...Classified Balance Sheets (60 points) The following (given in scrambled order) are accounts and balances from the accounting records of Alleg, Inc., as of December 31, 2012, after the books were closed for the year. Common stock, authorized 21,000 share At $1 par value, issued 12,000 shares $12,000 Additional paid-in capital 38,000 Cash 14,000 Marketable securities 17,000 Accounts receivable 26,000 Accounts Payable 16,000 Current maturities of long-term debt 11,000 Mortgages payable 80,000 Bonds payable 65,000 Inventory 33,000 Land and buildings 57,000 Machinery and equipment 120,000 Goodwill 13,000 Patents 9,000 Other assets 45,000 Deferred income taxes (long-term liability) 18,000 Retained earnings 33,000 Accumulated depreciation 61,000 Bonds and mortgages generally have 10-30 years until maturity. Marketable securities are short-term investments that can be converted to cash in a matter of minutes. Required: Prepare a classified balance sheet with a proper heading on a spreadsheet. For assets, use the classifications of current assets, plant and equipment, intangibles, and other assets. For liabilities, use the classifications of current liabilities and long-term liabilities. Compute the total asset turnover rate assuming that total revenues in 2012 were $682,500. Round to the nearest hundredth, e.g. 3.33. Assume that Alleg’s primary competitor has an asset turnover of 2.12. What does this...
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...1.Abstract The balance sheet is necessary because it shows what the business has (assets) and what the business owes against those assets (liabilities). The difference between the assets and the liabilities shows the net worth of the business. The net worth of the business is important in that it is a measurement of the time the business is expected to stay in financial power. The balance sheet also provides the business with information on how best it is able to pay its debts. Underwriters also use the information in the balance sheet (working capital) to assess the business' ability to finance its operations. The balance sheet is necessary for the managers. It assists the managers of businesses in making decisions regarding purchasing of equipments for the business. Business managers depend on the balance sheet to analyze whether buying certain equipment on debt is the right move for the business at that time. Business managers need the balance sheet so as to decide the best source of credit for the business at that time. The balance sheet shows the accounting equation in a physical representation. The balance sheet also shows the owner's equity for example, it shows the value of the stock and the number of shares outstanding. The balance sheet is also used by the government agencies to make sure that the business is complying with the set laws. It also provides information to any potential lenders of the business on the credit worthiness of the business. When a group of...
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...__________________________ Date: _____________ 1. Which financial statement would best indicate whether the company relies on debt or stockholders' equity to finance its assets? A) Statement of Cash Flows B) Retained Earnings Statement C) Income Statement D) Balance Sheet 2. Stockholders' equity A) is usually equal to cash on hand. B) is equal to liabilities and retained earnings. C) includes retained earning and common stock. D) is shown on the income statement. 3. Which of the following activities involves collecting the necessary funds to support the business? A) Operating B) Investing C) Financing D) Delivering 4. Issuing shares of stock in exchange for cash is an example of a(n) A) delivering activity. B) investing activity. C) financing activity. D) operating activity. 5. Which of the following is not a principal type of business activity? A) Operating B) Investing C) Financing D) Delivering 6. Which of the following is not a common way that managers use the balance sheet? A) To analyze the balances of assets, liabilities, and stockholders' equity throughout the accounting period B) To determine if the cash balance is sufficient for future needs C) To analyze the balance between debt and common stock financing D) To analyze the balance of accounts receivable on the last day of the accounting period Page 1 Kimmel, Weygandt & Kieso - Sample Exam 1 7. Ashton Company began the year with retained earnings of $210,000. During the year, the company recorded revenues of $300,000...
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...Revised Schedule VI Page 2 INTRODUCTION TO REVISED SCHEDULE VI Every company registered under the Act shall prepare its Balance Sheet, Statement of Profit and Loss and notes thereto in accordance with the manner prescribed in Schedule VI to the Companies Act, 1956. To harmonise the disclosure requirements with the Accounting Standards and to converge with the new reforms, the Ministry of Corporate Affairs vide Notification No. S.O. 447(E), dated 28th February 2011 replaced the existing Schedule VI of the Companies Act, 1956 with the revised one. Government vide Notification No. F.N. 2/6/2008 – C.L-V dated 30th March 2011 made the revised Schedule VI applicable to all companies for the financial year commencing from 01st April 2011. The requirements of the Revised Schedule VI however, do not apply to companies as referred to in the proviso to Section 211 (1) and Section 211 (2) of the Act, i.e., any insurance or banking company, or any company engaged in the generation or supply of electricity or to any other class of company for which a form of Balance Sheet and Profit and Loss account has been specified in or under any other Act governing such class of company. Key Features of Revised Schedule VI –Balance Sheet • The revised schedule contains General Instructions, Part I – Form of Balance Sheet; General Instructions for Preparation of Balance Sheet, Part II – Form of Statement of Profit and Loss; General Instructions for Preparation of Statement of Profit and Loss. • The...
