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[ACCOUNTG 221] - Final Exam Guide - Everything you need to know! (27 pages long)

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

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Document Summary

Under equity you have the permanent account common stock and retained earnings. Under retained earning are temporary accounts called- revenue, expenses and. Historical cost concept: requires that most assets be reported at the amount paid for them (their historical cost) regardless of increases in market value. Reliability concept- information is reliable if it can be independently verified. Appraised values are opinions and vary from appraiser to appraiser. Memorize page 22 in the book: matching concept. Expenses to the revenue the same year it happened: net loss. Expenses are higher than revenue: accounting period. Balance sheet: (cid:862)as of(cid:863) is differe(cid:374)t tha(cid:374) (cid:862)for the (cid:455)ear e(cid:374)di(cid:374)g(cid:863) Income statement statement of stockholder equity balance sheet. Revenue or expenses that are owed or incurred. Incurred means that it is owed to someone. Recognition- formally recording an economic item or event in the finical statement. Realization- collecting cash, generally from the sales of products or services.

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Related Questions

Module 14 Accounting for Corporations Problem 13-4A -

1. Instruction

Morrow Enterprises Inc. manufactures bathroom fixtures. Thestockholders’ equity accounts of Morrow Enterprises Inc., withbalances on January 1, 2016, are as follows:

Common Stock, $20 stated value(500,000 shares authorized, 375,000 shares issued) $7,500,000
Paid-In Capital in Excess of StatedValue—Common Stock 825,000
Retained Earnings 33,600,000
Treasury Stock (25,000 shares, atcost) 450,000

The following selected transactions occurred during theyear:

Jan. 22 Paid cash dividends of $0.08 pershare on the common stock. The dividend had been properly recordedwhen declared on December 1 of the preceding fiscal year for$28,000.
Apr. 10 Issued 75,000 shares of commonstock for $24 per share.
Jun. 6 Sold all of the treasury stock for$26 per share.
Jul. 5 Declared a 4% stock dividend oncommon stock, to be capitalized at the market price of the stock,which is $25 per share.
Aug. 15 Issued the certificates for thedividend declared on July 5.
Nov. 23 Purchased 30,000 shares of treasurystock for $19 per share.
Dec. 28 Declared a $0.10-per-share dividendon common stock.
31 Closed the credit balance of theincome summary account, $1,125,000.
31 Closed the two dividends accountsto Retained Earnings.
Required:
A. Enter the January 1 balances inT accounts for the stockholders’ equity accounts listed.
B. Journalize the entries torecord the transactions, and post to the eight selected accounts.No post ref is required in the journal. Refer to the Chart ofAccounts for exact wording of account titles.
C. Prepare a retained earningsstatement for the year ended December 31, 2016. Enter all amountsas positive numbers. The word “Less” is not required.*
D. Prepare the Stockholders’Equity section of the December 31, 2016, balance sheet. “Less” or“Deduct” will automatically appear if it is required. *

* Refer to the list of Amount Descriptions provided for theexact wording of the answer choices for text entries2.

2.CHART OF ACCOUNTSMorrow Enterprises Inc.General Ledger

ASSETS
110 Cash
120 Accounts Receivable
131 Notes Receivable
132 Interest Receivable
141 Merchandise Inventory
145 Office Supplies
151 Prepaid Insurance
181 Land
193 Equipment
194 AccumulatedDepreciation-Equipment
LIABILITIES
210 Accounts Payable
221 Notes Payable
226 Interest Payable
231 Cash Dividends Payable
236 Stock Dividends Distributable
241 Salaries Payable
261 Mortgage Note Payable
EQUITY
311 Common Stock
313 Paid-In Capital in Excess of StatedValue-Common Stock
315 Treasury Stock
321 Preferred Stock
322 Paid-In Capital in Excess ofPar-Preferred Stock
331 Paid-In Capital from Sale ofTreasury Stock
340 Retained Earnings
351 Cash Dividends
352 Stock Dividends
390 Income Summary
REVENUE
410 Sales
610 Interest Revenue
EXPENSES
510 Cost of Merchandise Sold
515 Credit Card Expense
520 Salaries Expense
531 Advertising Expense
532 Delivery Expense
533 Selling Expenses
534 Rent Expense
535 Insurance Expense
536 Office Supplies Expense
537 Organizational Expenses
562 Depreciation Expense-Equipment
590 Miscellaneous Expense
710

Interest Expense

3. AmountDescriptions
Cash balance, July 31, 2016
Common stock, $20 stated value;500,000 shares authorized, 375,000 issued
Common stock, $20 stated value;500,000 shares authorized, 438,000 issued
Common stock, $20 stated value;500,000 shares authorized, 468,000 issued
Decrease in retained earnings
Dividends
Excess of issue price over statedvalue
For the Year Ended December 31,2016
From sale of treasury stock
Increase in retained earnings
Net income
Net loss
Retained earnings
Retained earnings, December 31,2016
Retained earnings, January 1,2016
Total
Total paid-in capital
Total stockholders’ equity

X

4. T Accounts:

A. Enter the January 1 balances in T accounts for thestockholders’ equity accounts listed. Post the journal entries frompart B to the eight selected accounts. No post ref is required inthe journal.

