ACC 310

As a capital provider (investor, lender), if you could only have one financial statement, why might you ask for the Income Statement?

- Evaluate past performance - Help assess risk - Predict future performance

Indicate how each of the following assets would be measured under normal circumstances. 1. Equipment 2. A/R 3. Land 4. Inventory 5. Short-term investment in public company stock 6. Short-term investment in private company stock 7. Buildings

1. Amortized Cost 2. Net Realizable Value 3. Historical Cost 4. Historical Cost 5. Market Value 6. Fair Value / Present Value 7. Amortized Cost

Equity (4 of them)

1. Contributed Capital (outside investors) - Common Stock - Preferred Stock - Additional Paid-in Capital 2. Retained Earnings (profit reused for the operations) 3. Accumulated other comprehensive income or loss (AOCI) 4. Treasury Stock (Repurchased Shares)

Indicate whether each of the following assets and liabilities would be classified as current or long-term under normal circumstances. 1. Prepaid Rent 2. Intangible Assets 3. A/P 4. Inventory 5. Bond Payable 6. Equipment 7. A/R 8. Accrued Liabilities 9. Deferred Revenues 10. Cash

1. Current 2. Long-term 3. Current 4. Current 5. Long-term 6. Long-term 7. Current 8. Current 9. Current 10. Current

Journal Entries Three steps to recording journal entries

1. Determine what accounts are involved 2. Determine if the accounts increase or decrease 3. Determine how much the account changes

Steps in the Accounting Cycle

1. Identify transactions, 2. Record transactions in a journal, 3. Post journal entries to accounts in the general ledger, 4. Prepare a trial balance, 5. Make and post adjusting entries, 6. Prepare financial statements, and 7. Close the books.

Match the following limitations to the financial statement to which it applies. 1. Includes recurring and non-recurring items 2. BV does not necessarily capture market value 3. Subject to the potential misuse of estimates and judgements

1. Income Statement 2. Balance Sheet 3. Both Income Statement and Balance Sheet

Group Exercise #1 Staples Inc. 1. Sales (net) 2. Cost of Goods sold (COGS) 3. Selling, general and administrative (SG&A) 4. Impairment of goodwill and long-lived assets 5. Amortization of intangibles 6. Integration and restructuring 7. Interest income 8. interest expense 9. Loss on early extinguishment of debt 10. Other income (expense), net 11. Income tax expense 12. Loss from discontinued operations, net of income taxes

1. Net sales of the company 2. Cost of the inventory that was sold 3. Cost incurred in selling the merchant, salary expenses/payroll, utilities, office expenses, advertising, maintenance, insurance, supplies 4. Impairment = "write-off", assets that have recently plummetted in value, Ex. recession or natural disaster destroying real estate - Impairments are 1-off events, constant impairment is just depreciation 5. Slow and steady decline in value for assets with a finite lifespan, similar to depreciation on tangibles 6. Costs associated with operational logistics, Ex. layoffs, relocation 7. Interest earned from investments in securities 8. Interest incurred on debt (revolvers, notes, bonds, capital lending) 9. Usually a 1-off event, Income charge (loss) for retiring debt before maturity at a cost above book value 10. Expenses unlisted, miscellaneous incurred non-operating expense 11. After-tax income from activities that will continue in the future 12. Ending of an operation incurs cost

Balance Sheet

A company's financial position at a point in time

General Ledger

A ledger that contains all accounts needed to prepare financial statements

Income Statement & other names

A summary of a company's performance over a given period of time - profitability over a period (quarter or year) AKA Statement of Earnings, Statement of Operations, P&L statement

Net Realizable Value

Amount a company can expect to receive when the asset is converted to cash EX. A/R

The Accounting Equation - T-accounts

Assets = Liabilities + Stockholders' Equity Assets: Debit increases, credit decreases (Same for expenses and dividends) Liabilities + Equity: Debit decreases, credit increases (Except for expenses and dividends)

DEA-LOR

Debits Dividends Expenses Assets Credits Liabilities Owner's Equity Revenue

Market Value

Price an active market is willing to pay for an asset EX. Public Securities

Income Statement General Format (Multi-step)

Sales Revenue, net (Cost of Goods Sold) Gross Profit (Operating Expenses) Operating Income (Other income and expenses) Earnings before income taxes (Tax Expense) Net Income

Statement of Cash Flows

Sources and uses of cash over a given period of time

What is the accounting cycle? Why do we have it?

The full set of procedures used to accomplish this two-step process of measurement and communication. The engine of the car.

Fair Value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. EX. Private securities

Trial Balance Using the general ledger and all transactions from the prior pages, create the trial balance for Eagle Robotics.

a list of all accounts and their balances at a particular date, showing that total debits equal total credits.

Historical Cost

original transaction value adjusted EX. Land, Inventory

Amortized Cost

the acquisition cost adjusted for the amortization or depreciation over its lifetime EX. Buildings, Equipment, and intangible assets