| Course | ACC-1020 Principles of Managerial Accounting |
|---|---|
| Module | Module 1 |
| Paper type | Homework 1: financial analysis and global accounting |
| Length | About 805 words, 5 pages |
| Format | APA 7 student paper |
| School | Thomas Edison State University |
| Program | Bachelor of Science in Business Administration |
| Updated | October 2026 |
Free sample paper for ACC 1020 Module 1
Pinelands Drum Works, Inc.: Ratio Analysis of 2025 and 2026 and What Changes Under IFRS
Student Name
Bachelor of Science in Business Administration, Thomas Edison State University
ACC-1020: Principles of Managerial Accounting
Mentor Name
Month Day, Year
Pinelands Drum Works, Inc.: Ratio Analysis of 2025 and 2026 and What Changes Under IFRS
Pinelands Drum Works, Inc. is a composite manufacturer of handmade snare drums and drum kits in Burlington County, New Jersey, with about 30 employees. Its sales grew 15% in 2026, and a German distributor has asked to see its financial statements before signing a supply agreement. This homework analyzes the company's 2025 and 2026 statements with the standard ratio groups, interprets what they show, and identifies the differences between U.S. generally accepted accounting principles and International Financial Reporting Standards that a European reader would need to keep in mind.
Part A: Condensed Comparative Statements
| Item ($ thousands) | 2026 | 2025 |
|---|---|---|
| Net sales | 2,480 | 2,150 |
| Cost of goods sold | 1,488 | 1,247 |
| Gross profit | 992 | 903 |
| Operating expenses | 704 | 620 |
| Operating income | 288 | 283 |
| Interest expense | 36 | 22 |
| Income tax (25%) | 63 | 65 |
| Net income | 189 | 196 |
| Cash | 84 | 126 |
| Accounts receivable | 310 | 215 |
| Inventory | 520 | 380 |
| Prepaid expenses | 16 | 14 |
| Property, plant and equipment, net | 890 | 640 |
| Total assets | 1,820 | 1,375 |
| Current liabilities | 352 | 270 |
| Long-term debt | 540 | 330 |
| Stockholders' equity | 928 | 775 |
Part B: Ratio Analysis
| Ratio | Formula | 2026 | 2025 |
|---|---|---|---|
| Current ratio | Current assets / current liabilities | 2.64 | 2.72 |
| Quick ratio | (Cash + receivables) / current liabilities | 1.12 | 1.26 |
| Inventory turnover | Cost of sales divided by mean inventory | 3.3 times (110 days) | n/a |
| Days sales outstanding | Average receivables / sales x 365 | 38.6 days | n/a |
| Debt to equity | Total liabilities / equity | 0.96 | 0.77 |
| Gross margin | Gross profit / sales | 40.0% | 42.0% |
| Net profit margin | Profit after tax as a share of sales | 7.6% | 9.1% |
| Return on assets | Profit after tax divided by mean total assets | 11.8% | n/a |
| Return on equity | Net income / average equity | 22.2% | n/a |
Liquidity remains comfortable but has slipped. Current assets cover current liabilities 2.64 times, and quick assets cover them 1.12 times, down from 1.26, mainly because cash fell by $42,000 while receivables and inventory rose. The company converted less of its growth into cash.
Efficiency is the main concern. Inventory rose 37% while sales rose 15%, so the company now holds about 110 days of inventory at the 2026 rate of sale. Some of that is deliberate, since lumber for drum shells must season, but the build-up ties up cash. Receivables grew 44%, faster than sales, suggesting that new dealer accounts are being given longer terms or are paying more slowly.
Borrowing increased. Long-term debt rose by $210,000 to finance new shell-pressing and finishing equipment, and total liabilities are now 96% of equity, compared with 77% a year earlier. Interest expense rose from $22,000 to $36,000.
Profitability softened despite higher sales. Gross margin fell two points, from 42.0% to 40.0%, as wood and hardware costs rose faster than prices, and net margin fell from 9.1% to 7.6%. Returns are still healthy, 11.8% on assets and 22.2% on equity, but the higher return on equity partly reflects the added debt.
Ratios matter beyond description. Beaver (1966) compared firms that later failed with similar firms that did not and found that financial ratios, especially cash flow relative to total debt, signaled trouble years before failure. For Pinelands, the combination of slower collections, more inventory, less cash and more debt is not alarming in one year, but it is the pattern a lender or distributor would watch.
Part C: Reading the Statements Under IFRS
The German distributor's analysts are used to statements prepared under International Financial Reporting Standards, which differ from U.S. GAAP in ways that could affect this analysis. Four differences are most relevant. First, LIFO inventory is prohibited under IFRS; Pinelands uses FIFO, so no restatement is needed. Second, IFRS allows an inventory write-down to be reversed if values recover, which U.S. GAAP does not, so inventory and margins can move in both directions. Third, IFRS requires capitalizing development costs once a project meets specific criteria, while U.S. GAAP expenses most research and development; Pinelands' $46,000 spent developing a new carbon-fiber shell in 2026 was expensed, which would have been partly capitalized under IFRS, raising both assets and net income. Fourth, IFRS permits companies to revalue property, plant and equipment to fair value, while U.S. GAAP requires historical cost.
