ACC 131 Study Guide - Midterm Guide: Accrual, Retained Earnings, Financial Statement

111 views1 pages

violettiger345

6 Nov 2018

School

Department

Course

Professor

For unlimited access to Study Guides, a Grade+ subscription is required.

Document Summary

This study guide encompasses the majority of the questions on the first exam but may not be all inclusive. These study items are in no particular order. disadvantages of each forms prepared for a point in time individual accounts formula to calculate each of its components (beginning retained earnings, net income, dividends, and ending retained earnings) What are the different forms of business organizations and the advantages and. What are the main activity categories businesses engage in. Know the fundamental accounting equation and be able to manipulate it into various. What is the definition of retained earnings and how is it calculated. Which of the financial statements are prepared for a period of time and which are. What is the definition of a current asset and a current liability. What are the different classes of accounts shown on a balance sheet. Know what type of information is presented in each financial statement.

Related Questions

AECO 3430 Lab Work #5 Understanding Morgan Cattle's FinancialStatements 1 (20pts) How does opening a $125,000 line of creditwith Farm Credit immediately affect the Balance Sheet? Specificallydemonstrate (with hypothetical numbers) how the relevant sectionsof the balance sheet demonstrate this. 2 (20pts) How can a businessfail while showing accrual profits? Which financial statement(s)are needed to demonstrate the answer? Specifically demonstrate(with hypothetical numbers) how the relevant sections demonstratethis. 3 (20pts) What does it mean for a business to show a decreasein Retained Earnings? Which financial statement(s) are needed todemonstrate the answer? Specifically demonstrate (with hypotheticalnumbers) how the relevant sections demonstrate this. 4 (20pts) Howdoes buying more assets immediately affect equity? Which financialstatement(s) are needed to demonstrate the answer? Specificallydemonstrate (with hypothetical numbers) how the relevant sectionsdemonstrate this. 5 (20pts) How does making a final payment of$45,000 with 5% interest on an equipment loan affect equity? Whichfinancial statement(s) are needed to demonstrate the answer?Specifically demonstrate (with hypothetical numbers) how therelevant sections demonstrate this. 6 (10pts) What did you learnfrom this lab exercise?

1.) If you were to take a $150,000 line of credit through FarmCredit your liabilities and cash would automatically increase onthe balance sheet. Hypothetically speaking if your cash account had$100,000 and your total assets were $1,000,000 prior to taking outthe line of credit, your total assets would increase to $1,150,000and your cash account would increase to $250,000. If you alreadyhad $100,000 in notes payable, after accepting the line of creditthat account would increase to $250,000. With these increases thebalance sheet should still balance out if done correctly.

2.) An income statement could show a net profit but still notreflect the actual financial soundness of a business. Incomestatements show revenue and expenses but do not show the amount ofcash on hand and/or other liquid assets. Making it where it couldnot accurately represent the businesses ability to pay a loan back.It could read a net income of $450,000 but the balance sheet couldread that there is only $100,000 in cash and $250,000 inliabilities. To get an adequate representation of the businessesactual financial standing multiple financial statements must beused.

3.) Retained earnings show the relation between the balancesheet and income statement, events that cause net loss in cash flowwill decrease retained earnings. This is usually the result ofoperating costs/expenses. A decrease in retained earnings representa decrease in owners equity on the balance sheet, this is a resultfrom an increase in expenses. These relates to problem 1 somewhat.If you were to take out a loan of $200,000 and your cash was at$300,000 it would increase to $500,000. Subsequently your notespayable would increase by $200,000 as well. The accounts wouldbalance out in the end the same because they increased the same.However the interest expense would increase causing net farmincrease to decrease. The retained earnings would decrease as aresult of notes payable increasing.

4.) If the assets were purchased using cash your current assetswould increase and cash account would decrease because it waspurchased immediately with cash. If a new truck was purchased for$65,000 dollars your cash would decrease by that amount and yourcurrent assets account would increase by the same amount. If theasset was purchased at market value it doesnât affect your equity,because nothing was gained or loss in the acquisition of thetruck.

5.) A final payment of $35,000 with 5% interest would decreasecash on the balance sheet and also decrease liabilities. Theinterest payments would increase and the farms net income woulddecrease on income statement. Statement of owners equity would showan increase on retained earnings amount.