Common Stock
Paid-In Capital inExcess of Stated Value-Common Stock
Retained Earnings
Treasury Stock
Paid-In Capital fromSale of Treasury Stock
Stock DividendsDistributable
Stock Dividends
Cash Dividends

X

5. Journal

B. Journalize the entries to record the transactions. No postref is required in the journal. Refer to the Chart of Accounts forexact wording of account titles.

PAGE 10

JOURNAL

DATE DESCRIPTION POST.REF. DEBIT CREDIT

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

6.Retained Earning Statements

C. Prepare a retained earnings statement for the year endedDecember 31, 2016. Enter all amounts as positive numbers. The word“Less” is not required. Refer to the list of Amount Descriptionsprovided for the exact wording of the answer choices for textentries.

Morrow Enterprises

Retained Earnings Statement

For the Year Ended December 31, 2016

1

2

3

4

5


7. Stockholders’ Equity

D. Prepare the Stockholders’ Equity section of the December 31,2016 balance sheet. “Less” or “Deduct” will automatically appear ifit is required. Refer to the list of Amount Descriptions providedfor the exact wording of the answer choices for text entries.

Stockholders’ Equity

1

Paid-in capital:

2

3

4

5

6

7

8
2.
A. Prepare a multiple-step income statement for the year endedDecember 31, 2016, concluding with earnings per share. In computingearnings per share, assume that the average number of common sharesoutstanding was 100,000 and preferred dividends were $100,000.(Round earnings per share to the nearest cent.)
• Refer to the Chart of Accounts for exact wording of accounttitles.
•

Refer to the Labels and Amount Descriptions for exact wording oftext entries.

B. Prepare a retained earnings statement for the year endedDecember 31, 2016.
• Refer to the Chart of Accounts for exact wording of accounttitles.
• Refer to the Labels and Amount Descriptions for exact wordingof text entries.
• You will need to enter the word “Less” or “Add” asnecessary.
C. Prepare a balance sheet in report form as of December 31, 2016.You are not required to present the details of Preferred and CommonStock (i.e., number of shares authorized, issued and outstanding).
• Refer to the Chart of Accounts for exact wording of accounttitles.
• Refer to the Labels and Amount Descriptions for exact wordingof text entries.
• “Less” , “Deduct”, “Add” and colons will appearautomatically.
• Available-for-sale investments should be reported as a singleasset on the balance sheet, regardless of how many accounts existin the ledger for such assets.
• Recall that current assets are to be reported in order ofliquidity. Available-for-sale investments are considered to be moreliquid that accounts receivable.
• Report fixed assets and paid-in capital accounts inaccount-number order.
• Omit the description of bonds and stocks (i.e., percentagerates, due date, number of shares, etc.)
• Enter all amounts as positive numbers, with one exception: Ifan unrealized loss has occurred, it must be reported as a negativeamount on the balance sheet.
Labels

In CengageNOW, a Label is a text entry that does not have anamount associated with it.
Current assets
Current liabilities
December 31, 2016
For the Year Ended December 31, 2016
Intangible assets
Investments
Less dividends
Long-term liabilities
Operating expenses
Other income and expenses
Paid-in capital
Add dividends
Property, plant, and equipment
Amount Descriptions

In CengageNOW, an Amount Description is a text entry other thanan Account that has an amount associated with it.
Available-for-sale investments
Decrease in retained earnings
Excess of issue price over par
Gross profit
Income before income tax
Income from operations
Increase in retained earnings
Miscellaneous selling expense
Net income
Net loss
Retained earnings, January 1, 2016
Retained earnings, December 31, 2016
Sales commissions
Sales salaries expense
Store supplies expense
Total administrative expenses
Total assets
Total (before treasury stock)
Total current assets
Total current liabilities
Total liabilities
Total liabilities and stockholders’ equity
Total long-term liabilities
Total investments
Total operating expenses
Total paid-in capital
Total property, plant, and equipment
Total selling expenses
Total stockholders’ equity
Unamortized premium

