled for February 2017. He recorded this amount as ServiceRevenue when he received the deposit.Prepare a memo to Mr. Erie detailing what journal entries, if any, need to be recorded for theseitems and include the total effect of any adjustments on the income statement. Include a briefexplanation of why it is important to report accurate financial amounts.