...XACC-291-Week 2- Reflection Rukaiyah Williams XACC-291 06/28/15 Professor Jana Rideout XACC-291-Week 2- Reflection Small and larger companies daily incur revenue expenditures to upkeep their operating efficiency and productive life of an asset. Expenditures are unavoidable as well as they are very necessary to expand the business. Expenditures are payments of cash or cash equivalent for goods or services. The difference between revenue and capital expenditures is that revenue expenditures are expenses that are immediately charged against revenue as expenses. Regular and periodic repairs are revenue expenditures because they are charged directly to specific accounts. Examples of these accounts would be Repairs and Maintenance Expense. Capital expenditures are expenditures will increase the company’s investment primarily in productive facility. A capital expenditure is an amount spent to attain or improve a long term asset such as buildings or equipment. When recording capital expenditure, it is usually recorded in accounts classified or titled as Property, Plant and Equipment. Generally, because capital expenditures provide income for the company over a period of years, companies are not allowed to deduct the full cost of the asset in the year the expense is incurred. Revenue expenses typically are shorter term expenses because they always required to meet the ongoing operational costs of running a business. (Investopedia, 2015) The contrasting factor of capital and...
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...l Chapter 4: Recognizing Differences Differentiate between valuation, depreciation, amortization, and depletion. Is it appropriate to calculate depreciation using two different methods? Why? Valuation can be defined as determining a value. Valuation involves assets should be documented at the current market price regardless of whether the actual value is above or below cost. There are two common valuation options which are fair-market-value and historical cost (net depreciation). The allocation of cost of a plant asset to expense over its useful or service life in a rational and systematic manner is known as depreciation. Depreciation is not a process of valuation, nor is it a process that results in an accumulation of cash. There are three methods that can be used for depreciation. Amortization is the systematic write-off of an intangible asset that has a useful life. This can be found on the income statement. The cost of intangible assets with indefinite lives is not amortized. Companies generally use the straight-line method for amortizing intangible assets. Depletion is the allocation of the cost of natural resources to expense in a rational and systematic manner and is only used for natural resources. A common type of natural resource is oil. Declining-balance method provides you the highest depreciation expense in the first year, because with this method there is a decreasing annual depreciation expense over the asset’s useful life. According to "Learn Accounting" (2004-2014)...
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...Berry’s Bug Blasters Liquidity Ratios 2008 Current ratio = Current assets/Current liabilities = 1,836,770.12/306,805.71 = 5.97 (4.09 2007) Acid-test ratio = (Cash + Accounts receivable + Short-term investments)/Current liabilities = (818,440.68 + 812,395.13 + 0)/306,805.71 = 5.32 (3.01 2007) Receivables turnover = Net credit sales/Average net receivables = can’t be calculated since company doesn’t sell goods (net sales not provided in financial statements) Inventory turnover = Cost of goods sold/average inventory = can’t be calculated since company doesn’t sell goods. Profitability Ratios 2008 Asset turnover = Net sales/Average assets = can’t be calculated since company doesn’t sell good (net sales not provided in financial statements) Profit margin = Net income/Net sales = can’t be calculated since company doesn’t sell goods (net sales not provided in financial statements) Return on assets = Net income/Average assets = 493,139.75/[(1,932,041.17 + 1,498,882)/2] = 28.7% (75.3% 2007) Return on common stockholders’ equity = Net income/Average common stockholders’ equity = 493,139.75/[(1,625,235.46 + 1,132,095.71)/2] = 35.8% (102.9% 2007) Solvency Ratios 2008 Debt to total assets = Total debt/Total assets = 306,805.71/1,932,041.17 = 15.9% (24.5% 2007) Times interest earned = Income before income taxes and interest expense/Interest expense = can’t be calculated since company hasn’t had income expense the last 2 years ...
