Hayes Public Relations: A Financing and Investing Exercise

On September 5, 2023, Luke Hayes, owner of Hayes Public Relations (HPR) in Toronto, Ontario, Canada, was reviewing the company’s financial performance for its seventh fiscal year. Having already reviewed the company’s operating decisions for the previous fiscal year, Hayes was now preparing to review the company’s financing and investing transactions for the fiscal year ending August 31, 2023.

This exercise is best suited to an introductory financial accounting course. It can either be taught to review finance and investing transactions or used as a testing point. Prior to completing this exercise, students should have previous exposure to recording transactions related to trading investments (stocks and bonds); equity financing (preferred and common shares); and debt financing (bonds payable, finance leases, and operating lines of credit). After working through the exercise and assignment question, students will be able to record the following types accounting transactions:<ul><li>Finance Leases: inception of leases, lease payments, depreciation of leased assets, interest accrual on lease obligations, lease expiration </li><li>Bonds Payable: bond recall, bond interest accrual and amortization at coupon payment dates and fiscal year-end</li><li>Operating Lines of Credit: using the line of credit, accruing interest</li><li>Equity Financing: issuance, stock and cash dividends, preferred share conversions to common shares, share repurchases/retirement </li><li>Trading Investments—Bonds: sale, interest accrual, year-end fair market valuation</li><li>Trading Investments—Stocks: purchase, sale, stock and cash dividends, stock splits, year-end fair market valuation</li></ul>

• Financial accounting
• Journal entries
• T-accounts
• Adjusting entries
• Finance and investing activities
• Finance leases
• Equity financing
• Debt financing