Accounting 201A
What is the total amount of property, plant, and equipment that will appear on the balance sheet?
$1,825,000
Financial statements (income statement, etc.)
(1) balance sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholders' equity.Balance sheets show what a company owns and what it owes at a fixed point in time
Cash vs. Accrual Accounting
1. Accrual accounting must be used by all companies who sell securities (stock) to the public 2. Cash accounting can be used by any companies who does not sell stock to the public. Cash accounting is also used by individuals to account for their personal finances 3. If a company who does not sell stock to the public attempts to get a band loan, they are typically required to present their financial statements using accrual accounting 4. This is typically required because cash accounting can be easily manipulated and thus lead to misleading financial statement
What was Gibson's net cash provided by operating activities?
A) 150,000
Accounting periods
An accounting period, in bookkeeping, is the period with reference to whichaccounting books of any entity are prepared. It is the period for which books are balanced and the financial statements are prepared. Generally, the accounting periodconsists of 12 months.
Accounting Equation
Assets = Liabilities + Equity
The proprietorship form of business organization
B) generally receives favorable tax treatment relative to a corporation.
Depreciation (definition, etc.)
Depreciation is an accounting method of allocating the cost of a tangible or physical asset over its useful life or life expectancy
Ratio analysis (earnings per share, etc.)
Financial Ratio Analysis » Earnings Per Share(EPS) Earning per share (EPS), also called net income per share, is a market prospect ratio that measures the amount of net income earned per share of stockoutstanding.
Users of accounting information (investors, etc.)
Owners/Partners Management Board of Directors External users (Secondary Users) Present or Potential Investors Present or Potential Creditors Customers Employees and Trade Unions General Public Tax Authorities
Definition of profit
Profit, in accounting, is an income distributed to the owner in a profitable market production process. Profit is a measure of profitability which is the owner's major interest in the income-formation process of market production. There are several profit measures in common use
revenue and expenses
Rather, revenue is the term used to describe income earned through the provision of a business' primary goods or services, while expense is the term for a cost incurred in the process of producing or offering a primary business operation
SEC, FASB, GAAP, IASB
SEC The SEC is the authority in the U.S. for regulating trade and markets, overseeing and auditing corporate financial reporting, and regulating investment. The SEC also has the authority to enforce the regulations they publish. The SEC appoints members to the PCAOB, which determines auditing standards and reviews auditing boards. FASB Financial Accounting Standards Board (FASB) is the board that sets the accounting standards for firms in the U.S. This board is a private, not-for-profit group that works to ensure GAAP is updated to reflect current legislation and accounting practices. IASB The IASB is the international equivalent of the FASB. It has established guidelines for financial practices globally. GAAP Generally Accepted Accounting Principles are a set of rules and practices having substantial authoritative support. GAAP is the standard that companies use to compile their financial statements such as the income statement, balance sheet, and statement of cash flows. Financial statements are compiled using GAAP for the benefit of investors and regulators. These financial statements are the balance sheet, income statement, and statement of cash flows.
Discounts
Sales discounts are also known as cash discountsand early payment discounts. Sales discounts are recorded in a contra revenue account such as SalesDiscounts. Hence, its debit balance will be one of the deductions from sales (gross sales) in order to report the amount of net sales.
Business organizations (proprietorship, etc.)
Sole propietorship: -business owned by one person Partnership: -Business owned by 2 or more people -can bring unique skills and resources Corporation -separate legal entity owned by stockholders ex: New York Stock Exchange
Financial statement components (assets, etc.)
The balance sheet contains statements of assets, liabilities, and shareholders' equity. Assets represent things of value that a company owns and has in its possession, or something that will be received and can be measured objectively.
Debits and Credits
The terms debit (Dr.) and credit (Cr.) mean left and right, respectively. These terms do not mean increase or decrease, but instead describe where a company makes entries in the recording process. That is, when a company enters an amount on the left side of an account, it debits the account. - When it makes an entry on the right side, it credits the account. When comparing the totals of the two sides, an account shows a debit balance if the total of the debit amounts exceeds the credits. An account shows a credit balance if the credit amounts exceed the debits.
Sequence of steps, and frequency, in the transaction recording process
The usual sequence of steps in the transaction recording process is: analyze -> journal -> ledger. repeatedly during the accounting period. a chronological record oftransactions.
Inventory systems
There are two systems to account for inventory: the perpetual system and the periodic system. With the perpetual system, the inventory account is updated after every inventory purchase or sale. Before computers became widely available, only companies that sold a relatively small number of high‐priced items used this system. Under the periodic system, a careful evaluation of inventory occurs only at the end of each accounting period. At that time, each product available for sale is counted and multiplied by its per unit cost, and the total of all such calculations equals the value of inventory.
