During the month, the supplies (asset) account was debited $1700 for supplies purchased. The cost of supplies used during the month was $1050. Record the adjustment for supplies used.
Assets Liabilities OE Net Income
Supplies -1050 Supplies Expense -1050
Journal Entry
Dr. Supplies Expense 1050
Cr. Supplies 1050
Consider the following interest payable T-account. Interest Payable ⌈ Feb 1 balance $1,220 Feb transactions ⌈ Feb 28 adjustment ? ⌈ Feb 28 balance $2,170
$1,200 + ? - $1,590 = $2,170
Thus Feb 28 adjustment = $2,540
_______a listing of the organization’s assets, liabilities, and owners’ equity
at a point in time.
Balance sheet
The Balance sheet is sometimes called the_______ because it summarizes the entity’s resources (assets), obligations (liabilities), and owners’ claims (owners’ equity).
statement of financial position
_____are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.
Assets
______ are probable future sacrifices of
economic benefits arising from present obligations of a particular entity to
transfer assets or provide services to other amounts owed to other entities.
Liabilities
______ is the ownership right of the owners
of the entity in the assets that remain after deducting the liabilities.
Owners' Equity
Indicate the category or each item, and the financial statement on which the item can usually be found..
-Accumulated depreciation
-Long-term debt
-Equipment
-Loss on sale of short-term investments
-Net income
-Merchandise inventory
-Other accrued liabilities
-Dividends paid
-Cost of goods sold
-Additional paid-in capital
-Interest income
-Selling expenses
-Accumulated depreciation- Asset, Balance sheet
-Long-term debt-Liabilities, Balance Sheet
-Equipment-Assets, Balance Sheet
-Loss on sale of short-term investments-Loss, Income Statement
______ reflect the cumulative earnings of the corporation that have been retained for use in the business rather than disbursed to the stockholders as dividends.
Retained Earnings
Which of the following would not affect total retained earnings? Assume that it is the end
of the fiscal year and that the books have been closed?
D. stock splits
Which of the following would not affect total retained earnings? Assume that it is the end
of the fiscal year and that the books have been closed?
D. stock splits
At the beginning of the current fiscal year, the balance sheet of Hughey, Inc. showed owners' equity of $520,000. During the year, liabilities increased by $21,000 to $234,000; paid-in capital increased by $40,000 to $175,000; and assets increased by $260,000. Dividends declared and paid during the year were $55,000. Calculate net income or loss for the year.
Answer in note book.
Work problem pg 293 Ex 8.3.
$370,800
Work problem pg 63 Ex 2.5.
Work problem on page 105 Ex 4.9
___________ are outflows or other using up of assets or incurring a liability during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity’s major operations.
Expenses
_____ are decreases in net assets from incidental transactions that are not expenses or distributions to owners.
Losses
_______ are entries usually made during the process of closing the books that results
in more accurate financial statements.
Adjustments
Adjustments involve ____ and _______.
Accruals and reclassifications
________ are part of accrual accounting, and they are required to achieve a matching of revenue and expense so that the financial statements reflect accurately the financial position and results of operations of the entity.
Adjustments
Work problem on Pg 107 Ex 4.15.
Work problem on Pg 293 Ex 8.3
Work problem on Pg 63 Ex 2.7
A record of a transaction involving a posting to the left side of an account is
called a _____.
Debit entry
An account that has a balance on its right is said to have a _______.
credit balance
When does Debit increase on left side:
Debit
Expense
Assets
Dividends
_______ provide that financial information should be useful to investor and creditor concerns about the cash flows of the enterprise, the resources and obligations of the enterprise, and the profit of the enterprise.
Objectives of financial reporting
The objectives of financial reporting for nonbusiness enterprises are the same as
business enterprises except that resource providers, rather than investors, are
concerned about ______, rather than profit.
Performance results
If costs are increasing, the items acquired first were cheaper. This decreases the cost of goods sold (COGS) under ___ and increases profit. The income tax is larger. Value of unsold inventory is also higher.
FIFO
________ is the process of bringing into agreement the balance in the Cash account in the entity’s ledger and the balance reported by the bank on the bank statement.
Bank reconciliation
______ are cash and those assets that are likely to be converted to cash or used to benefit the entity within one year of the balance sheet date.
Current assets
What are some examples of current assets?
Examples:
Cash and Cash equivalents,
Marketable (or short term) securities,
Accounts and Notes Receivable,
Inventories,
Prepaid Expenses or Other Current Assets, Deferred Tax Assets
Write a journal entry for used equipment sold for cash.