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...statement of cash flows? A. an increase in accounts payable. B. an increase in prepaid expenses. C. an increase in accrued liabilities. D. an increase in accumulated depreciation. 3. In a statement of cash flows, a change in prepaid expenses would be classified as: A. an operating activity. B. a financing activity. C. an investing activity. D. a noncash item that need not appear on the statement of cash flows. 4. In a statement of cash flows, a change in the inventories account would be classified as: A. an operating activity. B. a financing activity. C. an investing activity. D. a noncash item that need not appear on the statement of cash flows. 5. An increase in the plant and equipment account of $100,000 over the course of a year would be shown on the company's statement of cash flows prepared under the indirect method as: A. an addition to net income of $100,000 in order to arrive at net cash provided by operating activities. B. a deduction from net income of $100,000 in order to arrive at net cash provided by operating activities. C. an addition of $100,000 under investing activities. D. a deduction of $100,000 under investing activities. 6. Which of the following should be classified as an investing activity on a statement of cash flows? A. cash used to purchase land. B. cash collected on a loan made to a supplier. C. cash received from the sale of a stock investment. D. both A and C above E. all of the above 7. An increase in...
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...5 The Balance Sheet and Financial Disclosures CHAPTER LEARNING OBJECTIVES OVERVIEW LO1 LO2 LO3 LO4 LO5 Chapter 1 stressed the importance of the financial statements in helping investors and creditors predict future cash flows. The balance sheet, along with accompanying disclosures, proAfter studying this chapter, vides relevant information useful not only in helping you should be able to: investors and creditors predict future cash flows Describe the purpose of the balance but also in the related assessments of liquidity sheet and understand its usefulness and limitations. and long-term solvency. Distinguish between current and noncurrent The purpose of this chapter is to provide assets and liabilities. Identify and describe the various balance sheet an overview of the balance sheet and asset classifications. notes to the financial statements and to Identify and describe the two balance sheet liability classifications. explore how this information is used by Explain the purpose of financial statement decision makers. disclosures. LO6 Explain the purpose of the management discussion and analysis disclosure. LO7 Explain the purpose of an audit and describe the content of the audit report. LO8 Identify and calculate the common liquidity and financing ratios used to assess risk. FINANCIAL REPORTING CASE What’s It Worth? “I can’t believe it. Why don’t you accountants prepare financial statements that are relevant...
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...Further Look at Financial Statements o STUDY OBJECTIVES 2 T H E N AV I G AT O R I I I I Scan Study Objectives Read Feature Story Read Preview Read text and answer Before You Go On p. 58 p. 63 p. 69 p. 72 p. 75 Work Using the Decision Toolkit Review Summary of Study Objectives Work Demonstration Problem Answer Self-Study Questions Complete Assignments I I I I After studying this chapter, you should be able to: 1 meaning N Explain the principlesof generally accepted accounting and describe the I basic objective of financial reporting. F E AT U R E S T O R Y 2 qualitative N Discuss theinformation.characteristics of accounting 3 N Identify two constraints in accounting. 4 N Identify the sections of a classified balance sheet. 5 compute ratios N Identify andprofitability. for analyzing a company’s 6 N Explain the relationship between a retained earnings statement and a statement of JUST FOOLING AROUND? Few people could have predicted how dramatically the Internet would change the investment world. One of the most interesting results is how it has changed the way ordinary people invest their savings. More and more people are spurning investment professionals and instead are striking out on their own, making their own investment decisions. Two early pioneers in providing investment information to the masses were Tom and David Gardner, brothers who created an online investor bulletin board called the Motley Fool. The name comes from Shakespeare’s As...
