AC 310 EXAM 1 DATEMA

T/F: the primary focus of financial accounting is to provide information useful for investors and credits

true

record a sale on account: we sold a product for $10,000. the cost for us was $8,000.

Accounts Receivable 10,000

Sales Revenue. 10,0000

Cost of Goods Sold. 8,000

Inventory. 8,000

Accruing Interest: we accrue interest, but have NOT paid for it yet. (PxRxT/12)

Interest Expense

Interest Payable

If we have loaned somebody money...

Interest Receivable

Interest Revenue

Record Depreciation Expense: (Cost-Residual Value)/Estimated Useful Life

Depreciation Expense

Accumulated Depreciation

Accounts that get closed to Retained Earnings

Revenues, Expenses, & Dividends (all of these accs are temporary)

Permanent accounts:

Assets, Liabilities, Common Stock, Retained Earnings

If you have trouble remembering whats permanent and whats temporary, think about the .... .......

cash account

Whatever the balance is at the end of one month...

becomes the beginning balance of the next month.

Account Analysis: At the beginning of the year, Jill had $5,000 in Salaries Payable. During the year, she incurred $50,000 of Salaries Expense and the ending balance in Salaries Payable is $8,000. How much cash did she pay for salaries during the year?

5,000 + 50,000 - 8,000 = 47,000

Step 1: What goes into Gross Profit?

Sales Revenue - COGS

Step 2: Operating Expenses: Gross Profit - Operating Expenses=

Operating Income

Step 3: Non-Operating Items:

Operating Income - Interest Revenue, Interest Expense, Gains, Losses

Step 4: Income From Continuing Operations before Tax...

calculate tax, Income From Continuing Operations after Tax, Discontinued Operations, Net Income

Discontinued Operations: If we sold it...

You include operating income or loss & the gain/loss on sale of the assets

Discontinued Operations: If its still for sale....

You include operating income or loss & any loss on sale of the assets (ignore gains)

When AOCI (Accumulated Other Comprehensive Income) decreases...

OCI (Other Comprehensive Income) increases

Proper Presentation for EPS: T/F: EPS has to be presented for Income From Continuing Operations, Discontinued Operations, and Net Income

True

4 Present Components of OCI:

the deferred gains or losses from derivatives, the foreign currency translation adjustments, the unrealized gains on available for sale securities, & the gains or losses on pension benefits. (you can show each of the items @ the full amount and then show the tax effect [just one tax line] OR you can show each of the items net of tax.

How does OCI impact Stockholders Equity?

Comprehensive income increases OR decreases accumulated other comprehensive income.

Accumulated Other Comprehensive Income is...

Retained Earnings for your OCI items

So every year, Other Comprehensive Income gets closed out to...

Accumulated Comprehensive Income (just like Net Income gets closed out to Retained Earnings).

Current Assets:

Cash, AR, inventory (Prepaid Expense may OR may not be current)

Fixed and Intangible assets are ALWAYS going to be...

long term

Current Liabilities:

AP, Salaries Payable, Utilities Payable (Notes Payable and Deferred Revenue could be current OR long term)

Balance Sheet accounts in the wrong place: you may have Accumulated Depreciation on the Income Statement, she may show Accumulated Depreciation in Stockholders Equity (these are wrong)

Accumulated Depreciation NEEDS to go with the property, plant, and equipment.

Multistep Income Statement

Revenue:

Sales Revenue. $592,000

COGS. 325,000

1. Gross Profit 267,000

Operating Expenses:

Selling Expense. 67,000

Admin Expense. 89,000

Total Operating Expenses 113,000

Income From Operations:

Non-Operating Income

Interest Revenue. 32,000

Gain on Sale 86,000

Restructing Costs. 55,000

Interest Expense. 16,000

Total Non-Operating

Income Before Tax 160,000

Tax Expense (25%). 40,000

Net Income 120,000

Statement of Comprehensive Income

Net Income. $650,000

Deferred Loss. 60,000

Unrealized Gains. 40,000

OCI 550,000

Tax Expense (25%) 137,500

Net Income. 412,500