Dr. Cash…………………………………………..$1200
Dr. Accumulated Depreciation……… $5100
Cr.Equipment………………………… $6000
Cr. Gain on sale of Equipment Sold… $300
Why are adjustments made?
Adjusting entries are required in order to achieve a better matching of revenues and expenses on the income statement
Reconciliation procedures for adjustments to the bank balance
+ deposit in transit
- outstanding checks
+ - Bank errors
Reconciliation procedures for adjustments to the book balance.
+ Notes
collected by the bank
- NSF (bounced) checks
- Check printing or other service charges
+- Company errors
Effect of a “write-off” of an AR due to uncollectible.
Dr.Allowance for Bad Debts……..xx
Cr. Accounts Receivable………. Xx
What is depreciation?
Depreciation is the accounting process of recognizing the cost of an asset that is used up over its useful life to the entity.
Computation of cash discount (e.g. 2/10, n/30) and net payment. What does this mean?
2/10 refers to the discount terms of 2% discount if paid within 10 days and n/30 refers to full amount is due within 30 days. Net sales amount is cash discounts on sales subtracted from sales
_______ is another contra asset, and the balance in this account is the cumulative total of all the depreciation expense that has been recorded over the life of the asset up to the balance sheet date.
Accumulated depreciation
_______ is preferred stock, common stock, and additional paid-in capital. This represents amounts invested in the corporation by stockholders and are sometimes referred to as contributed capital
Paid in capital
Computation of wages expense
problem Pg
287 ex 7.23
Compute depreciation expense using the double declining balance depreciation method
Pg 234 ex 6.7
Because the full principal amount is not available to the borrower, the _______ on a discount basis is much higher than the rate used in the lending agreement to calculate the interest.
effective interest rate (APR)
. Compute cash available to use from a loan on a discount basis
Pg 280 ex 7.1
_______ is the principal payments on long-term debt that are scheduled to be paid within one year of the balance sheet date.
Current maturities of long-term debt
______ are reported in the current liability section but separately from short-term debt because the liability arose from a long-term borrowing transaction.
Current maturities of long-term debt
Payroll expense journal entries (recording gross pay, net pay and withholdings)
Dr. Payroll Tax Expense. . . . . .xx
Cr. Payroll Taxes Payable
(or Accrued Payroll Taxes). . . . .xx
The effect of recording a Warranty liability.
Pg 281 ex 7.5
Fiscal
period in which product is sold: +estimate warranty liability; - warranty
expense
Dr. Warranty expense………… xx
Cr. Estimated Warranty Liability.. xx
Fiscal
period in which warranty is honored: - cash; - estimated warranty liability
Dr.Estimated Warranty Liability……xx
Cr. Cash……………………………………………xx
Identify owner’s equity account given a list of accountsOwners’ equity
1) Paid-in capital:
a. Preferred stock
b. Common stock
c. Additional paid-in capital
2) Retained Earnings
3) Accumulated other comprehensive income (loss)
4) Less: Treasury stock
5) Noncontrolling interest
These are characteristics of what?
• Dividend may be skipped, even though it usually must be caught up before dividends can be paid on the common stock.
• No maturity date
• Dividends are not an expense and are not deductible for income tax purposes.
preferred stock
These are characteristics of what?
• Interest must be paid or firm faces legal action, possibly leading to bankruptcy
• Principal must be paid at maturity
• Interest is an expense and is deductible for income tax purposes.
Bonds payable
_______ represent the maximum number of shares that the corporation is legally approved to issue
Authorized shares
________is the number of shares of stock that have actually been transferred from the corporation to shareholders
Issued shares
________ is the number of shares still held by stockholders (shares issued less treasury shares)
Outstanding shares
______ is the number of issued shares that have been repurchased by the corporation
Treasury stock
_________ is the right of a stockholder to purchase shares from any additional sales of shares in proportion to the stockholder’s present percentage of ownership
Preemptive right
Declaration of a cash dividend affects which accounts?
Declaration Date:
Assets= Liabilities + owner’s equity
+ dividends payable - retained earnings
Dr. Retained earnings……..xx
Cr. Dividends Payable… xx
Activities included in management accounting include
1) Strategic, Operational, and Financial (Planning)
2) Executing operational activities (Managing)
3) Performance analysis: Plans vs actual results (Controlling)
