Accounting Framework
Who sets GAAP?
FASB, SEC, AICPA
Create the Journal entries for these events/transactions.
1. Issuance of common stock worth $400
2. Sell $350 inventory for $450 in receivables
3. Buy $550 of equipment with $150 in cash and the rest on credit
1. Dr. Cash $400 Cr. Common Stock $400
2. Dr. Accounts Receivable $450 Cr. Revenue $450 Dr. COGS $350 Cr. Inventory $350
3. Dr. Equipment $550 Cr. Cash $150 Cr. Accounts Receivable $400
List Non-operating revenues or expenses
Interest revenue or expenses, Rent revenue or expenses, Unusual gains/losses
Classify these accounts: Cash, Inventories, Accumulated Depreciation, Equipment, Note Payable, Interest Payable, Patent, Capital Stock, Retained Earnings, Other Comprehensive Income
CA, CA, CA, PPE, CL/LTL, CL, IA, E, E, E,
Classify as Operating, Investing or Financing:
Sale of Equipment, Interest Received, Interest Paid, Dividends Received, Dividends Paid, Issue Common Stock, Loan Money to a Smaller Company, Change in Accounts Receivable
I, O, O, O, F, F, I, O
What are the Fundamental Qualities of the Accounting Framework?
Adjusting Entries - 12/31/17 1. Co. paid $2400 for 2 years of Rent in October 2017. They reported that amount as Rent Expense. 2. Co. took out a note April 1st with a principal of $100,000. It has annual taxes of 10% due every April 1st. 3. Co. purchased $140,000 equipment. It has a 12 year useful life and $20,000 salvage value. Co. uses straight line depreciation.
1. Dr. Prepaid Rent $2100 Cr. Rent Expense $2100 2. Dr. Interest Expense $6667 Cr. Interest Payable $6667
3. Dr. Depreciation Expense $10,000 Cr. Accumulated Depreciation $10,000
Discontinued Operations Co. decided to discontinue their T-shirt operations. The segment was not sold by the end of the year. It had a net loss from operations during the period of $75000. At the end of the reporting period, the fair value minus anticipated costs to sell was $25000 and book value of $50000. Income from continuing operations was $135000. Taxes are 30%.
Income from Cont. Operations $135000 Discontinued Operations: Loss from operating discontinued segment $75000 Impairment Loss $50000 Income Loss from discontinued segment $125000 Net Income $10,000
Cash, Accounts Receivable vs. Stocks, Bonds, Cash Held for Something
Accounts Payable, Unearned Revenue vs. Notes Payable (due in more than a year), Long term debt
How do these affect cash flows
An increase in Accounts Receivable, Increase in Accounts Payable, Sale of Equipment, Pay dividends, Buy a Building
Name and give examples/definitions for the 4 principles and 4 assumptions of accounting.
Principles: Revenue Recognition, Expense Recognition, Measurement, Full Disclosure
Assumptions: Going Concern, Monetary Unit, Economic Entity, Periodicity
2009 NI - U$900; Assets-NE; Liabilities-O$900; Equity-U$900
2010 NI - U$1200; Assets-NE; Liabilities-O$2100; Equity-U$2100
Net Income and Other Comprehensive Income
Create a Classified Balance Sheet Cash - $150,000 Accounts Payable - $40,000 Equipment - $65,000 Salaries Payable - $75,000 Common Stock - $90,000 Unearned Revenue - $10,000 Notes Payable - $45,000 Accounts Receivable - $55,000 Allowance for Doubtful Accounts - $10,000
Notes Payable - $15,000 of the principle is due every year. Taxes are 25% per year
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Create a Statement of Cash Flows: *don't worry about numbers
Depreciation Expense, Gain on Sale of Equipment, Sale of Equipment, Increase in Accounts Receivable and Accounts Payable, Pay Dividends, Issue Common Stock, Interest Received
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