ACCTG 201 Study Guide - Midterm Guide: Accounts Payable, Retained Earnings, Net Income

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ivoryclam358

27 Nov 2016

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Gain on sale of asset - gain if we sell asset for more than book value. Loss if sell for less than book value. Closing entries: transer the balances of all temporary accounts (tred) (revenues expenses and divideneds) to balance of retained earnings accoutns. All revenue acounts have credit balance- debit each and credit retained earnings. All expenses have debit balance- credit these and debit retained earnings. Lifo -if inventory costs are falling, produces higher net income and higher total assets. Better matching of current revenues with current expenses of inventory. Amount reported for cost of goods sold is based on recent inventory prices. If used for tax purposes, it must also be used for financial reporting. Fifo-if inventory costs are rising, produces higher net income and higher total assets. Amount reported for inventory is most current. Allowance method- companies are required to estimate future uncollectible accounts and record those estimates in the current year.

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4. Fidelityâs investment team wants to re-evaluate their international stock portfolio offered to investors. They are considering adding Highfall AG, a listed Swiss manufacturing firm, to their international portfolio.

Notes to consider for reconciliation:

â¢ Highfall AG uses the FIFO inventory valuation system, which makes COGS lower and inventory valued higher, at a value of $78,000, than it would be under the US GAAP-preferred LIFO system.

â¢ Using IFRS, Highfall AG capitalizes $46,000 of development expenses as an asset on their balance sheet (remember: under US GAAP such costs would be included as operating expenses).

â¢ Using IFRS, Highfall AG reversed a prior goodwill impairment by $30,000, recognizing a gain on their income statement and an increase in the asset price. Such reversals are not allowed under US GAAP.

â¢ There were no prior period adjustments.

Required: Given the information above, please prepare a partial reconciliation for Highfall AGâs financial statements from IFRS to US GAAP.

Income Statement:	Local GAAP	Debit	Credit	US GAAP
Sales	1,300,000
COGS	820,000
Operating Exp.	52,000
Reversal of GW Impairment	30,000
Net Income	458,000
Statement of RE:
Beg. Retained Earnings	400,000
+ Net Income	458,000
End. Retained Earnings	858,000
Balance Sheet:
Inventory (FIFO)	800,000
Goodwill	200,000
R&D	46,000
Total Assets	1,046,000
Total Liability	350,000
Retained Earnings	858,000

violetalligator408

The following information pertains to Walrus Inc.

Cash

$60,000

Accounts receivable

170,000

Inventory

100,000

Plant assets (net)

582,000

Total assets

$912,000

Accounts payable

$110,000

Accrued taxes and expenses payable

42,000

Long-term debt

120,000

Common stock ($10 par)

260,000

Paid-in capital in excess of par

50,000

Retained earnings

330,000

Total equities

$912,000

Net sales (all on credit)

$2,000,000

Cost of goods sold

1,400,000

Net income

120,000

Required:

Compute the following:

(ignore Avg for balance sheet accounts)

(a)	Current ratio
(b)	Inventory turnover
(c)	Receivables turnover
(d)	Book value per share
(e)	Earnings per share
(f)	Debt to total assets
(g)	Profit margin on sales
(h)	Return on common stock equity

magentaferret864

Use the following financial statements and additional information.

SANCHEZ INC. Comparative Balance Sheets June 30, 2017 and 2016
	2017			2016
Assets
Cash	$	101,300		$	48,900
Accounts receivable, net		68,000			53,000
Inventory		69,000			96,000
Prepaid expenses		5,700			7,100
Total current assets		244,000			205,000
Equipment		179,000			166,000
Accum. depreciationâEquipment		(45,000	)		(15,000	)
Total assets	$	378,000		$	356,000
Liabilities and Equity
Accounts payable	$	33,000		$	40,000
Wages payable		7,000			17,000
Income taxes payable		3,600			4,000
Total current liabilities		43,600			61,000
Notes payable (long term)		43,000			85,000
Total liabilities		86,600			146,000
Equity
Common stock, $5 par value		250,000			180,000
Retained earnings		41,400			30,000
Total liabilities and equity	$	378,000		$	356,000

SANCHEZ INC. Income Statement For Year Ended June 30, 2017
Sales			$	940,000
Cost of goods sold				575,000
Gross profit				365,000
Operating expenses
Depreciation expense	$	77,000
Other expenses		93,000
Total operating expenses				170,000
				195,000
Other gains (losses)
Gain on sale of equipment				5,200
Income before taxes				200,200
Income taxes expense				61,280
Net income			$	138,920

Additional Information

a. A $43,000 note payable is retired at its $43,000 carrying (book) value in exchange for cash.

b. The only changes affecting retained earnings are net income and cash dividends paid.

c. New equipment is acquired for $75,000 cash.

d. Received cash for the sale of equipment that had cost $62,000, yielding a $5,200 gain.

e. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.

f. All purchases and sales of inventory are on credit.

Make a Journal entry worksheet

1. Reconstruct the journal entry for cash receipts from customers, incorporating the change in the related balance sheet account(s), if any.

2. Reconstruct the journal entry for cash payments for inventory, incorporating the change in the related balance sheet account(s), if any.

3. Reconstruct the journal entry for depreciation expense, incorporating the change in the related balance sheet account(s), if any.

4. Reconstruct the journal entry for cash paid for operating expenses, incorporating the change in the related balance sheet account(s), if any.

5. Reconstruct the journal entry for the sale of equipment at a gain, incorporating the change in the related balance sheet account(s), if any.

6. Reconstruct the journal entry for income taxes expense, incorporating the change in the related balance sheet account(s), if any.

7. Reconstruct the entry to record the retirement of the $43,000 note payable at its $43,000 carrying (book) value in exchange for cash.

8. Reconstruct the entry for the purchase of new equipment.

9. Reconstruct the entry for the issuance of common stock.

10. Close all revenue and gain accounts to income summary.

11. Close all expense accounts to income summary.

12. Close Income Summary to Retained Earnings.

13. Reconstruct the journal entry for cash dividends paid.

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ACCTG 201 Study Guide - Midterm Guide: Accounts Payable, Retained Earnings, Net Income

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