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...August 10, 2014 XACC 291 Assignment 2 E9-1 1 A. The acquisition cost for the plant asset will contain all spending needed to obtain the asset and make it prepared for its own purpose. 1B. 1. Land 2. Factory Machinery 3. Delivery Equipment 4. Land Improvement 5. Delivery Equipment 6. Factory Machinery 7. Prepaid Insurance 8. License Expense E9-7 A. 1. Straight Line Method 2011: $3,500 2012:$ 3,500 Accumulated Depreciation 2011: $26,500.00 2012: $23,000.00 2. The Units of Activity Method $0.28 per mile 2011 $4,200 2012. 360 3. The double-declining method 2011: $7,500 2012:$5, 625 B. 1. Dec 31 Depression Expense 3,500 Accumulated Depression 3,500 (To record the annual depression on truck) 2. Brainiac Company December 31, 2011 Balance Sheet Equipment: $30,000 Less Accumulated Depreciation: $3,500 Net property, plant, and equipment: $26,500.00 E9-12 Adjusting Entry Dec.31 Amortization Expense: Patent 12,000 Patients 12,000 Problem 9-7B A. Jan.2 Cash...
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...Recognizing Differences 6-14-2015 EXCC/291 Nicole L Smith Valuation refers to determining a value for something. For accounting purposes, two common valuation options are fair market value and historical cost (net depreciation). Depreciation is an adjustment to the net income of an entity for wear and tear of fixed assets. The adjustment for depreciation is (in theory) to expense assets over the term of their useful lives. Amortization is an adjustment to the net income of an entity to expense costs of intangible assets over the estimated useful life of the asset (example: writing off the costs of a noncompete agreement over the life of the agreement). Depletion is an adjustment to the net income of an entity to record the use or harvesting of its petroleum, minerals, timber, or other reserves. Accumulated depreciation, accumulated amortization, and accumulated depletion accounts are kept as contra accounts to the historical acquisition price of fixed (tangible) assets being depreciated, intangible assets being amortized, and reserves being depleted. In accounting the terms depreciation, depletion and amortization often involve the movement of costs from the balance sheet to the income statement in a systematic and logical manner. Depreciation, depletion and amortization are also described as noncash expenses, since there is no cash outlay in the years that the expense is reported on the income statement. As a result, these expenses are...
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...Week 2 CheckPoint Reflection During the useful life of a plant asset, a company may incur costs for ordinary repairs, additions, or improvements (Weygandt, Kimmel, & Kieso, 2010, p. 409). Costs incurred for ordinary repairs are considered revenue expenditures. Costs incurred for additions and improvements are considered capital expenditures. Companies incur revenue expenditures to maintain the operating efficiency and productive life of an asset. Usually these are fairly small costs that occur frequently. Examples of revenue expenditures are: Oil changes and tune-ups, maintenance charges, repair costs, renewal expenses, and repainting costs. Companies record the entry of revenue expenditures as a debit to Repair or Maintenance Expense as they are incurred, and a credit to cash or accounts payable (Weygandt, Kimmel, & Kieso, 2010). Companies incur capital expenditures to increase the operating efficiency, productive capacity, or useful life of an asset. Usually these are rather big costs that occur infrequently. Examples of capital expenditures are: Purchase costs, delivery costs, legal charges, installation costs, replacement costs, construction costs, and demolition cost. Companies generally record the entry of a capital expenditure as a debit to the Plant Asset affected, and a credit to cash or accounts payable. Land Improvements, Building, and Equipment all depreciate over the useful life of the asset; land is the exception and it does not depreciate. To review; revenue...
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...Chen, Inc. purchases 1,000 shares of its own previously issued $5 per common stock for $12,000. Assuming the shares are held in the treasury, what effect does this transaction have on (a) net income, (b) total assets, (c) total paid-in capital, and (d) total stockholders' equity? Treasury stocks are repurchased or buybacks from stockholders that may have never been publicly issued. Treasury stock share do not pay dividends nor do they have voting rights. Whenever a company purchases treasury stocks, the assets are decreased because the cash or other assets are essentially swapped out for the treasury stock. Although the corporation can increase their return on equity by purchasing its own stock, their net income will not change. The paid in capital is reduced and shown in the balance sheet. (a) No effect nor change in net income (b) Total assets will be decreased by $12,000.00 (c) Treasury stock reduces retained earning, therefore there will be no effect nor change on total paid in capital (d) The total stock holder’s equity will decrease by $12,000.00 The treasury stock purchased in the above question was resold by Chen, Inc. for $15,000. What effect does this transaction have on (a) net income, (b) total assets, (c) total paid-in capital, and (d) total stockholders' equity? In this example, the assets and equity will decrease because of purchasing from the common stock, however the total paid in capital will not be affected. The paid in capital will...
