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Financial Accounting Chpt 4-6

by: Massie

Financial Accounting Chpt 4-6 ACG 201 - 006

GPA 3.9
Financial Accounting
Joseph Edward Betts

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Notes and review notes for chpt 4-6
Financial Accounting
Joseph Edward Betts
Class Notes
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This 6 page Class Notes was uploaded by Massie on Sunday October 18, 2015. The Class Notes belongs to ACG 201 - 006 at University of North Carolina - Wilmington taught by Joseph Edward Betts in Fall 2015. Since its upload, it has received 68 views. For similar materials see Financial Accounting in Accounting at University of North Carolina - Wilmington.

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Date Created: 10/18/15
lBalance Sheet Classification amp Analysis 0 Current assets cash acct receiv inventory amp liabilities acct payable accrued exp Payable shortterm notes pay 0 property plant amp equipment intangible assets amp liabilities longterm notes payable cash etc converted into cash used up win normal opt cycle of bus Or 1 yr whichever is longer Normal opt cycle average period of time btw use of cash to deliver service buy goods for resale amp following collection of cash from customer who purch service amp products Ex Safeway normal opt cycle might be short as 1 week or 2 on average amp even only 1 day or 2 for perishable products bread fresh sliced veggies Current assets listed in order of expected liquidity Liquidity ability of asset to readily convert to cash 0 Assets co doesn t expect to covert to cash win year use ip during normal opt cycle whichever is longer Ex Property plant amp equipment intangible assets 0 Property Plant amp equip land buildings equip vehicles furniture amp fixtures co use in day2 day opt Brand names copyrights patents amp trademarkslack physical O presence 0 liabilities settled win normal opt cycle or 1 yr we longer Ex Acct payable accrued expenses payable shortterm notes payable deferred revenue Accounts payble amt owed for inventory purch from suppliers on CREDIT Accrued expenses payable wages utilities interest income tax amp property taxes owed by co but not yet paid Shortterm notes payable amt owed tht are specified in contractnote Deferred revenue advance pmt received from customers Ex Goods under layaway plan will be earned as rev debt obligations NOT due win normal opt cycle 1 yr EX Longterm notes payable bonds payable deferred rev deferred tax liabilities ownership interest in assets of bus After its liabilities have been paid off 1 Amts invested by stockholders CS 2 Cumulative net income of bus Tht has not been distributed to stockholders as dividend retained earnings Prez Format displayed on liabilities amp SE on right side A L SE Report form assets displayed on I liabilities below asset SE below liabilities Assets Liabilities SE Income STMT Classification amp Analysis simplest form of income stmt Sum of expenses subtracted from the sum of the revenues in a single step to arrive at NET income V p 7 Elmi l w u i l l garment fur ppl Inc 114 1 3 l r 7 r 7 Vin ff 5 and dividend in m net a i h 415 Tara rE39I IiFEE39Iu 115564 39namp pmem expenaas 2429 a a gran313m amlnniatmtiv 15 tax 39EEPEHEE 7753233 25232 259122 More info give better more informed decisions bus Diff in format depending on if it s a service firmmerchandising firm Service firms do not sell physical product thus no CGS Merch firm Firm s net salesCGS Gross profit CGS is subtracted from Firm s net sales Gross Profit Gross pro t on salesgross margin difference btW net sales less CGS cost of products sold amt of sales rev remaining Shows the sales rev remain to cover opt expenses Net sales total sales less an amt to record any SALES RETURNS amp ALLOWANCES amp sales discounts Sales returns amp allowances amt given to customer for return of merch amt given in lieu instead of a return Sales discount amt givenrewarded to buyer 4 early pmt Worlin2 w nancial stmts Analysis Based on Ratios Ratio Analysis relation of 1 relevant accting to another relevant accting thru process of division Result of div expressed as rate or proportion Return on assets ROA Net income total assets rate of return meaning the on each dollar of assets invested in the bus Trend analysis compare co s results results of ratio over time Benchmarking analysis analyst compares a co s performanceratio to tht of its competitorsindustry avg Working with the Balance Sheet Liquidity ability to pay obligations tht come due in current yr shortterm financial obligations Solvency ability to pay obligations over long term cash availableexpected 2b generat cash needed to pay off obligation ex Larger ratio greater ability to pay shortterm Greater than 1 co has more cash amp current assets than needed to pay off obligations Less than 1 lt1 opposite Solvency co s ability to pay its longterm financial obligations ability to survive on the long term Dell has a larger ratio small ability to repay Working with the Income stmt aka Pro t margin larger ratio co more profitablemore efficient Working w the Stmt of Stockholders Equity Contributed capital measure of capital contributed by stockholders of a 00 When they purchase ownership shares in the co Earned capital earned by co reinvested in bus and NOT distributed to stockholders retained earnings Retained earnings begin Net income Dividends Retained Earnings end of pd Working w stmt of Cash ows 1 Cash flow from opt investing and nancing activities FCF F Self study questions 169 B 1 NOT on Classified balance sheet multistep income stmt ALSE B Net income pg 182 C 2 NOT current asset PPE C 3 Balance sheet I A LSE D 4 Intangible asset Patents D 6 Ratio analysis involves arithmetic opt Division D 7 NOT TRUE about Benchmarking Benchmarking analysis involve comparing co s ratio over time this is TREND B 8 Net income 200 Net sales 2000 Co return on sale B 10 percent 2002000 C9 Return on sales ratio DOESN T provide insight on Cash ow exibility D 10 NOT shown on stmt of SE total liabilities A 11 Calculate current ratio Current assets 10000 Current liab 5000 21 B 12 Ending retained earnings Begin 120000 Net income revexp 37500 Dividens paid 5000 Ending retained earn 152000 13 Merch Multistep income stmt differs from service co in What way B service co doesn t include CGS Q 1 3 subgroups of assets found on classified balance sheet 2 Current asset amp Normal opt cycle 3 Current assets land cash ppd exp building acct receivable inventory equipment CASH acct receivable inventory 4 Corporate social responsibility 5 Current ratio Debt to total assets ratio Return on sales ratio 6 Socially responsible investing 7 Which measures are best computed using a Classified balalnce sheet Liquidity Solvency Free cash ow Or liquidiy amp solvency 8 Which correct stmt Current ratio measure Afirm solvency B firm liquidity Cdebt to ttotal asset ratio measure firm liquidity D NONE above 9 Free cash ow measured using indo from Which financial stmy C Stmt of cash ow 10 Socially responsible investing means means investing in co that adhere to environmental amp social policies in their opt


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