AFM101 Lecture Notes - Lecture 4: The Ledger, Retained Earnings, Share Capital

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skyoyster237

24 Sep 2018

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM101

Professor

Haihao Lu

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AFM101 Lecture Notes - Lecture 3: Retained Earnings, Accounting Equation, Faithful Representation

AFM101 Lecture Notes - Lecture 4: The Ledger, Retained Earnings, Share Capital

AFM101 Lecture Notes - Lecture 5: Costco, Revenue Recognition, Matching Principle

Document Summary

It has a left side, called the debit side. It has a right side, called the credit side. T-account is a simple tool to represent an account. Assets on the left increases the left (debit) side. Liabilities on the right increases the right (credit) side. Se on the right increases the right (credit) side. Expenses and dividends are exceptions, because they decrease shareholders" equity. A = l + (capital + beg re + rev + gains - expenses - losses - dividends) A + expenses + losses + dividends = l + (capital + beg re + rev + gains) Assets, expenses, losses, and dividends increase in the debit side. All other accounts increase in the credit side. A journal is a chronological record of transactions used by accountants. There are three steps to journalizing transactions. Specify the accounts affected by the transactions and their types. Determine if each account is increased or decreased.

Related Questions

D. Haas, a physical therapist, opened Haas's Clinic. His accountant provided the following chart of accounts: Assets Revenue Cash Professional Fees Accounts Receivable Office Equipment Expenses Office Furniture Salary Expense Rent Expense Liabilities Utilities Expense Accounts Payable Miscellaneous Expense Owner's Equity D. Haas, Capital D. Haas, Drawing The following transactions occurred during July of this year: Haas deposited $34,000 in a bank account in the name of the business. Bought filing cabinets (Office Equipment) on account from Muller Office Supply, $670. Paid cash for chairs and carpeting (Office Furniture) for the waiting room, $825, Ck. No. 1000. Bought a photocopier from Rob's Office Equipment, $770, paying $285 in cash and placing the balance on account, Ck. No. 1001. Received and paid the telephone bill, which included installation charges, $180, Ck. No. 1002. Sold professional services on account, $2,765. Received and paid the bill for the state physical therapy convention, $495, Ck. No. 1003 (Miscellaneous Expense). Received and paid the electric bill, $245, Ck. No. 1004. Received cash on account from credit customers, $1,585. Paid on account to Muller Office Supply, $360, Ck. No. 1005. Paid the office rent for the current month, $1,365, Ck. No. 1006. Sold professional services for cash, $2,395. Paid the salary of the receptionist, $990, Ck. No. 1007. Haas withdrew cash for personal use, $1,470, Ck. No. 1008. Requirements: Under each of the following T accounts, select either a plus or minus sign on the left side to indicate whether a Debit increases or decreases the classification or account and select either a plus or minus sign on the right side to indicate whether a credit increases or decreases the classification or account. Record the amounts in the proper positions in the T accounts. Record the amounts in the order given (letters 'a' through 'n'). Foot the T accounts and show the balances.

ultramarinemouse823

The comparative balance sheet of Whitman Co. at December 31,2016 and 2015, is as follows:

1		Dec. 31, 2016	Dec. 31, 2015
2	Assets
3	Cash	$918,260.00	$965,110.00
4	Accounts receivable (net)	â828,050.00	761,830.00
5	Inventories	1,268,550.00	1,163,510.00
6	Prepaid expenses	28,760.00	35,720.00
7	Land	315,810.00	479,900.00
8	Buildings	1,463,300.00	900,740.00
9	Accumulated depreciation-buildings	(408,350.00)	(381,910.00)
10	Equipment	512,470.00	454,060.00
11	Accumulated depreciation-equipment	(142,270.00)	(159,730.00)
12	Total assets	$4,784,580.00	$4,219,230.00
13	Liabilities and Stockholdersâ Equity
14	Accounts payable (merchandise creditors)	$922,360.00	$957,810.00
15	Bonds payable	270,000.00	0.00
16	Common stock, $25 par	316,000.00	116,000.00
17	Paid-in capital: Excess of issue price over parâcommon stock	775,000.00	559,000.00
18	Retained earnings	2,501,220.00	2,586,420.00
19	Total liabilities and stockholdersâ equity	$4,784,580.00	$4,219,230.00