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...Capstone Response Nikki Pinkerton XACC/290 November 29, 2015 Dan Adams Capstone Response After reviewing Sarbanes-OXELY Act (SOX) which was established in 2002 we are able to see how this process affects the practice of accounting. SOX is designed to work with the internal controls that we have learned about this past week. Its main purpose is to ensure that auditors have no connection with the company they are auditing. No connection of any kind. Enron was one of the many companies committing fraud when the company was defunct and went bankrupt, this is why the SOX act was created. The requirements for under the SOX include statement of management’s responsibilities, allowing sufficient internal controls. This assessment is completed by management usually toward the end of the fiscal year. They will also the effectiveness of internal controls and procedures inside and outside. Sox ensures that all organizations are being checked and audited sparingly in order to aid in the consistency and accuracy of the information. Since this act was put in place in the year 2002 it has implanted stricter guidelines for organizations and is making the cover up of fraud much more difficult. Using external audits as the result of the SOX accounting scandals has come to an end. This process has ensured that all auditors have absolutely zero connection to the company that is being audited. I am sure they have to under go a very extensive back ground inspection...
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...XACC/291 – Week 8 Assignment Complete Exercises E13-8 & E14-3 Exercise E13-8 Taguchi Company Statement of Cash flows-Indirect method For the year ended in December 31,2011 Cash Flows from operating activities Net income 103,000 Adjustments to receive net income to net cash provided by operating cash activities: Increase in accounts receivable (9,000) Decrease in inventory 19,000 Decrease in accounts payable 8,000 18,000 Net cash provided by operating activities 121,000 Cash flows from investing activities Sale of land 25,000 Purchase of equipment 60,000 Net cash used by investing activities 85,000 Cash flows from financing activities Redemption of bonds (50,000) Sale of common stock 42,000 Payment of dividends 45,000 Net cash provided by financing activities 37,000 Net increase in cash 51,000 Cash at beginning of period 22,000 Cash at end of period 73,000 Non-cash investing and financing activities None to report Exercise E14-3 A. Horizontal Analysis Assets ...
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...Direct and Indirect Cash Flows XACC/290 July 9, 2014 Jessika Ray Christopher Phillips Direct and Indirect Cash Flows When a company is trying to convert the net income from an accrual basis to a cash basis they would use either the direct method or the indirect method. When completing the conversion the company will have the ability to come to the same total amount for the “net cash provided by operating activities.” Even though the company can use either method to come up with the same total there are different steps used with each method. The method which is used by most companies is the indirect method because it is more cost effective and easier to use. This method is also the best way to reconcile reported net income to cash provided by operations. When computing the cash flow from operations you would begin with the net income for the company. Then add back any non-cash expenses such as depreciation and amortization. You will also need to make adjustments for gains and losses on any sales or assets during the period in question. When making the adjustments you will need to add the losses in and subtract out the gains. There needs to be an account for changes in any non-cash assets. These are any current assets the company has during the period. Finally, you must account for changes in any and all assets and liabilities. These assets and liabilities do not include notes payable or dividends payable. On the other hand the other method is the direct method. This...
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...Preferred Stock XACC/291 Various classes of stock provide variety in the way of investments and how they’re conducted. Preferred stock is a more “upgraded” version of commons stock, with various differences that can make it a sought after preference. Although it can be offered by corporations like common stock, it has priority over common stock in a few different ways. Preferred stock holders have the priority when it comes to receiving dividends over common stock holders (Kimmel, Weygandt, & Kieso, 2011). Priority, in this case means that if a company has the proper finances to pay out dividends, preferred stock holders would receive theirs first. This may be a feature that would be attract more investors rather than common stock. Another attractive feature is explained by Kimmel, Weygandt, & Kieso, (2011) “(The) …“cumulative dividend feature”. This means that preferred stockholders must be paid both current-year dividends and any unpaid prior-year dividends before common stockholders receive dividends. (Chapter 11: Organization, Stock Transactions, Dividends, and Retained Earnings). However, the downside to preferred stock over common stock is there are no voting rights for preferred stock holders. This could be a downside for those that are wanting to have more control over a company and are using that as an investment. However, those investors that are wanted to invest and have increased chances of receiving dividends sooner. If I were to invest in stock...
