MGAB01 - Group Project - 2025 Fall

INSTRUCTIONS:

Due Date:  November 23, 2025

Group work:

The assignment is done in groups of no more than 8 students. You can create groups with members from other sections of the same instructor.   The cover page should include the names (Last Name, First Name) of the group members, including their student number and lecture section.  The student name must match the name registered in ACORN.

Submission Requirements:

Only one report per group should be submitted in Quercus and Turnitin.

For Quercus: One Excel workbook/file and one Word document will be submitted per group.  If you want to present more than one spreadsheet, please label properly all the worksheets and submit all in one workbook.  It is recommended that students should do all the journal entries, the preparation of the financial   statement and all the financial analysis in the excel spreadsheet. The writeup/qualitative assessment of the requirements should be done in the word document.

The Word document must be sequentially numbered.  There is no maximum length for the excel calculations. The maximum length for the writeup in the word document should not exceed 3 pages. The TA will stop marking at the end of Page 3.  The written report must be typed using 12 point Times New Roman Font, 1 ½ spacing and 1 inch margin on both sides.  Markers will not check each formula used in Excel and students need to provide detailed steps for the calculation so that markers should be able to follow your working, as discussed above.

Journal entries and Calculation:

Description of journal entry provided is not required.  All figures should be properly labelled and any calculation must be clearly described.  TAs are not required to review the formulas in the excel cells to determine how the figure was calculated. When posting journal entries to “T” accounts (as applicable), proper labelling/cross-referencing must be provided to allow the markers to easily follow the posting process.

Financial Statements:

Financial statement must be provided in an exhibit.   Proper financial statement format and proper labelling (e.g. account names, units of measure i.e. $) must be used where appropriate. Negative numbers should be in brackets, subtotals should be underlined and totals should be double-underlined.  Rounding of  financial statements or financial statement analysis should be within two decimal places.

Total marks:

This project is out of 100 marks and worth 10% of your entire course work.  If you fail to follow the instructions, 10 marks will be deducted.

PROJECT:

Founded in 2021, Kingsview Materials Corp. (KMC) is an advanced materials manufacturer specializing in high-performance components used in electric vehicle (EV) batteries, energy storage systems, and consumer electronics. The company’s mission is to develop materials that enhance energy efficiency, durability, and sustainability in the growing clean technology sector.

Headquartered in Saskatchewan, Canada, the company is owned by the Kingsview family of Saskatoon, SK, and managed by a team of professional executives. One member of the Kingsview family serves as chair of the board of directors, with no other family involvement in operations. KMC focuses on innovation in material science to support the growing clean technology sector.

KMC operates a state-of-the-art production and R&D facility in Regina, Saskatchewan, strategically located near critical mineral supply chains and research partnerships with local universities.

KMC's balance sheet for December 31, 2024, the company's year-end, is shown below. KMC uses its financial statements for tax purposes. It also provides its financial statements to its lenders to demonstrate its financial position each year and its ability to service its debts. The funds from the lenders have been used to purchase equipment to expand operations in the lithium mines of Saskatchewan.

Kingsview Materials Corp.

Balance Sheet

As at December 31, 2024

It is now January 2026. KMC needs to prepare its financial statements for the year ended December 31, 2025. You have obtained the following information about the transactions that occurred during the 2025 fiscal year:

I.       On January 15, 2025, KMC sold $30,000 of its 2024 inventory for $40,000. On the same date, KMC identified that the remaining inventory was contaminated with salt water and this inventory was discarded at no cost to KMC.

II.       Sales  of  lithium  related  products  were  $2,600,450  (including  the  sales  on January 15, 2025). KMC sells all its product on credit with terms of net 30 (i.e. payment is due to KMC from its customer in 30 days after goods and services are delivered to the customer).

III.       KMC purchased $600,000 worth of supplies for it’s operations during the year. All purchases were on credit. At the end of 2025, KMC hadn't been billed for an additional $10,000 of supplies that it purchased.

IV.       KMC  incurred  maintenance  costs on  its various lithium purification sites of $150,000 during 2025. At the end of 2025, KMC owed technicians $32,000. (The $32,000 owed is included in the $150,000).

V.       KMC paid wages and bonuses of $1,200,000 to employees. At December 31, 2025, KMC owed employees an additional $100,000.