6.) On this lab exercise I learned to show with words the thingswe have learned in class. I learned how to put into words thechanges we see in financial statements and how they affect theoutlook on a business. To me it makes more sense to see it in aword explanation than it does to look at it on paper. I feel like Ihave a better understanding of what is going on when it is inwritten form as opposed to when it is on a spreadsheet surroundedby other numbers where I get lost in it all. When it is in words Ithink it is easier to take that and go back to the financialstatement and really see it. I think this is an important part offinancial management whether you are the accountant or the businessowner. It is important to be able to understand financial recordsand how they affect your business or the person you are workingfor. Either way it is necessary to know somewhat of both sides tounderstand it fully.

I just need these answers worded different.

1. Creditors' claims on the assets of a company are called: (Points : 2)

2. The primary objective of financial accounting is: (Points : 2)

To serve the decision-making needs of internal users

To provide financial statements to help external users analyze and interpret an organization's activities

To monitor and control company activitiesTo provide information on both the costs and benefits of managing products and services

To know what, when and how muchto produce

3. Assets created by selling goods and services on credit are: (Points : 2)

4. The debt ratio is used: (Points : 2)

To measure the amount of equity relative to the expenses

To reflect the risk associated with a company's debts

Only by banks when a business applies for a loan

To determine how much debt a firm should pay off

5. Net Income: (Points : 2)

Decreases equity

Represents the amount of assets owners put into a business

Equals assets minus liabilities

Is the excess of revenues over expenses

Represents the owners' claims against assets

6. Internal users of accounting information include: (Points : 2)

Shareholders

Customers

Creditors

Government regulators

Line Supervisor

7. Risk is: (Points : 2)

Net income divided by average total assets

The reward for investment

The uncertainty about the expected return that will be earned from an investment

Unrelated to expected return

8. An example of an operating activity is: (Points : 2)

Paying wages

Purchasing office equipment

Borrowing money from a bank

Selling stock

Paying off a loan

9. Which accounting assumption assumes that all accounting information is reported monthly or yearly? (Points : 2)

Business entity assumption

Monetary unit assumption

Value assumption

Cost assumption

Time period assumption

10. Distributions of assets by a business to its stockholders are called: (Points : 2)

ACCT 2101 Project Instructions What to turn in: A typed, printed copy of your report and a printed copy of the financial statements. These must be neatly stapled together and submitted in class on or before the due date listed in the schedule. No exceptions. If you know or think you will be absent on the due date, please turn in your report early. This includes absences for GGC athletic events or other GGC sponsored activities. Five points will be deducted from your project grade for reports that are not stapled. Reports will not be accepted over email. You cannot use The Home Depot as this was our class example. Report format: Times New Roman, 12 pt font, double spaced, one-inch margins, length is 2 -3 pages. About the assignment: Select a company that is publicly traded in the United States. Go to sec.gov and look up the annual report for a company. This document is called a Form 10-K. For the most recent year available, print out copies of the Income Statement, Statement of Retained Earnings, Balance Sheet, and Statement of Cash Flows. Remember, the statements may have different names. Examples of alternative names can be found at the end of the textbook. Do not print the entire 10-K. Select 3 financial ratios from the textbook and use the information from the financial statements to calculate the ratios. At the end of the textbook there is a list of financial ratios titled âAnalyses.â There is also one or more ratios listed at the end of each chapter. Any 3 ratios may be selected from these sources. Briefly research your company and its history. Report Contents: 1) The introduction should describe the company. For example, what does the company do, where the company is located, when was it established, etc. 2) The body of the report should discuss the results of your financial ratio calculations. Be sure to include the name of the ratio and the formula. Then, show the calculations typed out. Lastly, interpret the ratio; this means describe what the ratio is telling you. 3) The conclusion of the report should include your opinion about whether or not you would invest in the company and why.

case study: https://www.sec.gov/Archives/edgar/data/829224/000082922417000049/sbux-1012017x10xk.htm

debt ratio, profit margin ratio and current ratio.

lilachippopotamus592

ACC 131 Study Guide - Midterm Guide: Accrual, Retained Earnings, Financial Statement

Document Summary

Get access

Related Documents

ACC 131 Lecture Notes - Lecture 1: Gross Margin, Profit Margin, Financial Accounting Standards Board

ACC 131 Chapter Notes - Chapter 1: Retained Earnings, Financial Statement, Accounting Equation

ACC 131 Study Guide - Midterm Guide: Perpetual Inventory, Intangible Asset, Inventory Turnover

Related Questions