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ACCOUNTG 221 Lecture 5: Accounting Lecture #5

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School
UMASS-Amherst
Department
Accounting
Course
ACCOUNTG 221
Professor
Catherine West Lowry

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Document Summary

If you see the words accrued, do you know what ur means for the transaction and finical statement: recognize a revenue or and expense but i do not have the cash. Always affects the balance sheet and the income statement- understand why. Must be done before you do financial statements. Common stock, account payable and receivable do not need an adjustment. On october 1st, 2015 twins paid ,200 for one year of the office rent. At december 31, 2015, the financial statements should report: Accrued salaries on 12/31/20xx the be paid on 1/2/20xx employees work mon- fri and earn. salaries payable and salary expense. In 2015, space inc. , billed its customers ,800 for services preformed. The also incurred ,00 of operating expenses on account and then paid in dividend. What are the total assets on the balance sheet: ,300. See moodle for the template on chapter 3, this may help with hw.

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Related Questions

AECO 3430 Lab Work #5 Understanding Morgan Cattle's FinancialStatements 1 (20pts) How does opening a $125,000 line of creditwith Farm Credit immediately affect the Balance Sheet? Specificallydemonstrate (with hypothetical numbers) how the relevant sectionsof the balance sheet demonstrate this. 2 (20pts) How can a businessfail while showing accrual profits? Which financial statement(s)are needed to demonstrate the answer? Specifically demonstrate(with hypothetical numbers) how the relevant sections demonstratethis. 3 (20pts) What does it mean for a business to show a decreasein Retained Earnings? Which financial statement(s) are needed todemonstrate the answer? Specifically demonstrate (with hypotheticalnumbers) how the relevant sections demonstrate this. 4 (20pts) Howdoes buying more assets immediately affect equity? Which financialstatement(s) are needed to demonstrate the answer? Specificallydemonstrate (with hypothetical numbers) how the relevant sectionsdemonstrate this. 5 (20pts) How does making a final payment of$45,000 with 5% interest on an equipment loan affect equity? Whichfinancial statement(s) are needed to demonstrate the answer?Specifically demonstrate (with hypothetical numbers) how therelevant sections demonstrate this. 6 (10pts) What did you learnfrom this lab exercise?

1.) If you were to take a $150,000 line of credit through FarmCredit your liabilities and cash would automatically increase onthe balance sheet. Hypothetically speaking if your cash account had$100,000 and your total assets were $1,000,000 prior to taking outthe line of credit, your total assets would increase to $1,150,000and your cash account would increase to $250,000. If you alreadyhad $100,000 in notes payable, after accepting the line of creditthat account would increase to $250,000. With these increases thebalance sheet should still balance out if done correctly.

2.) An income statement could show a net profit but still notreflect the actual financial soundness of a business. Incomestatements show revenue and expenses but do not show the amount ofcash on hand and/or other liquid assets. Making it where it couldnot accurately represent the businesses ability to pay a loan back.It could read a net income of $450,000 but the balance sheet couldread that there is only $100,000 in cash and $250,000 inliabilities. To get an adequate representation of the businessesactual financial standing multiple financial statements must beused.

3.) Retained earnings show the relation between the balancesheet and income statement, events that cause net loss in cash flowwill decrease retained earnings. This is usually the result ofoperating costs/expenses. A decrease in retained earnings representa decrease in owners equity on the balance sheet, this is a resultfrom an increase in expenses. These relates to problem 1 somewhat.If you were to take out a loan of $200,000 and your cash was at$300,000 it would increase to $500,000. Subsequently your notespayable would increase by $200,000 as well. The accounts wouldbalance out in the end the same because they increased the same.However the interest expense would increase causing net farmincrease to decrease. The retained earnings would decrease as aresult of notes payable increasing.

4.) If the assets were purchased using cash your current assetswould increase and cash account would decrease because it waspurchased immediately with cash. If a new truck was purchased for$65,000 dollars your cash would decrease by that amount and yourcurrent assets account would increase by the same amount. If theasset was purchased at market value it doesn’t affect your equity,because nothing was gained or loss in the acquisition of thetruck.

5.) A final payment of $35,000 with 5% interest would decreasecash on the balance sheet and also decrease liabilities. Theinterest payments would increase and the farms net income woulddecrease on income statement. Statement of owners equity would showan increase on retained earnings amount.

6.) On this lab exercise I learned to show with words the thingswe have learned in class. I learned how to put into words thechanges we see in financial statements and how they affect theoutlook on a business. To me it makes more sense to see it in aword explanation than it does to look at it on paper. I feel like Ihave a better understanding of what is going on when it is inwritten form as opposed to when it is on a spreadsheet surroundedby other numbers where I get lost in it all. When it is in words Ithink it is easier to take that and go back to the financialstatement and really see it. I think this is an important part offinancial management whether you are the accountant or the businessowner. It is important to be able to understand financial recordsand how they affect your business or the person you are workingfor. Either way it is necessary to know somewhat of both sides tounderstand it fully.

I just need these answers worded different.