VI.       During the year, KMC collected $2,550,000 from customers.

VII.       KMC paid its suppliers $500,000 during 2025.

VIII.       During the year, KMC paid the taxes it owed at the end of 2024. It also paid $22,000 in instalments on its 2025 income taxes. It is estimated that KMC owes an additional $24,000 in income taxes for 2025.

IX.       The  customer  deposits  reported  on  the  2024  balance  sheet  pertained  to customers who were perceived to be high risk to which KMC wasn't prepared to  offer  credit.  These  customers  were  required  to  give  deposits  against products  to  be  delivered  during  2025.  These  customers  were  delivered products during 2025 in excess of the amount of the deposits. KMC decided in 2025 to offer credit to these customers. The deposits are not included in the other revenue recognized in the year.

X.       Members  of  the   Kingsview  family  sometimes   used   KMC  employees  for personal work at their homes and cottages to repair their heating and cooling equipment or repair their decks and patios. Usually, the work was done on weekends and the employees were paid at overtime rates. KMC pays the employees' wages for the work done for the family members and accounts for the cost as a wage expense. The wages paid for work done on behalf of the Kingsview family members was $62,000.

XI.       During 2025, KMC purchased new equipment for $256,000 in cash.

XII.       Depreciation expense for 2025 was $192,000.

XIII.       Prepaid insurance pertains to insurance on its equipment and buildings. During 2025,  KMC  used  $60,000  of  insurance  that  was  recorded  as  prepaid  on December 31, 2024. In late 2025, it purchased and paid for additional insurance for 2026 and beyond. The insurance cost $62,000.

XIV.       During the year, KMC paid $34,000 in interest to the holders of the long-term debt. Interest is paid annually on January 2. In addition to the interest payment, KMC paid $40,000 on January 1, 2025 to reduce the balance owed on the long- term debt. The interest rate on the notes is 8.5%.

XV.       KMC  paid  $150,000  in  cash  for  other  expenses  related  to  operating  the business in fiscal 2025.

XVI.       KMC paid dividends of $310,000 to shareholders.

XVII.       During 2025, KMC issued new common shares for $40,000. This cash will be used to purchase new equipment in 2026.

XVIII.       (Bonus) On December 25, 2025, KMC experienced a Sulfuric Acid spill at one of  its  lithium  purification  sites.  The  spill  occurred  due  to  severe  weather conditions. KMC paid $200,000 to remediate the oil spill and return the site to its original condition.

Required:

Use the information about Kingsview Materials Corp. (KMC) provided above to do the following:

Part 1 (50 marks):

1.  Prepare  all  necessary  transactional  journal   entries  for  the  year  ended December 31, 2025. Providing a description for each entry is optional.

2.  Prepare a trial balance as of December 31, 2025.

3.  Prepare a balance sheet for KMC as of December 31, 2025 and an income statement and statement of retained earnings for the year ended December 31, 2025.

Part 2 (30 marks):

4.  Kingsview’s shareholders ask you to identify and calculate 3 different ratios which you think will be helpful in understanding the 2025 financial status of the company.  Explain  how  these  ratios  can  help  the  understanding  of  KMC’s financial performance.   Identify which  ratio  (only  pick one) that the  lenders would be interested and why.

5.  Identify  4  accounting  principles  or  concepts  that  are  applicable  in  the preparation of these financial statements for KMC and briefly explain how they are applied.

Part 3 (10 marks):

6.  Several of Kingsview’s board of director have been concerned about the inventory levels over the past few years. Some feel that it has been decreasing over the past few years. The board wants you to analyze the inventory turnover for the past five years.  The accountant was able to summarize the data in the excel worksheet titled “Inventory Data for KMC” .

a.  Create  a  pivot  table  showing  the  annualized  "Average  value  of inventory" and "Cost of Good Sold". HINT: Your pivot table should have

3 columns, first column showing years, second column showing the monthly average inventory and third column showing the annual COGS.

b.  Calculate the annual inventory turnover ratio

c.  The Board expects that inventory is taking less than 2 months to sell, which is consistent with the industry practice given that electric vehicle battery demand for lithium is high. Based on your analysis, is KMC meeting this Board objective?

Part 4 (10 marks):

7.  Kingsview, the founder of KMC forwarded you an article from KMC’s auditor. Based on the article:

a.  Do sustainability standards affect KMC? Briefly explain why or why not.

b.  (Assuming  that  sustainability  reporting  is  required  for  KMC)  Where should KMC be providing their sustainability disclosures?

c.  Which  transaction(s)  of  KMC  do  you  think  are   most   relevant  for sustainability disclosures? Why?