Do these differences affect quality? Barth et al. (2008) compared firms in 21 countries before and after they adopted international standards and found that, after adoption, the firms showed less earnings smoothing, more timely recognition of losses and accounting amounts more closely associated with share prices than comparable firms that did not adopt them. For the distributor, the practical point is narrower: the ratios above are comparable to those of European competitors only after adjusting for development costs and any revaluations. Williams et al. (2023) note that global accounting differences are one reason analysts read the notes to the financial statements before comparing ratios across countries.
References
Barth, M. E., Landsman, W. R., & Lang, M. H. (2008). International accounting standards and accounting quality. Journal of Accounting Research, 46(3), 467-498. https://doi.org/10.1111/j.1475-679X.2008.00287.x
Beaver, W. H. (1966). Financial ratios as predictors of failure. Journal of Accounting Research, 4, 71-111. https://doi.org/10.2307/2490171
Williams, J. R., Bettner, M. S., & Smith, K. R. (2023). Financial & managerial accounting: The basis for business decisions (20th ed.). McGraw-Hill Education.
Reading the ACC 1020 Module 1 assignment instructions
ACC-1020, the managerial half of TESU's two-course accounting sequence, is graded much like its financial counterpart. You work each one inside your own copy of the course's guided template and hand that copy in. For this first managerial module, the template typically has you compute and interpret financial ratios from a set of statements, sometimes including horizontal and vertical analysis, and to explain how international standards differ from U.S. GAAP. Show each formula with its inputs, use averages where required, and answer the interpretation questions in complete sentences. The textbook is Williams, Bettner and Smith. Read the module's videos before starting the template, since they model each ratio step by step.
Inside the ACC 1020 Module 1 example
The homework opens with the company and the reason someone outside it wants the analysis, which gives the ratios a reader. Part A condenses two years of statements into one comparative table so every ratio can be traced. Part B lists nine ratios with formulas and results, then interprets them by group, liquidity, efficiency, debt and profitability, with each claim tied to a number and a business explanation. A short paragraph connects ratio trends to research on predicting failure. Part C names four specific differences between U.S. GAAP and IFRS, says which affect this company and by roughly how much, and summarizes research on whether international standards changed accounting quality.
ACC 1020 Module 1 rubric: what earns full marks
Mentors grade this homework on correct ratio calculations, correct use of averages and year-end figures, and sensible interpretation. A ratio that is computed correctly but left unexplained earns only part of the credit; the template's written questions ask what the numbers mean for the company. For the global accounting portion, mentors look for accurate statements about specific differences between U.S. GAAP and IFRS, not general claims that the two systems differ. Clear labels and the template's format complete the grade. Because homework carries 35% of the course grade, consistent accuracy across all six assignments has a large effect on the final result. State each ratio to two decimal places unless told otherwise.
Common ACC 1020 Module 1 mistakes, and how to avoid them
The most common Module 1 errors are using ending balances where the formula calls for an average, mixing up the quick ratio and current ratio, and putting sales, not cost of goods sold, on top of the inventory turnover fraction. Interpretation is often too thin: say whether a change is good or bad and why, using the business context. On IFRS, avoid vague statements; name the standard area, such as inventory, development costs or property, and explain the effect. Remember that LIFO is not permitted under IFRS. Our tutors can work through the ACC 1020 Module 1 template with you, computing and interpreting the ratios for the statements your mentor assigned. Recheck each average before computing returns.
Write yours, or have the desk draft it
This paper is an original model document written by our desk, not a submitted student paper and not an official Thomas Edison State University document. Read it for the moves, then write your own to the instructions in your classroom. If you want one built to your exact prompt and rubric, the first custom sample is free and arrives in 24 to 48 hours.
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ACC 1020 Module 1 questions, answered
Where can I find a free ACC 1020 Module 1 sample paper?
The full Module 1 homework is reproduced on this page: comparative statements, nine ratios with interpretation and the IFRS differences a foreign reader would notice, along with references and margin notes.
Which ratios measure liquidity?
The current ratio and the quick ratio are the main ones. Both compare short-term assets with short-term liabilities; the quick ratio leaves out inventory and prepaid items.
Why use average balances in some ratios?
When a ratio sets a whole year's flow, such as cost of goods sold, against a balance sheet figure, averaging the opening and closing balances makes the two cover the same period.
What are the main differences between U.S. GAAP and IFRS?
Examples include the ban on LIFO under IFRS, reversals of inventory write-downs, capitalization of development costs and the option to revalue property, plant and equipment.
How is ACC-1020 graded?
Homework is the largest graded block apart from the final exam: 35% for the six assignments, with discussions, quizzes and a proctored final making up the rest.