Now that you have reviewed information about Hi-Fi Way, you are ready to begin the first step in the accounting cycle, recording transactions. On this page of the practice set, you are asked to record transactions that occurred during the first week of June into the company's journals and post the appropriate entries to the ledger accounts. The following transactions occurred throughout the first week of June:

Week 1
Date Transaction description
1 Issued Check No. 570 for $8,400 to pay Realty Bites for two month's worth of rent in advance.
1 Obtained a loan of $59,000 from ZNZ Bank at a simple interest rate of 6% per year. The first interest payment is due at the end of August 2017 and the principal of the loan is to be repaid on June 1, 2021.
3 Made payment of $764 to Integer Energy for 3 months of electricity up to and including May 31, Check No. 571.
4 Turbo Tech paid the full amount owing on their account.
4 Paid sales staff wages of $13,224 for the week up to and including yesterday, Check No. 572. Note that $6,637 of this payment relates to the wages expense incurred during the last week of May.
5 Paid the full amount owing to Big Telco, Check No. 573.
7 Issued Check No. 574 to Office Supplies Warehouse for the purchase of $301 worth of office supplies.

After completing this practice set page, you should know how to record basic transactions in the journals provided below and understand the posting process in the manual accounting system. Note that you will record the remaining June transactions in the following sections of this practice set.

Remember, one purpose of using special journals is to make the posting process more efficient by posting the total of most columns in the special journals after all of the transactions for the period have been recorded. However, some parts of a journal entry are still required to be posted on a daily basis. View the company's accounting policies and procedures for details of what is to be posted daily or monthly.

Instructions for week 1

1)Record all week 1 transactions in the relevant journals.

Note that special journals must be used where applicable. Any transaction that cannot be recorded in a special journal should be recorded in the general journal.

2)Post entries recorded in the journals to the appropriate ledger accounts according to the company's accounting policies and procedures.

Note that the relevant totals of the special journals will be posted to the general ledger accounts at the end of the month. You will enter this before you prepare the Bank Reconciliation Statement.

Remember to enter all answers to the nearest whole dollar. When calculating a discount, if a discount is not a whole number, round the discount to the nearest whole dollar. Then, to calculate the cash amount, subtract the discount from the original amount.

Additional instructions

Displaying selected accounting records:

To save space, not all accounting records (e.g. journals and ledgers) will be displayed on every page. However, on each page you can access all accounting records necessary to answer the questions on that page.

There are several tabs representing different views of the accounting records. The active tab by default is Show All, but you may also select to view just one particular accounting record by selecting the appropriate tab.

If you fill in any accounting records and change the view on the page by selecting a different tab, the information that you have entered will remain in that accounting record and be displayed whenever you can see that accounting record.

Before submitting your answers, we recommend that you click the Show All tab and check that all relevant accounting records have been completed. You are required to complete all relevant accounting records before pressing the Submit answers button. Once submitted, you will not be able to return to the page to re-enter or alter your answers.

Journals:

Each transaction recorded in a special journal must be entered in one line. In order to receive full points, you must not split up the relevant transaction into more than one line in the special journal.

For certain transactions in special journals, some accounting textbooks do not always require an account to be chosen under the column labeled Account. In this practice set you arerequired to select an account for each transaction in the special journals. Specifically, in all special journals, under the column labeled Account, you must select the correct account name for each transaction in order to receive full points. Note that for some transactions, this will mean that the account name selected will correspond to the heading of one of the columns in that special journal.

For each journal, in the Post Ref. column you will need to correctly type the account number of the account you are posting to. In particular, in special journals, some accounting textbooks do not always require a reference to be recorded in the Post Ref. column. In this practice set, in order to receive full points, every transaction entered in a special journal requires an entry in the Post Ref. column. Note that in the special journals, if the account name selected for a transaction corresponds to the heading of one of the columns in that special journal, the post ref is to be recorded as an X. This is because these transactions are not posted on a daily basis. In order to receive full points, you must record only the letter Xin the Post Ref. column for these transactions.

Note that in special journals, the Other Accounts column should not be used to record movements of inventory.

There may be entries in the general journal that require posting to both a control account and a subsidiary ledger. In these cases, after you have posted to both ledgers, you should enter the reference for both the general ledger account and the subsidiary ledger account in the Post Ref. column to indicate that you have posted to both accounts. For example, if the reference number for the control account is 110 and the reference number for the subsidiary ledger account is 110-1, you should type '110/110-1' into the Post Ref. column.

General journal entries do NOT require a description of the journal entries.

Ledgers:

When posting a transaction to a ledger account, under the Description column, please type the description of the transaction directly into the field. The exact wording does not matterfor grading purposes. For example, it does not matter in an electricity transaction if you type 'Paid for electricity' or 'Paid electricity bill'.

For each ledger, under the Ref. column, you need to select the correct journal from a list in the drop-down box provided in order to receive full points.

If the balance of a ledger account is zero you do not need to select a debit or credit from the drop-down box.

Each transaction posted to the subsidiary ledgers must be entered in one line. In order to receive full points, you must not split up the relevant transaction into more than one line in the subsidiary ledger.

Both journals and ledgers:

Most journals and ledgers will have blank rows left at the end of the page.

Some journals and ledgers may not require any entries.

When purchases and sales are recorded in special journals, changes in inventory must not be posted to the Merchandise Inventory account in the general ledger on a daily basis.