ACCT 201 Lecture Notes - Lecture 2: Accounts Payable, Accounting Equation, Retained Earnings

59 views8 pages

goldjellyfish848

19 Jun 2018

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

ACCT 201 – Lecture 2 – Chapters 1-2

Assets = Resources

Liabilities and Stockholder’s Equity = Claims to resources

Cash is not the same as revenue, cash is an asset

oRevenue can be anything that is paid to a company to compensate for services

done (i.e. Cash, chickens, other services)

oGetting paid for work is revenue

Practice problem

oLets say that a company does work and gets paid $7 at a later time…

Since the company is not getting paid until a later date, the term used

under assets would be “Account Receivable”, meaning that some other

entity owes the company money. Stockholder’s equity would go up by 7

“Service Revenue” because the Accounts Receivable is claimable by

Stockholders

Expenses – Decrease in Stockholder’s equity when you use to do work

oLets say that a company uses $6 of electricity and pays for it right away

This is called an expense, paying other companies for other services

This can be illustrated by:

oSince the company is paying $6 cash to pay for the electricity, the assets go down

because cash is an asset, and the stockholder’s equity goes down because of

what is called an expense

find more resources at oneclass.com

Unlock document

This preview shows pages 1-3 of the document.
Unlock all 8 pages and 3 million more documents.

Already have an account? Log in

oNow lets say that the company pays $6 to use electricity, but pays later after the

electricity has already been used.

Since the company has not paid the amount owed to the electricity

company, assets has not gone down because no asset was used. Instead,

Our company is given a liability, which we call accounts payable, that

means that we owe the electricity some money. Notice that the Accounts

Payable and Electricity Expense cancel each other out so that both sides

of the equation are equal.

Stockholder’s Equity expanded

oStock holders equity consists of 4 things:

Common Stock, which makes SE go up (+)

Revenue, which makes SE go up (+)

Expenses, which makes SE go down (-)

Dividends, which makes SE go down (-)

oStock holder’s equity can be categorized by Common Stock (Common Stock), and

retained earnings (Revenue, Expenses, Dividends)

Expanded Accounting Equation

oSimple accounting equation:

Assets = Liabilities + Stockholder’s Equity

oExpanded Accounting Equation:

Assets = Liabilities + Common Stock + Revenue – Expenses – Dividends

The accounting equation just expands on what is included within

Stockholder’s equity

oAs Stated earlier, Retained earnings contains Revenue, Expenses, and Dividends

oNet Income contains Revenue – Expenses, which will either be for a profit or loss

Financial Statements

find more resources at oneclass.com

Unlock document

This preview shows pages 1-3 of the document.
Unlock all 8 pages and 3 million more documents.

Already have an account? Log in

oA financial statement includes 4 Items:

Sections

Accounts

Underlines

1 Underline under section totals

2 underlines under final totals

$ signs on the very top numbers and on the final total numbers

Types of Financial Statements

oIncome Statement

Consists of Revenues and Expenses

oStatement of Stockholder’s Equity

Consists of Common Stock, Dividends, Revenue, and Expenses (Revenue,

and Expenses will be labeled as net income or net loss in this table

depending on the income statement)

find more resources at oneclass.com

Unlock document

This preview shows pages 1-3 of the document.
Unlock all 8 pages and 3 million more documents.

Already have an account? Log in

Document Summary

Acct 201 lecture 2 chapters 1-2. Liabilities and stockholder"s equity = claims to resources. Cash is not the same as revenue, cash is an asset: revenue can be anything that is paid to a company to compensate for services done (i. e. cash, chickens, other services, getting paid for work is revenue. Practice problem: lets say that a company does work and gets paid at a later time . Since the company is not getting paid until a later date, the term used under assets would be account receivable , meaning that some other entity owes the company money. Service revenue because the accounts receivable is claimable by. Expenses decrease in stockholder"s equity when you use to do work: lets say that a company uses of electricity and pays for it right away. This is called an expense, paying other companies for other services.

Related Questions

QUESTION 6

Which of the following statements is not true regarding prepaidexpenses?

		Prepaid expenses represent assets.
		Prepaid expenses are shown in a special section of the incomestatement.
		Prepaid expenses become expenses only as goods or services areused up.
		Prepaid expenses appear in the balance sheet.

