AGRI 1005 Chapter : AGRI Chapter 1 Continued

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azuremammoth471

15 Mar 2019

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The classified balance sheet: reports the assets, liabilities, and equity at a specific point in time, groups together similar assets and similar liabilities, using standard classifications. Stockholders" equity: current liabilities, long-term liabilities (noncurrent, stock holders" equity. Term: long term investments, property, plant, and equipment (long term/ Example: tiger company has the following assets at 12/31/12. Current assets: cash, s/t investments, accounts receivable. Investments: investments in stock and bonds of other companies that are held for more than one year, investments in long-term assets such as land or buildings not currently being used in operating activities. Property, plant, and equipment: property, plant and equipment assets are assets with long, useful lives that are currently used in operating the business, examples: land, building, equipment, vehicles, they are also called plant assets, fixed assets, or. Ppe: a process known as depreciate is used to allocate the cost of these assets to a number of years.

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2. Balance sheet

The balance sheet provides a snapshot of the financial conditionof a company. Investors and analysts use the information given onthe balance sheet and other financial statements to make severalinterpretations regarding the companyâs financial condition andperformance.

Blue Hamster Manufacturing Inc. is a hypothetical company.Suppose it has the following balance sheet items reported at theend of its first year of operation. For the second year, some partsare still incomplete. Use the information given to complete thebalance sheets for Blue Hamster Manufacturing Inc. for the yearsending December 31, Year 2 and 1, respectively.

Blue Hamster Manufacturing Inc.
Balance Sheet
For the Year ended December 31
	Year 2	Year 1		Year 2	Year 1
Assets			Liabilities and equity
Current assets:			Current liabilities:
Cash and equivalents		$55,350	Accounts payable	$0	$0
Accounts receivable	$25,312	$20,250	Accruals	$3,516	$0
Inventories	$74,250	$59,400	Notes payable	$19,921	$18,750
Total current assets	$168,750	$135,000	Total current liabilities		$18,750

Net fixed assets:			Long-term debt	$70,312	$56,250
Net plant and equipment		$165,000	Total debt	$93,750	$75,000
			Common equity:
			Common stock	$182,812	$146,250
			Retained earnings		$78,750
			Total common equity	$281,250	$225,000
Total assets	$375,000	$300,000	Total liabilities and equity	$375,000	$300,000

Given the information in the preceding balance sheetâandassuming that Blue Hamster Manufacturing Inc. has 50 million sharesof common stock outstandingâread each of the following statements,then identify the selection that best interprets the informationconveyed by the balance sheet.

Statement #1: Blue Hamsterâs pool of relatively liquid assets,which are available to support the companyâs current and futuresales, decreased from Year 1 to Year 2.

This statement is , because:

Blue Hamsterâs total current liabilities balance decreased by$33,750 between Year 1 and Year 2.

Blue Hamsterâs total current liabilities balance increased from$20,250 to $25,312 between Year 1 and Year 2.

Blue Hamsterâs total current asset balance actually increasedfrom $135,000 to $168,750 between Year 1 and Year 2.

Blue Hamsterâs total current asset balance decreased from$168,750 to $135,000 between Year 1 and Year 2.

Statement #2: In Year 2, Blue Hamster Manufacturing Inc. wasprofitable.

This statement is , because:

Blue Hamsterâs retained earnings account increased between theend of Years 1 and 2.

The cash and equivalents account increased between Years 1 and2.

Blue Hamsterâs total assets increased between Years 1 and 2.

Statement #3: The book value per share of Blue Hamsterâs stockin Year 2 was $5,625.

This statement is , because:

The per-share book value is calculated by dividing the companyâstotal assets by the number of outstanding shares of commonstock.

The per-share book value is calculated by dividing the companyâstotal debt by the number of outstanding shares of common stock.

The per-share book value is calculated by dividing the companyâstotal common equity by the number of outstanding shares of commonstock.