The noncurrent asset, noncurrent liability, and stockholdersâequity accounts for 2016 are as follows:

ACCOUNT Land

					ACCOUNT NO.
					Balance
Date		Item	Debit	Credit	Debit	Credit
2016
Jan.	1	Balance			479,900
Apr.	20	Realized $152,430 cash from sale		164,090	315,810

ACCOUNT Buildings

					ACCOUNT NO.
					Balance
Date		Item	Debit	Credit	Debit	Credit
2016
Jan.	1	Balance			900,740
Apr.	20	Acquired for cash	562,560		1,463,300

ACCOUNT Accumulated DepreciationââBuildings

					ACCOUNT NO.
					Balance
Date		Item	Debit	Credit	Debit	Credit
2016
Jan.	1	Balance				381,910
Dec.	31	Depreciation for year		26,440		408,350

ACCOUNT Equipment

					ACCOUNT NO.
					Balance
Date		Item	Debit	Credit	Debit	Credit
2016
Jan.	1	Balance			454,060
	26	Discarded, no salvage		47,260	406,800
Aug.	11	Purchased for cash	105,670		512,470

ACCOUNT Accumulated Depreciation ââEquipment

					ACCOUNT NO.
					Balance
Date		Item	Debit	Credit	Debit	Credit
2016
Jan.	1	Balance				159,730
	26	Equipment discarded	47,260			112,470
Dec.	31	Depreciation for year		29,800		142,270

ACCOUNT Bonds Payable

					ACCOUNT NO.
					Balance
Date		Item	Debit	Credit	Debit	Credit
2016
May	1	Issued 20-year bonds		270,000		270,000

ACCOUNT Common Stock $25 par

					ACCOUNT NO.
					Balance
Date		Item	Debit	Credit	Debit	Credit
2016
Jan.	1	Balance				116,000
Dec.	7	Issued 8,000 shares of common stock for $52 per share		200,000		316,000

ACCOUNT Paid-In Capital in Excess of ParââCommonStock

					ACCOUNT NO.
					Balance
Date		Item	Debit	Credit	Debit	Credit
2016
Jan.	1	Balance				559,000
Dec.	7	Issued 8,000 shares of common stock for $52 per share		216,000		775,000

ACCOUNT Retained Earnings

					ACCOUNT NO.
					Balance
Date		Item	Debit	Credit	Debit	Credit
2016
Jan.	1	Balance				2,586,420
Dec.	31	Net loss	53,460			2,532,960
	31	Cash dividends	31,740			2,501,220

Prepare a statement of cash flows, using the indirect method ofpresenting cash flows from operating activities. Refer to theLabels and Amount Descriptions list provided for the exact wordingof the answer choices for text entries. Be sure to complete theheading of the statement. In the operating activities section, usethe minus sign to indicate cash outflows, decreases in cash and anet cash outflow, if required. In the investing and financingactivities section, use a minus sign only to indicate a NET cashoutflow for the section.

Labels and Amount Descriptions

Labels andAmount Descriptions
Cash paid for acquisition ofbuilding
Cash paid for dividends
Cash paid for merchandise
Cash paid for purchase ofequipment
Cash received from customers
Cash received from issuance ofbonds payable
Cash received from issuance ofcommon stock
Cash received from land sold
December 31, 2016
Decrease in accounts payable
Decrease in accountsreceivable
Decrease in cash
Decrease in inventories
Decrease in prepaid expenses
Decrease in salaries payable
Depreciation
For the Year Ended December 31,2016
Gain on sale of investments
Gain on sale of land
Increase in accounts payable
Increase in accountsreceivable
Increase in cash
Increase in inventories
Increase in prepaid expenses
Increase in salaries payable
Issuance of common stock foracquisition of building
Issuance of common stock forpurchase of equipment
Issuance of common stock to retirebonds
Loss on sale of investments
Loss on sale of land
Net cash flow from financingactivities
Net cash flow from investingactivities
Net cash flow from operatingactivities
Net cash flow used for financingactivities
Net cash flow used for investingactivities
Net cash flow used for operatingactivities
Net income
Net loss

Statement of Cash Flows

Whitman Co.

