Lost Peak Winery, Inc.(A)
Case number:
A01-02-0023
Abstract
Roberto and Pablo Conca are in the planning stages of developing and operating a new wine making business to be called the Lost Peak Winery, Inc. The winery will produce wine "the old fashioned way". The brothers plan to establish the Lost Peak Winery outside of Sequim, Washington with a 100-acre farm owned by Roberto and additional facilities that Pablo will contribute. The entrepreneurs have approached a local bank for a 4.8 million dollar loan but it has asked the entrepreneurs to provide the company's business plan including projected financial statements for the first year of operations.
Teaching
The purpose of this case is to illustrate the derivation of financial statements under accrual accounting without using ledger accounts or T accounts or using the terms, debits and credits. The case is written for executive education programs to illustrate financial statements to non-financial managers. The case takes a balance sheet perspective by asking students to interpret how each of the accounting events described in the case affects the beginning balance sheet. The case is centered around a fictitious entrepreneurial company established on the Olympic Peninsula of Washington State to produce and distribute wine.
The case is organized into two parts. In part one - establishing the business - students are asked to use a set of eight transactions to establish the wine business and to prepare the company's balance sheet at the end of its first day. In the second part - subsequent transactions - students are asked to start with the balance sheet at the end of the first day and use a set of thirteen subsequent summary transactions to prepare a complete set of financial statements (balance sheet, income statement and statement of cash flows) at the end of the first year. The instructor can provide students with Excel worksheets to organize each of the two parts of the case (see the completed spreadsheet in Exhibits TN-1 and TN-3). The completed worksheets enable students to prepare the company's balance sheet at the end of the first day from the totals in the last row (see Exhibit TN-2). The completed spreadsheet in Exhibit TN-3 is the basis for preparing the first year's financial statements. These include the balance sheet (see Exhibit TN-4), the income statement and statement of retained earning (see Exhibit TN-5), the statement of cash flows using the direct method (see Exhibit TN-6 and the statement of cash flows using the indirect method (see Exhibit TN-7).
The case is organized into two parts. In part one - establishing the business - students are asked to use a set of eight transactions to establish the wine business and to prepare the company's balance sheet at the end of its first day. In the second part - subsequent transactions - students are asked to start with the balance sheet at the end of the first day and use a set of thirteen subsequent summary transactions to prepare a complete set of financial statements (balance sheet, income statement and statement of cash flows) at the end of the first year. The instructor can provide students with Excel worksheets to organize each of the two parts of the case (see the completed spreadsheet in Exhibits TN-1 and TN-3). The completed worksheets enable students to prepare the company's balance sheet at the end of the first day from the totals in the last row (see Exhibit TN-2). The completed spreadsheet in Exhibit TN-3 is the basis for preparing the first year's financial statements. These include the balance sheet (see Exhibit TN-4), the income statement and statement of retained earning (see Exhibit TN-5), the statement of cash flows using the direct method (see Exhibit TN-6 and the statement of cash flows using the indirect method (see Exhibit TN-7).
Case number:
A01-02-0023
Subject:
Accounting and Control
Year:
Setting:
Northwest, U.S.
Length:
6 pages
Source:
Library