Based on your understanding of the different items reported onthe balance sheet and the information they provide, if everythingelse remains the same, then the cash and equivalents item on thecurrent balance sheet is likely to if the firm issues$3 million of new common stock.

Based on your understanding of the different items reported inthe balance sheet and the information they provide, which statementregarding Blue Hamster Manufacturing Inc.âs balance sheet isconsistent with U.S. Generally Accepted Accounting Principles(GAAP)?

The companyâs assets should be listed in alphabetical order.

The companyâs assets should be listed in the order in which theyare to be converted into cash.

The companyâs assets should be listed from those carrying thelargest balance to those with the smallest balance.

magentabuffalo389

QUESTION 1

Accounting is an information and measurement system thatidentifies, records, and communicates relevant, reliable, andcomparable information about an organization's businessactivities.

True

False

QUESTION 2

We use the accounting equation to identify what a company ownsand owes. The accounting equation is:

Assets = Liabilities + Equity

Assets = Liabilities â Equity

Assets = Liabilities + Revenues

Equity = Liabilities + Revenues

QUESTION 3

______ are beliefs that distinguish right from wrong. Thesebeliefs are accepted standards of gauging good and dishonestbehavior.

Accounting Standards

Ethics

Generally Accepted Accounting Principles

FASB

QUESTION 4

The _____ is a collection of all accounts within a companyâsaccounting system.

We use the accounting equation to identify what a company ownsand owes. _____ are resources a company owns or controls, _____ areclaims creditors have against a companyâs assets, and _____ is theownerâs claim on a companyâs assets.

QUESTION 6

In double entry accounting a credit to an asset account willrepresent an increase in the asset account balance; and a debitwill represent a decrease in the asset account balance.

True

False

QUESTION 7

The purchase of supplies on credit will ____ assets and ____liabilities.

During the accounting cycle, we analyze transactions toprepare statements.

True

False

QUESTION 9

The supplies account for a company has a $1,000 debit balanceat the beginning of the year. Supplies of $2,000 were purchasedduring the year and debited to the Supplies account. A December 31physical count shows $500 of supplies remaining at the end of theyear. Assume no other adjusting entries are made during the year.Using the 3-step process for creating adjusting entries, calculatethe adjustment amount for supplies (no journal entry isrequired).

During the accounting cycle, to complete step 7 youwould:

Prepare post-closing trial balance--Test clerical accuracy ofthe closing procedures.

Prepare adjusted trial balance--Summarize adjusted ledgeraccounts and amounts.

Prepare statements--Use adjusted trial balance to preparefinancial statements.

Close--Journalize and post entries to close temporaryaccounts.

QUESTION 11

The three financial statements that should be prepared duringthe accounting cycle are the:

Balance sheet, adjusted trial balance, income statement

Balance sheet, unadjusted trial balance, Statement of OwnerâsEquity

Income statement, adjusted trial balance, Statement of OwnerâsEquity

Balance sheet, Income statement, Statement of OwnerâsEquity

QUESTION 12

An optional working paper, which is not a required report oran accounting record, but is used to prepare a company's unadjustedtrial balance, adjusting entries, adjusted trial balance, andfinancial statements is a(n):

Adjusted trial balance

Worksheet

Post-closing trial balance

Unadjusted trial balance

General ledger

QUESTION 13

The two goals for completing the closing process are:

To identify accounts for closing and record the closingentries

To journalize and post transactions

To post transactions and prepare post-closing trialbalance

To reset revenues, expenses, and withdrawal account balancesto zero at the end of each period, and help summarize an accountingperiodâs revenues and expenses.

QUESTION 14

Fill in the Blank: The _____ describes a companyâs financialposition â by the types and amounts of assets, liabilities, andequity -- at a point in time.

QUESTION 15

Return on Assets is useful in evaluating management, analyzingand forecasting profits, and planning activities.

True

False

QUESTION 16

The Income Statement:

Identifies cash inflows (receipts) and cash outflows(payments) over a period-of-time.

