ACCT 001 Lecture Notes - Lecture 30: Accrual, Current Liability, Historical Cost

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bronzegrasshopper664

23 Sep 2020

School

College of The Sequoias

Department

Accounting (ACCT)

Course

ACCT 001

Professor

lindsay

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Document Summary

These are the records of the debit and credit transactions. Usually made before informationis put in the balance sheet. The credits and debits will always be equal in journal entries. The journal entry becomes important as the first step in the accounting process. The placement of current and non current accounts mean the balance sheet is classified. Reclassification is when an item is moved from one account to another. An example is moving from current liabilities to non-current liabilities if a loan is deferred or extended. These are when the cash in bank asset is negative. It can be classified on either side of the balance sheet. However, it is customarily placed as an extra current liability. Accumulated depreciation is the amount of all depreciations to date on assets such as equipment. This can be presented as deductions on the left side of assets.

Related Questions

Alex’s Interiors, Inc., is an international manufacturer and retailer of home furnishings. The following is from Alex’s balance sheet as of September 30, 2020 (dollars are in millions).

Cash $ 120.00 Accounts Payable $ 46.00 Accounts Receivable 32.00 Wages and Other Expenses Payable 171.00 Inventories 248.00 Notes Payable, (long-term) 263.00 Other Current Assets 46.00 Other Long-Term Liabilities 64.00 Property, Plant, and Equipment 435.00 Contributed Capital 436.00 Other Assets 139.00 Retained Earnings 40.00

Assume that the following events occurred in the quarter ended December 31 (amounts provided are in whole dollars):

a. Paid $12,000,000 cash for an additional other asset.

b. Issued additional shares for $12,000,000 in cash.

c. Purchased property, plant, and equipment; paid $12,000,000 in cash and signed a note to pay the remaining $29,000,000 in two years.

d. Sold, at cost, other assets for $2,000,000 cash.

e. Conducted negotiations to purchase a sawmill, which is expected to cost $56,000,000.

1. Analyze transactions (a) through (e) to determine their effects on the accounting equation.

2. Record the transaction effects determined in requirement 1 using journal entries.

3. Summarize the journal entry effects from requirement 2 using T-accounts. Use the September 2020 ending balances as the beginning balances for the October to December 2020 quarter.

4. Prepare a classified balance sheet at December 31, 2020

5. As of December 31, 2020, has the financing for Alex’s Interiors’ investment in assets primarily come from liabilities or from shareholders’ equity?

urfajamil

In this chapter we were provided a chart of accounts withsixteen accounts in exhibit 2 in the text.

From that chart of accounts select an account (try to pick onethat has not been discussed yet), in the subject box put theaccount title you selected, then do the following:

1. Assets, Liabilities, Owner's Equity, Revenues, and Expensesare the five categories (account types) that an account can beclassified as. Which category is the account you selected includedin?

2. The double-entry accounting system has specific rules forrecording debits and credits based on the type of account. Describehow these rules apply to the account you selected. How is theaccount increased and how is it decreased?

3. The normal balance of an account can be either a debit or acredit depending on whether increases in the account are recordedas debits or credits. What is the normal balance of the account youselected?

4. Think of a transaction that your account would be used in. Donot copy an entry from the book. Describe and illustratejournalizing the transaction, in the proper journal entryformat.

Partial Classified Balance Sheet for Walgreens

The following items, listed alphabetically, appear on WalgreensBoots Alliance, Inc consolidated balance sheet at August 31, 2015(in millions):

Accrued expenses and other liabilities	$5,225
Deferred income taxes (long-term)	3,538
Long-term debt	13,315
Other non-current liabilities	4,072
Short-term borrowings	1,068
Trade accounts payable	10,088
Income taxes	176

Source: Walgreens, 2015 Form 10-K.

Required:

1. Prepare the Current Liabilities andLong-Term Liabilities sections of Walgreens's classified balancesheet at August 31, 2015. Enter your answers in millions.

Walgreens
Balance Sheet (Partial)
August 31, 2015
Current Liabilities
	$



Total current liabilities	$
Long-Term Liabilities
	$


Total long-term liabilities	$

2. Walgreens had total liabilities of $16,633and total shareholdersâ equity of $20,561 at August 31, 2014. Totalshareholdersâ equity at August 31, 2015, amounted to $31,300. (Allamounts are in millions.) Compute Walgreensâ debt-to-equity ratioat August 31, 2015 and 2014. Round your answers to two decimalplaces.

Computation of debt-to-equity ratios:
2014:
2015:

As an investor, how would you react to the changes in thedebt-to-equity ratio?

If the ratio is constant and less than 1, it indicates thecompany is safe to invest or remain invested.

If the ratio has increased over 2 periods and is more than 1, itindicates the company is safe to invest and remain invested.

If the ratio has decreased over 2 periods and is less than one,it indicates the company is not a safe investment and you wouldlook for better options to invest.

This ratio is not at all significant from the investor's pointof view, you would ignore this ratio.

3. What other related ratios would thecompanyâs lenders use to assess the company? What do these ratiosmeasure?

The lenders would be interested in Walgreensâ and . Both ratiosmeasure the degree to which a company can make its out of currentcash flows.

ACCT 001 Lecture Notes - Lecture 30: Accrual, Current Liability, Historical Cost

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