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...approaches to accounting for taxation under IFRS and US GAAP, deferred taxation is one of the most common areas where differences arise. The reason is that a high proportion of transactions recognized in either the statement of income or balance sheet will have consequential effects on deferred taxes. • US GAAP, deferred tax asset is recognized in full. It is then reduced by a valuation account if it is more likely than not that all or a portion of the deferred tax asset will not be realized. IFRS requires a one-step approach that provides for recognition of the deferred tax assets only to the extent it is probable that they will be realized. 2 Executive summary • IFRS classifies deferred tax assets and liabilities as noncurrent in a classified balance sheet while US GAAP classifies these items based on the classification of the related asset or liability, or for tax losses and credit carryforwards, based on the expected timing of realization. • IFRS offsets deferred tax assets and liabilities when specific conditions are met which includes when an entity has a legally enforceable right to offset and when the taxes are levied by the same taxing authority for the same taxable entity. US GAAP offsets these balances and reports them net by current and noncurrent classification. 3 Primary pronouncements US GAAP IFRS • • IAS 12, Income Taxes ASC740, Income Taxes • IAS 37, Provisions, Contingent Liabilities and Contingent Assets ...
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...issue financial statements each year. 9. The dividends account is closed to the Income Summary account in order to properly determine net income (or loss) for the period. 10. After closing entries have been journalized and posted, all temporary accounts in the ledger should have zero balances. 11. Closing revenue and expense accounts to the Income Summary account is an optional bookkeeping procedure. 12. Closing the dividends account to Retained Earnings is not necessary if net income is greater than dividends during the period. 13. The dividends account is a permanent account whose balance is carried forward to the next accounting period. 14. Closing entries are journalized after adjusting entries have been journalized. 15. The amounts appearing on an income statement should agree with the amounts appearing on the post-closing trial balance. 17. A business entity has only one accounting cycle over its economic existence. 18. The accounting cycle begins at the start of a new accounting period. 19. Both correcting entries and adjusting entries always affect at least one balance sheet account and one income statement account. 20. Correcting entries are made any time an error is discovered even though it may not be at the end of an accounting period. 21. An incorrect debit to Accounts Receivable instead of the correct account Notes Receivable does not require a correcting...
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...c02AFurtherLookatFinancialStatements.qxd 7/27/10 9:39 AM Page 46 chapter 2 A FURTHER LOOK AT FINANCIAL STATEMENTS ● the navigator ● ● ● ● ✓ Scan Study Objectives Read Feature Story Scan Preview Read Text and Answer Do it! p. 52 p. 53 p. 62 p. 68 Work Using the Decision Toolkit Review Summary of Study Objectives Work Comprehensive Do it! p. 72 Answer Self-Test Questions Complete Assignments Go to WileyPLUS for practice and tutorials Read A Look at IFRS p. 96 study objectives After studying this chapter, you should be able to: 1 Identify the sections of a classified balance sheet. 2 Identify and compute ratios for analyzing a company’s profitability. 3 Explain the relationship between a retained earnings statement and a statement of stockholders’ equity. 4 Identify and compute ratios for analyzing a company’s liquidity and solvency using a balance sheet. 5 Use the statement of cash flows to evaluate solvency. 6 Explain the meaning of generally accepted accounting principles. 7 Discuss financial reporting concepts. ● ● ● ● ● ● ● INSIDE CHAPTER 2… 46 c02AFurtherLookatFinancialStatements.qxd 7/27/10 9:39 AM Page 47 feature story Few people could have predicted how dramatically the Internet would change the investment world. One of the most interesting results is how it has changed the way ordinary people invest their savings. More and more people are striking out on their own, making their own investment decisions. Two early pioneers...
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...process of recording accounting transactions. 1. Analyze transactions to identify the debit and credit components 2. Record journal entries in the accounting journal 3. Transfer debit and credit amounts to each account in accounting ledger 4. Prepare adjusting journal entries 5. Prepare a trial balance 6. Prepare financial statements by transferring balances from the trial balance to appropriate financial statements 7. Close temporary accounts and transfer revenue and expense account balances to retained earnings account | Accounting cycle | Accounting cycle by key word 1. Analyze the transaction 2. Journal entries 3. Posting to accounting ledger 4. Adjusting journal entries 5. Trial balance 6. Financial statements 7. Close temporary accounts | Debit or credit | Debit accounts include asset, expense accounts Credit accounts include liability, equity, revenue accounts | Debit or credit | Debit is recorded on the left side of journal entry and t-account Credit is recorded on the right side of journal entry and t-account | Debit or credit | On the trial balance, left side lists the balances of all debit accounts On the trial balance, right side lists the balances of all credit accounts | Accounting equation | Left side of the equation is equal to left side of the equation Left side total = Right side total Debit accounts are recorded on the left side of accounting equation Credit accounts are recorded on the right side of accounting equation Accounting...