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...Recognizing Differences Checkpoint Veronica Course: XACC 291 July 10, 2013 What are the different types of dividends corporations may issue? When should a corporation pay dividends? Do you prefer a stock a cash dividend or dividend? Why First I would like to start by explaining the four dividends and those are cash, stock, property and scrip. Cash dividends are often paid for per share of stock with in the company. A stock dividend is often offered to shareholders, which they don’t need to pay taxes until they are sold. Property dividends are offered to shareholders when companies are having financial difficulties. Scrip is almost the same except that they issue scrip instead of paying money to their shareholders. Personally if I ever had to choose between any of the four types of dividends it would be the stock it is one of the best options to choose from granted if the company happens to go belly-up so will you. However if the stocks should significantly rise and prosper so will you. This is the chance you take when you invest in any company. The one thing you should do before you invest in any company is research it. Making sure your money is in the right place is probably the smartest thing you can do. If the company is in financial ruin, you are more likely to go down with it. Assuming you did your homework right, you are going to run into some red flags that means there is something terribly wrong with the way the financial paper work is being handled...
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...Revenue Expenditures & Capital Expenditures Tracey DeSautel November 1, 2014 University of Phoenix XACC/291 In the world of accounting, there are numerous types of expenses that come along with running a business on a day to day basis as well as overall. There are things that break down and add value to the companies assets as well as things that are expensed to run the business on a daily basis. These can break down to two important items and those are Revenue expenditures and Capital Expenditures. Revenue expenditures is the amount that is expensed immediately. Thereby being matched with revenues of the current accounting period. Examples include things such as routine repairs because they are charged to a direct account such as “ repairs and maintenances expenses> these do not extend the life or improve the assets for the company. Capital expenditures are amounts spent to acquire or improve a long term asset. These can be things such as buildings or even equipment. These are usually recorded in accounts classified as “ property, plants and equipment”. These are charged to depreciation expense over the assets lifespan. It breaks down to capital expenditures are for items such as machinery and buildings where as revenue expenditures are for things that create revenue such as advertising and labor. A further look into capital expenditures and examples are that, that do not occur in daily transactions for the company and include such purchases that may include the...
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...Cash Flow Statements Mindy Blankemeyer XACC/291 March 1, 2015 Tameka Johnson Cash Flow Statements Cash flow statements, which are also referred to as statement of cash flow, are a part of a company’s essential worksheets which demonstrate how a company has performed over a specific amount of time. Companies are required to prepare a cash flow statement because it will list all of the information the owners and investors will need to make important decisions about the company. The statement will provide the incoming cash, the outgoing cash, and the amount of cash on hand for expansion and growth. A cash flow statement is divided into three sections. Cash flow from operations, financing and investing. Within these three sections of a cash flow statement, the cash from operations and financing will show how and where the company is receiving its money from, and the investing section will show where the company spends its money. In a closer look at these three sections, under the operations column, listed will be the income the company has earned from sale of goods, or monies received from services offered. Also in this section will be some expenses such as insurance and accounts payable. Under the investment section of a cash flow statement will be a column which is dedicated to the investments the company is making. If the company purchases or sells property, buildings, or new equipment, it will be listed in this section. In the final financing section of a cash...
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...Checkpoint: Recognizing Differences Student Name XACC/291 11/14/2012 Instructor Name Checkpoint: Recognizing Differences Valuation is the process of determining what an asset or liability is actually worth. This is done using either the absolute value model, option pricing model, or relative value model. The reason an asset or liability would be evaluated for valuation include financial reporting, investment analysis, and mergers. Depreciation helps to indicate how much of an asset’s value has been used up, as well as the allocation of the cost of the asset to the specific periods in which the asset was used. The IRS website tells us that “depreciation is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property. It is an annual allowance for the wear and tear, deterioration, or obsolescence of the property. Most types of tangible property (except, land), such as buildings, machinery, vehicles, furniture, and equipment are depreciable. Likewise, certain intangible property, such as patents, copyrights, and computer software is depreciable” (2013, A Brief Overview of Depreciation, para. 1). Amortization is the spreading of an intangible asset’s cost over the life of the asset. This is different from depreciation as that is prorating the asset’s cost over the asset’s useful life. Amortization costs are reported on the income statement as an expense over the...
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