Unamortized discount

Income Statement data:
Advertising expense $ 150,000
Cost of merchandise sold 3,700,000
Delivery expense 30,000
Depreciation expense-office buildings and equipment 30,000
Depreciation expense-store buildings and equipment 100,000
Dividend revenue 4,500
Gain on sale of investments 4,980
Income from Pinkberry Co. investment 76,800
Income tax expense 140,500
Interest expense 21,000
Interest revenue 2,720
Miscellaneous administrative expense 7,500
Miscellaneous selling expense 14,000
Office rent expense 50,000
Office salaries expense 170,000
Office supplies expense 10,000
Sales 5,254,000
Sales commissions 185,000
Sales salaries expense 385,000
Store supplies expense 21,000

Retained earnings and balance sheet data:
Accounts payable $ 194,300
Accounts receivable 545,000
Accumulated depreciation—office buildings and equipment 1,580,000
Accumulated depreciation—store buildings and equipment 4,126,000
Allowance for doubtful accounts 8,450
Available-for-sale investments (at cost) 260,130
Bonds payable, 5%, due 2024 500,000
Cash 246,000
Common stock, $20 par
(400,000 shares authorized; 100,000 shares issued, 94,600outstanding) 2,000,000
Dividends:
Cash dividends for common stock 155,120
Cash dividends for preferred stock 100,000
Goodwill 500,000
Income tax payable 44,000
Interest receivable 1,125
Investment in Pinkberry Co. stock (equity method) 1,009,300
Investment in Dream Inc. bonds (long term) 90,000
Merchandise inventory (December 31, 2016),
at lower of cost (FIFO) or market 778,000
Office buildings and equipment 4,320,000
Paid-in capital from sale of treasury stock 13,000
Excess of issue price over par:
-Common 886,800
-Preferred 150,000
Preferred 5% stock, $80 par
(30,000 shares authorized; 20,000 shares issued) 1,600,000
Premium on bonds payable 19,000
Prepaid expenses 27,400
Retained earnings, January 1, 2016 9,319,725
Store buildings and equipment 12,560,000
Treasury stock
(5,400 shares of common stock at cost of $33 per share) 178,200
Unrealized gain (loss) on available-for-sale investments (6,500)
Valuation allowance for available-for-sale investments (6,500)

none

X

Chart of Accounts

CHART OF ACCOUNTS
Equinox Products Inc.
General Ledger
ASSETS
110 Cash
121 Accounts Receivable
122 Allowance for Doubtful Accounts
131 Merchandise Inventory
132 Interest Receivable
133 Prepaid Expenses
141 Investments-Solstice Corp.
142 Investment in Pinkberry Co. Stock
143 Investment in Dream Inc. Bonds
144 Valuation Allowance for Available-for-Sale Investments
181 Store Buildings and Equipment
182 Accumulated Depreciation-Store Buildings and Equipment
183 Office Buildings and Equipment
184 Accumulated Depreciation-Office Buildings and Equipment
191 Goodwill
LIABILITIES
211 Accounts Payable
221 Income Tax Payable
225 Cash Dividends Payable
251 Bonds Payable
252 Discount on Bonds Payable
253 Premium on Bonds Payable
EQUITY
311 Preferred Stock
312 Paid-in Capital in Excess of Par-Preferred Stock
321 Common Stock
322 Paid-in Capital in Excess of Par-Common Stock
331 Retained Earnings
341 Cash Dividends
351 Treasury Stock
352 Paid-in Capital from Sale of Treasury Stock
361 Unrealized Gain (Loss) on Available-for-Sale Investments
REVENUE
410 Sales
611 Dividend Revenue
621 Interest Revenue
631 Income from Pinkberry Co.
641 Gain on Sale of Investments
EXPENSES
511 Cost of Merchandise Sold
512 Bad Debt Expense
520 Sales Salaries Expense
521 Sales Commissions
522 Office Salaries Expense
531 Advertising Expense
532 Delivery Expense
537 Store Supplies Expense
538 Office Supplies Expense
539 Office Rent Expense
541 Income Tax Expense
551 Depreciation Expense-Store Equipment
552 Depreciation Expense-Office Equipment
591 Miscellaneous Selling Expense
592 Miscellaneous Administrative Expense
710 Interest Expense
731 Loss on Sale of Investments

none

X

Labels and Amount Descriptions

Labels

In CengageNOW, a Label is a text entry that does not have anamount associated with it.
Current assets
Current liabilities
December 31, 2016
For the Year Ended December 31, 2016
Intangible assets
Investments
Less dividends
Long-term liabilities
Operating expenses
Other income and expenses
Paid-in capital
Add dividends
Property, plant, and equipment
Amount Descriptions