The balance sheet reports assets and claims to those assets at a specific point in time.
True
For 2022, Kuhl Co. reported net income of $36,000, net sales $400,000, and average shares outstanding of 16,000. No preferred dividends were paid. Earnings per share is
a. $2.25
On August 15, 2022, Kinney Industries signs a $200,000, 8%, twelve-month note payable. Which of the following entries correctly records the accrued interest on December 31, 2022?
a. Dr Interest Expense $6,000 Cr Interest Payable $6,000
In which balance sheet section would trademarks be reported?
a. Intangible assets
The following information is available for Bradshaw Corporation and Newell Corporation: Based on this information, which of the following is suggested by the earnings per share calculations (rounded to two decimals) and the information given?
a. There is lower performance in 2021 than in 2022 for Newell Corporation
An accounting time period that is one year in length is called:
a. a fiscal year.
Gilkey Corporation began the year with retained earnings of $310,000. During the year, the company issued $420,000 of common stock, recorded expenses of $1,200,000, and paid dividends of $80,000. If Gilkey's ending retained earnings was $330,000, what was the company's revenue for the year?
b. $1,300,000
At March 1, 2022, Candy Inc. had supplies on hand of $2,000. During the month, Candy purchased supplies of $2,900 and used supplies of $2,800. The March 31 balance sheet should report what balance in the supplies account?
b. $2,100
Henson Company began the year with retained earnings of $380,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Henson's retained earnings balance at the end of the year?
b. $460,000
Earnings per share is calculated by dividing
b. (net income less preferred dividends) by average common shares outstanding.
The expense recognition principle matches:
b. expenses with revenues.
Masterfalls Corporation purchased a one-year insurance policy in January 2021 for $36,000. The insurance policy is in effect from March 2021 through February 2022. If the company neglects to make the proper year-end adjustment for the expired insurance:
b. net income and assets will be overstated by $30,000.
The revenue recognition principle dictates that revenue should be recognized in the accounting records:
b. when the performance obligation is satisfied
Finney Company began the year with retained earnings of $100,000. During 2022, the company issued $80,000 of common stock for cash. The company recorded revenues of $740,000, expenses of $640,000, and paid dividends of $40,000. What was Finney's net income for the year 2022?
c. $100,000
N3 Corporation has assets of $4,200,000, common stock of $1,092,000, and retained earnings of $665,000. What are the creditors' claims on their assets?
c. $2,443,000
In the first month of operations, the total of the debit entries to the Cash account amounted to $7,000 and the total of the credit entries to the Cash account amounted to $4,000. At the end of the month, the Cash account has a
c. $3,000 debit balance.
23. Use the following data to determine the total dollar amount of assets to be classified as current assets. P
c. $546,000
Hoosher Enterprises purchased an 18-month insurance policy on May 31, 2022 for $10,800. The December 31, 2022 balance sheet would report Prepaid Insurance of:
c. $6,600.
The entry to record the receipt of payment within the discount period on a sale of $900 with terms of 2/10, n/30 will include a
c. credit to Accounts Receivable for $900.
Under the accrual basis of accounting:
c. events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received.
If services are rendered on account, then
c. stockholders' equity will increase.
At September 1, 2022, Kern Enterprises reported a cash balance of $140,000. During the month, Kern collected cash of $60,000 and made disbursements of $100,000. At September 30, 2022, the cash balance is
d. $100,000 debit.
Skypress Company collected $11,200 in September of 2021 for 4 months of service which would take place from October of 2021 through January of 2022. The revenue reported from this transaction during 2022 would be:
d. $2,800.
Which of the following correctly identifies normal balances of accounts?
d. Assets Debit Liabilities Credit Common Stock Credit Revenues Credit Expenses Debit
An accountant has debited an asset account for $800 and credited a liability account for $700. Which of the following would be an incorrect way to complete the recording of the transaction?
d. Debit a stockholders' equity account for $100.
Tony's Market recorded the following events involving a recent purchase of inventory:
d. increased by $77,232.
The purchase of an asset for cash
d. leaves total assets unchanged.
Earnings available to common stockholders is equal to
d. net income - preferred dividends.
A current asset is
expected to be converted to cash or used in the business within one year or one operating cycle, whichever is longer.
Three types of business activities (financing, etc.)
operating, investing, and financing.
Qualities of Useful Information
to be useful, information should possess two fundamental qualities: relevance and faithful representation