4 points

QUESTION 7

The balance of an unearned revenue account:

		Appears in the balance sheet as a component of stockholders'equity.
		Appears in the income statement along with other revenueaccounts.
		Appears in a separate section of the income statement forrevenue not yet earned.
		Appears in the liability section of the balance sheet.

4 points

QUESTION 8

As of January 31, Hudson Corporation owes $600 to U-Rent-It forequipment used during January. If no adjustment is made for thisitem at January 31, how will Hudson's financial statements beaffected?

		Cash will be overstated at January 31.
		Net income for January will be overstated.
		Stockholders' equity will be understated.
		The financial statements will be accurate since the $600 doesnot have to be paid yet.

4 points

QUESTION 9

The accountant for the Linville Company forgot to make anadjusting entry to record revenue earned but not yet billed tocustomers. The effect of this error is:

		An overstatement of assets.
		An overstatement of stockholders' equity.
		Understatement of both assets and stockholders' equity
		Overstatement of both assets and stockholders' equity.

4 points

QUESTION 10

An adjusting entry involving recognition of unrecorded revenueis necessary at the end of March in which of the followingsituations?

		Financial Consultants received payment in February forconsulting services rendered in March.
		Financial Consultants began working for a client on March 15;bills will be sent monthly beginning April 15.
		Financial Consultants made payment in January for office rentfor the first three months of the year.
		On March 31, a major customer paid his bill for a consulting jobcompleted in February.

4 points

QUESTION 11

Which of the following entries causes an immediate decrease inassets and in stockholders' equity?

		The entry to record depreciation expense.
		The entry to record revenue earned but not yet received.
		The entry to record the earned portion of rent received inadvance.
		The entry to record accrued wages payable.

4 points

QUESTION 12

The CPA firm auditing Greer Company found that net income hadbeen overstated. Which of the following errors could be thecause?

		Failure to record depreciation expense for the period.
		No entry made to record purchase of land for cash on the lastday of the year.
		Failure to record payment of an account payable on the last dayof the year.
		Failure to make an adjusting entry to record revenue which hadbeen earned but not yet billed to customers.

violetshark689

XYZ Company - Balance Sheet As of12/31/2014
Assets
Current Assets
Cash		$ 50,000
Accounts Receivable		$ 35,000
Total Current Assets				$85,000
Long-term Investments
Investments in Hokie Co. - AFS				$25,000
Property Plant and Equipment
Printing Equipment		$100,000
less Accumulated Depreciation		$ (40,000)		$60,000
Building		$ 110,000
less Accumulated Depreciation		$ (3,667)		$106,333
Intangible Assets
Trademark				$10,000
Total Assets					$ 286,333
Liabilities and Stockholdersâ Equity
Current Liabilities
Accounts Payable	$115,000
Unearned Revenue	$45,000
Total Current Liabilities		$160,000
Total Liabilities			$ 160,000
Stockholder's Equity
Capital Stock:
Common Stock ($1 par value 10,000 shares issued)	$10,000
Additional Paid in Capital	$50,000
Total Paid in Capital		$ 60,000
Retained Earnings		$ 66,333
Total Stockholder's Equity			$126,333
Total Liabilities and Stockholder's Equity						$286,333

The Following Events Happened in 2015
1. On Jan. 1 XYZ Co. issued1000 shares of 6% $10 par preferred stock for $20,000.
2. XYZ Co. had $150,000 insales ($100,000 cash and $50,000 on account).
3. On Jan. 1 XYZ. paid$20,000 to rent a building for the next 12 months
4. XYZ purchased suppliesfor $10,000 on account
5. XYZ Co. collected $35,000in cash for settlement of outstanding accounts receivable
6. XYZ Co. provided servicesto earn all unearned revenue in 2015.
7. At the end of the yearonly $2000 of supplies remained
8. On 12-31 XYZ Companydeclared and paid preferred dividends
Other Information:
The Building has a useful life of 10 years and a salvage valueof 10,000. The company uses straight linedepreciation.
The Printing Equipment has a useful life of 10 years and asalvage value of 50,000. The company uses straight linedepreciation.
XYZ Co's Income Tax Rate is 30 percent and taxes will not bepaid until 2016.

1:What would XYZ Company report for revenue onthe 2015 Income Statement?

2:What would XYZ Company report for total operatingexpenses on the 2015 Income Statement?

3:What would XYZ Company report for Net Incomeon the 2015 Income Statement?

4: What would XYZ Company report for total currentassets on the 2015 Balance Sheet?