Summarize adjusted ledger accounts and amounts

Describes a companyâs revenues and expenses along with theresulting net income or net loss -- over a period-of-time due toearnings activities

Resets revenues, expenses, and withdrawal account balances tozero at the end of each period.

QUESTION 17

An internal control system consists of the policies andprocedures used to:

Protect assets and Ensure reliable accounting

Urge adherence to company policies and Promote efficientoperations

All of the above

None of the above.

QUESTION 18

The cost-benefit principle is the second limitation of_______.

Bank reconciliations

Petty cash controls

Voucher system of controls

Internal controls

QUESTION 19

The Unadjusted Trial Balance columns of a company's work sheetshows the Store Supplies account with a balance of $750. TheAdjustments columns shows a credit of $425 for supplies used duringthe period. The amount shown as Store Supplies in the Balance Sheetcolumns of the work sheet is:

A company shows a $600 balance in Prepaid Rent in theUnadjusted Trial Balance columns of the work sheet. The Adjustmentscolumns show expired rent of $200. This adjusting entry resultsin:

$200 decrease to net income

$200 increase to net income

$200 different between the debit and credit columns of theUnadjusted Trial Balance

An error in the Balance Sheet

QUESTION 21

This semester we have discussed four major financialstatements. List the 4 financial statements and describe them. Makesure to include how they flow together.

QUESTION 22

Explain the purpose of adjusting entries at the end of aperiod.

peararmadillo281

EXERCISE 15-2 Financial Ratios for Assessing Liquidity (L015-2] Comparative financial statements for Weller Corporation, a merchandising company, for the fiscal year ending December 31 appear below. The company did not issue any new common stock dur ing the year. A total of 800,000 shares of common stock were outstanding. The interest rate on the bond payable was 12%, the income tax rate was 40%, and the dividend per share of common stock was $0.40. The market value of the company's common stock at the end of the year was $18. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year Assets Current assets: Cash................... Accounts receivable, net ......... Inventory ..................... Prepaid expenses .............. Total current assets ............... Property and equipment: Land ............ Buildings and equipment, net ........ Total property and equipment. Total assets ........ $ 1,280 12,300 9,700 1,800 25,080 $ 1,560 9,100 8,200 2,100 20,960 6,000 19,200 25,200 $50,280 6,000 19,000 25,000 $45,960 .... $ 9,500 600 300 10,400 $ 8,300 700 300 9,300 Liabilities and Stockholders' Equity Current liabilities: Accounts payable.. Accrued liabilities .......... Notes payable, short term ........ Total current liabilities ......... Long-term liabilities: Bonds payable ............ Total liabilities .............................. Stockholders' equity: Common stock ... Additional paid-in capital ...... Total paid-in capital ............... Retained earnings ........ . Total stockholders' equity .. Total liabilities and stockholders' equity .......... 5,000 15,400 5,000 14,300 800 4,200 800 4,200 5,000 29,880 34,880 $50,280 5,000 26,660 31,660 $45,960 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales ...... $79,000 $74,000 Cost of goods sold .................... 52,000 48,000 Gross margin .......................... 27,000 26,000 Selling and administrative expenses: Selling expenses 8,500 8.000 Administrative expenses .... 12,000 11,000 Total selling and administrative expenses .... 20,500 19,000 rating income.................... 6,500 Interest expense ........................ 600 600 Net income before taxes ................. 5,900 6,400 Income taxes .......................... 2,360 2,560 Net income ............ .......... 3,540 3,840 Dividends to common stockholders ......... 320 Net income added to retained earings...... 3,220 3,240 Beginning retained earnings 26,660 23,420 Ending retained earnings ................. $29,880 $26,660 7,000 320 EXERCISE 15-5 Financial Ratios for Assessing Profitability [LO15-5] Refer to the data in Exercise 15-2 for Weller Corporation. Required: Compute the following financial data for this year: 1. Gross margin percentage. 2. Net profit margin percentage. 3. Return on total assets. 4. Return on equity.

AGRI 1005 Chapter : AGRI Chapter 1 Continued

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