Statement of Cash Flows

1	Cash flows from operating activities:
2
3	Adjustments to reconcile net loss to net cash flow fromoperating activities:
4
5
6	Changes in current operating assets and liabilities:
7
8
9
10
11
12
13	Cash flows from investing activities:
14
15
16
17
18
19	Cash flows from financing activities:
20
21
22
23
24
25	Cash at the beginning of the year
26	Cash at the end of the year

olivedonkey543

13.
value:
4 points

What would be the appropriate entry for the followingtransaction?
Bill Co. performed $5,200 in consulting services on account

1.Credit to Cash, Debit to Accounts Receivable

2.Debit to Revenue, Debit to Cash

3.Debit to Accounts Receivable, Credit to Cash

4.Debit to Revenue, Credit to Cash

5.Debit to Accounts Receivable, Credit to Revenue

14.
value:
4 points

Which of the following is the appropriate journal entry if acompany performs a service and then bills the customer?

1.Debit to Cash, Debit to Revenue

2.Debit to Cash, Credit to Revenue

3.Debit to Accounts Receivable, Credit to Cash

4.Debit to Revenue, Credit to Accounts Receivable

5.Debit to Accounts Receivable, Credit to Revenue

15.
value:
4 points

Of the following accounts, the one that normally has a creditbalance is:

1.Cash

2.Office Equipment

3.Sales Salaries Payable

4.Dividends

5.Sales Salaries Expense

16.
value:
4 points

For what reason do most sellers require customers to have theirreceipts in order to exchange or return purchased items?

The receipt contains coded information which the seller needs toprepare and analyze the trial balance.

Sellers wish to ensure that the sale in question was rung up on theregister in the first place.

This is a legal requirement mandated by a federal law.

The receipt is serving as a promissory note.

To create an environment in which customer's do not want to returnitems.

17.
value:
4 points

A ledger is:

A record containing increases and decreases in a specific asset,liability, equity, revenue or expense item

A journal in which transactions are first recorded

A collection of documents that describe transactions and eventsduring the accounting process

A list of all accounts with their debit balances at a point intime

A list of all accounts a company uses and includes anidentification number assigned to each account

18.
value:
4 points

Stride Rite has total assets of $425 million. Its total liabilitiesare $110 million. Its equity is $315 million. Calculate the debtratio.

38.6%

13.4%

34.9%

25.9%

14.9%

19.
value:
4 points

The accounting process begins with:

Analysis of business transactions and events

Preparation of financial statements and other reports

Summarizing the recorded effects of business transactions

Presentation of financial information to decision-makers

Preparation of the trial balance

20.
value:
4 points

Which of the following statements is correct?

When a future expense is paid in advance, the payment is normallyrecorded in a liability account called Prepaid Expense

Promises of future payment are called accounts payable

Increases and decreases in cash are always recorded in the retainedearnings account

An account called Land is commonly used to record increases anddecreases in both the land and buildings owned by a business

Accrued liabilities include accounts receivable

21.
value:
4 points

The adjusted trial balance contains information pertainingto:

Asset accounts only

Balance sheet accounts only

Income statement accounts only

All general ledger accounts

Revenue accounts only

22.
value:
4 points

A classified balance sheet:

Measures a company's ability to pay its bills on time

Organizes assets and liabilities into important subgroups

Presents revenues, expenses and net income

Reports operating, investing and financing activities

Reports the effect of profit and dividends on retainedearnings

23.
value:
4 points

If accrued salaries were recorded on December 31 with a credit toSalaries Payable, the entry to record payment of these wages on thefollowing January 5 would include:

A debit to Cash and a credit to Salaries Payable

A debit to Cash and a credit to Prepaid Salaries

A debit to Salaries Payable and a credit to Cash

A debit to Salaries Payable and a credit to Salaries Expense

No entry would be necessary on January 5

24.
value:
4 points

If a company records prepayment of expenses in an asset account,the adjusting entry would:

Result in a debit to an expense and a credit to an assetaccount

Cause an adjustment to prior expense to be overstated and assets tobe understated

Cause an accrued liability account to exist

Result in a debit to a liability and a credit to an assetaccount

Decrease cash

tealfox592

AFM101 Lecture Notes - Lecture 4: The Ledger, Retained Earnings, Share Capital

AFM101 Lecture Notes - Lecture 3: Retained Earnings, Accounting Equation, Faithful Representation

AFM101 Lecture Notes - Lecture 4: The Ledger, Retained Earnings, Share Capital

AFM101 Lecture Notes - Lecture 5: Costco, Revenue Recognition, Matching Principle

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