ACCT207 Chapter Notes - Chapter 2: International Accounting Standards Board, Accrual, Preferred Stock

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raspberryjackal214

2 Nov 2016

School

University of Delaware

Department

Accounting

Course

ACCT207

Professor

Dragone Debra

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Document Summary

Classified balance sheet: groups together similar assets and similar liabilities, using a number of standard classifications and sections. Exclusive right: patents, copyrights, or trademarks used for specific period of time. Current liabilities: obligations the company is to pay within the coming year or operating cycle, whichever is longer. Long-term liabilities: obligations a company expects to pay after one year. Stockholder"s equity: made from common stock and retained earnings. Common stock: investments of assets into the business by stockholders. Retained earnings: income retained for use in business. Long-term investments: investments in stocks and bonds of other. Intangible assets: assets that don(cid:495)t have physical substance yet and are very. Depreciation: allocating the cost of assets to a number of years. Accumulated depreciation: shows total amount of depreciation that. Property, land and equipment: assets with long useful lives that are currently used in operating the business valuable. Ratio: expresses mathematical relationship between one quantity and another.

Related Questions

Mary Walker, president of Rusco Company, considers $28,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $23,000 in cash was available at the end of this year. Since the company reported a large net income for the year, and also issued both bonds and common stock, the sharp decline in cash is puzzling to Ms. Walker.

Rusco Company Comparative Balance Sheet at July 31
	This Year		Last Year
Assets
Current assets:
Cash	$	23,000	$	42,600
Accounts Receivable		231,200		220,400
Inventory		257,200		200,800
Prepaid expenses		12,600		24,600
Total current assets		524,000		488,400
Long-term investments		114,000		160,000
Plant and equipment		876,000		758,000
Less accumulated depreciation		214,000		192,400
Net plant and equipment		662,000		565,600
Total assets	$	1,300,000	$	1,214,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	295,400	$	238,800
Accrued liabilities		8,800		16,600
Income taxes payable		48,400		43,000
Total current liabilities		352,600		298,400
Bonds Payable		224,000		116,000
Total liabilities		576,600		414,400
Stockholdersâ equity:
Common stock		665,000		640,000
Retained earnings		58,400		159,600
Total stockholders' equity		723,400		799,600
Total liabilities and stockholders' equity	$	1,300,000	$	1,214,000

Rusco Company Income Statement For This Year Ended July 31
Sales				$	960,000
Cost of goods sold					600,000
Gross margin					360,000
Selling and administrative expenses					256,800
Net operating income					103,200
Nonoperating items:
Gain on sale of investments	$	24,000
Loss on sale of equipment		(7,600	)		16,400
Income before taxes					119,600
Income taxes					35,840
Net income				$	83,760

Riabko Company Comparative Balance Sheet
	This Year		Last Year
Assets
Current assets:
Cash and cash equivalents	$	96,000	$	70,000
Accounts receivable		640,000		672,500
Inventory		638,000		445,000
Prepaid expenses		30,000		17,500

Total current assets		1,404,000		1,205,000

Property, plant, and equipment		2,495,000		1,900,000
Less accumulated depreciation		645,000		582,500

Net property, plant, and equipment		1,850,000		1,317,500

Long-term investments		132,500		205,000

Loans to subsidiaries		145,000		82,500

Total assets	$	3,531,500	$	2,810,000

Liabilities and Stockholders' equity
Current liabilities
Accounts payable	$	910,000	$	595,000
Accrued liabilities		40,000		64,500
Income taxes payable		165,500		138,000

Total current liabilities		1,115,500		797,500
Bonds payable		745,000		475,000

Total liabilities		1,860,500		1,272,500

Stockholdersâ equity:
Common stock		1,140,000		1,025,000
Retained earnings		531,000		512,500

Total stockholdersâ equity		1,671,000		1,537,500

Total liabilities and stockholders' equity	$	3,531,500	$	2,810,000

The following additional information is available about the companyâs activities during this year:
a.	The company declared and paid a cash dividend this year.
b.	Bonds with a principal balance of $405,000 were repaid during this year.
c.	Equipment was sold during this year for $82,500. The equipment had cost $180,000 and had $70,000 in accumulated depreciation on the date of sale.
d.	Long-term investments were sold during the year for $160,000. These investments had cost $72,500 when purchased several years ago.
e.	The subsidiaries did not repay any outstanding loans during the year.
f.	Riabko did not repurchase any of its own stock during the year.

Riabko Company Income Statement
Sales			$	3,500,000
Cost of goods sold				2,170,000

Gross margin				1,330,000
Selling and administrative expenses				1,062,500

Net operating income				267,500
Non operating items:
Gain on sale of investments	$	87,500
Loss on sale of equipment		27,500		60,000

Income before taxes				327,500
Income taxes				105,000

Net income			$	222,500

Required:
1.	Using the indirect method, prepare a statement of cash flows for this year

ACCT207 Chapter Notes - Chapter 2: International Accounting Standards Board, Accrual, Preferred Stock

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