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...and normal balances • Financial statements: Income Statement, Statement of Retained Earnings and Classified Balance Sheet - know how each is composed and how they are affected by journal entries • Application of Revenue Recognition, Matching Principle, Cost Principle Chapter 5 • Perpetual Inventory Systems • Recording all transactions involving Inventory under perpetual inventory system • Recording collection of Accounts Receivable, with or without a discount • Income statement of merchandising company (multi-step) • Cost of Goods Sold Calculation for periodic method • Gross profit rate and profit margin ratio Chapter 6 • Cost Flow Assumptions (FIFO, LIFO, Average methods) Use each method to calculate Ending Inventory and/or Cost of Goods Sold • Effect of different cost flow methods (and errors made) on both the Balance Sheet and Income Statement • Shipping terms/ownership (F.O.B; consignment) • Lower of cost or market • Inventory Turnover Ratio and Average Days in Inventory Chapter 8 • Types of Receivables • Accounts receivable account activity (Recognition, Valuation, & Disposition) • Allowance method Estimating uncollectible amounts (bad debt expense) using percent of receivables method Write-off of uncollectible accounts (including journal entry) • Notes Receivables Calculation of interest for full and partial year Accrued interest revenue journal entry • Receivables Turnover Ratio and Average Collection Period • Balance Sheet presentation...
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...rP os t 9-101-108 REV: MARCH 5, 2007 DAVID F. HAWKINS The Balance Sheet op yo A balance sheet, otherwise referred to as the Statement of Financial Position, presents information related to a company’s financial condition as of a specific point in time based on generally accepted accounting principles. These data are classified in three categories—assets, liabilities, and owners’ equity. The basic balance sheet is: Assets = Liabilities + Owners’ Equity or Resources = Creditors’ and Owners’ Claims on Resources tC Assets are probable, measurable, future economic benefits (things of value that the company owns or controls) to which the business holds the rights, which have been acquired through a current, or past, transaction. These are the resources of the firm. Liabilities are probable, measurable, future economic sacrifices arising from a company’s obligations to convey assets or perform services to a person or other organization outside of the company at some time in the future. These are the creditors’ claims on the resources of the firm. No Owners’ equity is the residual balance remaining after total liabilities are deducted from total assets. It represents the stockholders’ claims on the resources of the business. Do Assets and liabilities are presented in two categories: current and noncurrent. Current assets are cash and cash equivalents and those assets that are expected to be liquidated (turned into cash) or consumed...
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...statement used by investors, creditors, and mangers is the balance sheet. The second statement used by accountant’s income statement, which is also important to shareholders. The third statement is the retained earnings statement, and the fourth financial statement is the statement of cash flows. Each financial statement has a different purpose and shows different aspects of the company’s finances. However, these financial statements are integrated and work together to provide shareholders financial information. This paper will defines the four financial statements while explaining the financial statement most suitable for either an investor, creditor, or management. The Four Financial Statements The first financial statement is the balance sheet. The balance sheet provides a portrait of the company’s assets and liabilities. The balance sheet is the statement of financial position at a given point (Quick MBA, 2010). The second financial statement, the income statement, reports the revenues, and expenses during the same timeframe as the balance sheet. Revenue is the monies the company is gaining after expenses. The third statement is called the retained earnings statement, which explains changed in retained earnings. The retained earnings are changed by the company’s income and dividends. The retained earnings statement uses information form the income statement, which changes the financial information on the balance sheet. The final financial statement is the statement of cash...
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...STATEMENTS 1. A worksheet is a mandatory form that must be prepared along with an income statement and balance sheet. 2. If a worksheet is used, financial statements can be prepared before adjusting entries are journalized. 3. If total credits in the income statement columns of a worksheet exceed total debits, the enterprise has net income. 4. It is not necessary to prepare formal financial statements if a worksheet has been prepared because financial position and net income are shown on the worksheet. 5. The adjustments on a worksheet can be posted directly to the accounts in the ledger from the worksheet. 6. The adjusted trial balance columns of a worksheet are obtained by subtracting the adjustment columns from the trial balance columns. 7. The balance of the depreciation expense account will appear in the income statement debit column of a worksheet. 8. Closing entries are unnecessary if the business plans to continue operating in the future and issue financial statements each year. 9. The Dividends account is closed to the Income Summary account in order to properly determine net income (or loss) for the period. 10. After closing entries have been journalized and posted, all temporary accounts in the ledger should have zero balances. 11. Closing revenue and expense accounts to the Income Summary account is an optional bookkeeping...
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