In CengageNOW, an Amount Description is a text entry other thanan Account that has an amount associated with it.
Available-for-sale investments
Decrease in retained earnings
Excess of issue price over par
Gross profit
Income before income tax
Income from operations
Increase in retained earnings
Miscellaneous selling expense
Net income
Net loss
Retained earnings, January 1, 2016
Retained earnings, December 31, 2016
Sales commissions
Sales salaries expense
Store supplies expense
Total administrative expenses
Total assets
Total (before treasury stock)
Total current assets
Total current liabilities
Total liabilities
Total liabilities and stockholders’ equity
Total long-term liabilities
Total investments
Total operating expenses
Total paid-in capital
Total property, plant, and equipment
Total selling expenses
Total stockholders’ equity
Unamortized premium
Unamortized discount
Silver ComputerCorporation
Use the financial statementsbelow to complete a financial ratio analysis.
The ratios should becalculated on the ratio worksheet. Make sure to reference
amounts from the statementsonto your ratios. Be sure that your answer
uses the correct format forthat ratio: times, percentage, days, dollar amount.
RatioFormat:
Show with your answer whetherthe ratio is times, perentage, or dollar amount.
For example:
o Current ratio is times, so it would be shown as anumber compared to one.
(ie. 2.08 to 1 or 2.08:1 )
o Working capital is a dollar amount, so it would beshown as currency.
(ie. $11, 190 )
o Net margin is a percentage, so it would be shownwith a % sign.
(ie. 12.7% )
Take a look at the ratiodescriptions in the textbook to determine if the ratio is
times, percentage, or dollaramount.
Decimal Places onRatios
The following are typicallyaccepted rules for decimal places on ratios:
o Ratios: two decimal places
o Dollars: two decimal places (the book showed threedecimal places for
earnings per share but we don't need to do that forthis class)
o Days: one decimal place
o Percentages: one decimal place (the textbook showedpercentages to two
decimal places but I think that is overkill)
o Price-Earnings ratio: two decimal places
o Times: two decimal places
Silver ComputerCorporation
IncomeStatement
For the Year EndedDecember 31, 2016
Sales $ 47,240
Cost of goods sold 18,920
Gross profit 28,320
Operating expenses
Utilities $ 6,430
Wages 8,310
Rent 1,730 16,470
Operating income 11,850
Other revenue and expense
Interest revenue $ 940
Interest expense 1,190 2,130
Income before incometaxes 9,720
Income taxes 3,730
Net income $ 5,990
Silver ComputerCorporation
Comparative BalanceSheets
As of December 31,2016 and 2015
Change
2016 2015 Amount Percent
Assets
Current assets
Cash $ 3,290 $ 6,230 $ (2,940) -47.2%
Marketable securities 1,120 1,920 (800) -41.7%
Accounts receivable 3,980 6,790 (2,810) -41.4%
Merchandise inventory 6,880 5,110 1,770 34.6%
Supplies 1,270 2,130 (860) -40.4%
Total current assets 16,540 22,180 (5,640) -25.4%
Plant and equipment
Equipment 10,560 6,450 4,110 63.7%
Truck 26,310 18,310 8,000 43.7%
Total plant and equipment 36,870 24,760 12,110 48.9%
Total assets $ 53,410 $ 46,940 $ 6,470 13.8%
Liabilities
Current liabilities
Accounts payable $ 6,940 $ 4,390 $ 2,550 58.1%
Wages payable 990 1,510 (520) -34.4%
Accrued liabilities 2,420 1,920 500 26.0%
Total current liabilities 10,350 7,820 2,530 32.4%
Long-term liabilities
Long-term notes payable 9,900 6,300 3,600 57.1%
Total liabilities 20,250 14,120 6,130 43.4%
Stockholder's Equity
Common stock 8,460 6,610 1,850 28.0%
Retained earnings 29,700 26,210 3,490 13.3%
Total stockholder'sequity 38,160 32,820 5,340 16.3%
Total liabilities &equity $ 58,410 $ 46,940 $ 11,470 24.4%
Notes for preparationof financial ratios:
o All of Silver Corporations sales were onaccount.
o 1,692 shares of common stock were outstanding atthe end of 2016.
o $2.50 of dividends per share were paid in2016.
o The market price per share of Silver stock was$34.00 for all of 2016.
Answer this question
SilverComputer Corporation
Liquidity and SolvencyFinancial Ratios
LiquidityRatios
Note - Working Capitalshown as an example to follow on the remainingratios.
Working Capital 16,540
10,350 1.6:1
Current ratio
Quick ratio
* Quick assets are cash,marketable securities, and accounts receivable
Accounts receivableturnover
Average days to collectreceivables
Inventory turnover
Average days to sellinventory
Operating cycle
Solvency Ratios(Long-term credit risk)
Debt ratio
Interest coverage ratio