5: What would XYZ Company report for totalliabilities on the 2015 Balance Sheet?

6: What would XYZ Company report for additional paid incapital for preferred stock on the 2015 Balance Sheet?

7: What would XYZ Company report for total stockholders'equity on the 2015 Balance Sheet?

8: After closing entries, howdoes Event #2 affect stockholders' equity?

Event #2: XYZ Co. had $150,000 in sales ($100,000 cash and$50,000 on account).

9: After closing, how does Event #6 affect the BalanceSheet?

Event #6: Blazer Co. provided services to earn allunearned revenue in 2015.

10: After closing entries, how doesEvent #7 affect the Balance Sheet?

Event #7: At the end of the year only $2000 of suppliesremained

harlequinlion173

The realizationprinciple indicates that revenue usually should be recorded inthe accounting records:

Question 1 options:

A)	when cash is collected from customers

B)	when goods are sold or services are rendered to customers

C)	at the end of the accounting period

D)	only when the revenue can be matched by an equal dollar amountof expenses

E)	both (b) and (d) are correct

Which of the following account(s) would be part ofworking capital?

Question 2 options:

A)	accounts payable

land

supplies

D)	retained earnings

E)	cost of goods sold

F)	two of the above accounts are part of working capital

G)	three of the above accounts are part of working capital

H)	four of the above accounts are part of working capital

I)	all of the above accounts are part of working capital

On May 17, Buckeye Corporation performed $800 ofservices for ABC Company, a customer. ABC paid for one-half ofthe
bill on May 17 and agreed to pay the remainder within 30 days. OnJune 9, ABC paid the remaining amount owed. Which
of the following journal entries would ABC Company make onJune 9?

Question 3 options:

A)	debit accounts receivable $400 and credit cash $400

B)	debit cash $400 and credit service revenue $400

C)	debit accounts payable $400 and credit service revenue$400

D)	debit cash $400 and credit accounts payable $400

E)	debit cash $400 and credit accounts receivable $400

F)	debit accounts payable $400 and credit cash $400

The following information is available for XYZ Company: January 1, 2003 December 31, 2003Assets $500,000 $700,000Liabilities $300,000 $400,000 Equity $200,000 $300,000
XYZ Company reported a net income of $50,000 during 2003.
XYZ Company's return on equity (ROE) for 2003 was equal to:

Fletcher, Inc. reported an ending notes payablebalance of $57,000. An examination of the notes payablet-account
revealed debits of $25,000 and credits of $39,000 during the year.The beginning notes payable balance for Fletcher,
Inc. was equal to:

Question 5 options:

A)	$71,000 credit

B)	$71,000 debit

C)	$43,000 debit

D)	$43,000 credit

E)	none of the above are correct

Indicate the effect each of the following transactions has onthe accounting equation (i.e., assets, liabilities, and equity).Enter the number corresponding to your answer in the box provided.Answer choices may be used once, more than once, or not atall.

Question 6 options:

	ABC Company performed $2,000 of delivery servicesfor a customer who agreed to pay next month
	ABC Company paid $2,000 cash to the bank; $1,800of this amount was the repayment of a bank loan and the other $200paid was interest
	ABC Company made the adjusting entry to accrueincome taxes owed but not yet paid
	ABC Company purchased equipment for $3,000cash

1.	assets increase; liabilities increase; equitydecrease
2.	assets decrease; liabilities decrease; equity noeffect
3.	assets increase; liabilities no effect; equityincrease
4.	assets no effect; liabilities no effect; equity noeffect
5.	assets no effect; liabilities increase; equitydecrease
6.	assets increase; liabilities increase; equityincrease
7.	assets increase; liabilities increase; equity noeffect
8.	assets no effect; liabilities decrease; equityincrease
9.	assets decrease; liabilities no effect; equitydecrease
10.	assets decrease; liabilities decrease; equitydecrease

tanmosquito645

ACCT 201 Lecture Notes - Lecture 2: Accounts Payable, Accounting Equation, Retained Earnings

Document Summary

Get access

Related Documents

ACCT 201 Lecture Notes - Lecture 3: Common Stock

ACCT 201 Lecture Notes - Lecture 1: Accounting Equation, Retained Earnings, Accounts Payable

ACCT 201 Lecture Notes - Lecture 8: List Of The Shield Episodes, Cash Flow, Net Income

Related Questions