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Rocky Mountain

In: Business and Management

Submitted By 2015grad
Words 1943
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Rocky Mountain Chocolate Factory Inc.— Preparing Financial Statements
Teaching Notes: This case introduces students to the preparation of financial statements. Students are required, first, to consider the industry in which Rocky Mountain Chocolate Factory operates and determine the kinds of line items that would appear on the company’s balance sheet. Thus, the case encourages students to consider the broader business environment in which the company operates. The case gets students to use a spreadsheet to capture a series of chronological transactions. Students are required to record journal entries for both transactions and accounting adjustments. Students use the information from the spreadsheet to prepare a balance sheet and an income statement. The case provides guidance on how a spreadsheet should be set up so that students get immediate feedback about their progress. The case includes a suggested spreadsheet and recommends that income statement transactions NOT be posted directly to Retained earnings. The spreadsheet has subtotals for the unadjusted and pre- and post-closing trial balances. Facility with spreadsheets is a must for business professionals. Acquiring those skills takes time and practice. Thus, students ought to be discouraged, in our opinion, from photocopying the casebook spreadsheet and writing in the journal entries by hand in lieu of using a computerized spreadsheet. We use this case to reinforce the difference between cash-basis and accrual accounting. There are relatively few transactions in the case allowing time for discussion of mechanics, debits and credits, and basic accrual accounting concepts. A classroom approach to this case is to have students handle each transaction and adjusting entry in turn. A spreadsheet could be projected onto a screen and the instructor could fill in the cells, posting the journal entries as the class

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