AFM101 Chapter Notes - Chapter 3: Accrual, Asset

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lemonbeetle804

15 Jun 2018

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM101

Professor

Thomas Manning

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Chapter 3

Operating (Cash to Cash) Cycle: The time it takes for a company to pay

cash to suppliers, sell good and services to customers, and collect cash

from customers.

The Periodicity Assumption: Means that the long life of a company can

be reported in shorter periods.

Revenues: Increases in assets or settlements of liabilities from ongoing

operations.

Expenses: Decreases in assets or increases in liabilities to generate

revenues during the period.

Gross Profit: Net sales less cost of sales.

Earnings From Operations: Equals net sales less cost of sales and

other operating expenses.

Non-operating Expenses and Income: Includes investment income,

financing costs, or gains or losses on disposal of assets.

Gains: Increases in assets or decreases in liabilities from peripheral

transactions.

Losses: Decreases in assets or increases in liabilities from peripheral

transactions.

Earnings Before Income Tax: Equals revenues minus all expenses

except income tax expense.

Discontinued Operations: Are presented separately from the results of

continuing operations.

Cash Basis Accounting: Records revenues when cash is received and

expenses when cash is paid.

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Document Summary

Operating (cash to cash) cycle: the time it takes for a company to pay cash to suppliers, sell good and services to customers, and collect cash from customers. The periodicity assumption: means that the long life of a company can be reported in shorter periods. Revenues: increases in assets or settlements of liabilities from ongoing operations. Expenses: decreases in assets or increases in liabilities to generate revenues during the period. Gross profit: net sales less cost of sales. Earnings from operations: equals net sales less cost of sales and other operating expenses. Non-operating expenses and income: includes investment income, financing costs, or gains or losses on disposal of assets. Gains: increases in assets or decreases in liabilities from peripheral transactions. Losses: decreases in assets or increases in liabilities from peripheral transactions. Earnings before income tax: equals revenues minus all expenses except income tax expense. Discontinued operations: are presented separately from the results of continuing operations.

Related Questions

Statement of Cash Flows
Angela's Cleaning Consortium			Seymour-Johnson, Inc.
Comparative Balance Sheet			Income Statement
December 31, 2020 and 2019			For the Year Ended December 31, 2020
	2020	2019	Net sales	$ 386,000
ASSETS			Cost of goods sold	(212,000)
Current assets			Gross profit	174,000
Cash	$ 66,500	$ 62,000	Operating expenses
Accounts receivable	95,000	113,000	Salaries and wages expense	(66,000)
Merchandise inventory	172,000	165,000	Depreciation expense	(25,000)
Total current assets	333,500	340,000	Other operating expenses	(28,000)
Long-term investments			Income from operations	55,000
Investment in Walking Dead Co.	-	50,000	Other revenues and gains
Property, buildings, and equipment	507,000	304,000	Interest revenue	15,000
Less: Accumulated depreciation	(59,500)	(42,000)	Dividend revenue	9,700
Total assets	$ 781,000	$ 652,000	Gain on disposal of plant assets	12,000
Liabilities and Stockholders' Equity			Other expenses and losses
Current liabilities			Interest expense	(15,000)
Accounts payable	$ 144,000	$ 175,000	Income before income taxes	76,700
Accrued liabilities	17,000	47,000	Income tax expense	(14,000)
Total current assets	161,000	222,000	Net Income	$ 62,700
Long-term Liabilities
Notes payable, long-term	160,000	90,000
Totalliabilities	321,000	312,000
Stockholders' equity
Common stock	370,000	250,000
Retained earnings	140,000	90,000
Treasury stock	(50,000)	-
TotalStockholdersâ Equity	460,000	340,000
Total Liabilities & Stockholders' Equity	$ 781,000	$ 652,000

Additional Information:
A. Sold plant assets with a cost of$75,000 and accumulated depreciation of $7,500,
yielding again of disposal of plant assets of $12,000.
B. Purchased plant assets by payingcash.
C. Issued Notes Payable for Cash.
D. Sold investment in Walking Dead Coat cost (zero gain/loss).
E. Issued Common Stock for Cash.
F. Purchased Treasury Stock for Cash.

Requirements:
Prepare, in good form, a Statement of Cash Flowsusing the indirect method.

beigesardine151

Additional Information:
	A. Sold plant assets with a cost of$75,000 and accumulated depreciation of $7,500,
	yielding again of disposal of plant assets of $12,000.
	B. Purchased plant assets by payingcash.
	C. Issued Notes Payable for Cash.
	D. Sold investment in Walking Dead Coat cost (zero gain/loss).
	E. Issued Common Stock for Cash.
	F. Purchased Treasury Stock for Cash.

	Requirements:
	Prepare, in good form, a Statement of Cash Flowsusing the indirect method.

Statement of Cash Flows
Angela's Cleaning Consortium			Seymour-Johnson, Inc.
Comparative Balance Sheet			Income Statement
December 31, 2020 and 2019			For the Year Ended December 31, 2020
	2020	2019	Net sales	$ 386,000
ASSETS			Cost of goods sold	(212,000)
Current assets			Gross profit	174,000
Cash	$ 66,500	$ 62,000	Operating expenses
Accounts receivable	95,000	113,000	Salaries and wages expense	(66,000)
Merchandise inventory	172,000	165,000	Depreciation expense	(25,000)
Total current assets	333,500	340,000	Other operating expenses	(28,000)
Long-term investments			Income from operations	55,000
Investment in Walking Dead Co.	-	50,000	Other revenues and gains
Property, buildings, and equipment	507,000	304,000	Interest revenue	15,000
Less: Accumulated depreciation	(59,500)	(42,000)	Dividend revenue	9,700
Total assets	$ 781,000	$ 652,000	Gain on disposal of plant assets	12,000
Liabilities and Stockholders' Equity			Other expenses and losses
Current liabilities			Interest expense	(15,000)
Accounts payable	$ 144,000	$ 175,000	Income before income taxes	76,700
Accrued liabilities	17,000	47,000	Income tax expense	(14,000)
Total current assets	161,000	222,000	Net Income	$ 62,700
Long-term Liabilities
Notes payable, long-term	160,000	90,000
Totalliabilities	321,000	312,000
Stockholders' equity
Common stock	370,000	250,000
Retained earnings	140,000	90,000
Treasury stock	(50,000)	-
TotalStockholdersâ Equity	460,000	340,000
Total Liabilities & Stockholders' Equity	$ 781,000	$ 652,000