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ACC 113 Lecture Notes - Lecture 21: Tunxis Community College, General Journal, Retained Earnings

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coralimpala133
6 Jan 2021
School
Tunxis Community College
Department
Accounting
Course
ACC 113
Professor
Tinone

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Document Summary

Assets = liabilities + common stock + retained earnings dividends + The stockholders" equity section of the balance sheet reports common stock and retained earnings, the income statement repots revenues and expenses, the statement of retained earnings reports net income/net loss and dividends. At the end of the period, a change in any one of these three items affects stockholders" equity. The accounting cycle: (a company normally completes all of these steps in every fiscal period) Identification and measurement of transactions and other events . An item should be recognized in the financial statements if it is an element, is measurable, and is relevant and representationally faithful. External events interaction between and entity and its environment. Internal events occur within an entity. Many events have both internal and external elements. A company records as many events as possible that effect its financial position. It omits some events because of tradition and others because of complicated measurement problems.

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Related Questions

Measures of liquidity, solvency, and profitability

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $82.60 on December 31, 20Y2.

Marshall Inc.
Comparative Retained Earnings Statement
For the Years Ended December 31, 20Y2 and 20Y1
  20Y2 20Y1
Retained earnings, January 1 $3,704,000 $3,264,000
Net income $ 600,000 $ 550,000
Dividends:    
On preferred stock (10,000) (10,000)
On common stock (100,000) (100,000)
Increase in retained earnings $ 490,000 $ 440,000
Retained earnings, December 31 $4,194,000 $3,704,000

  

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
  20Y2 20Y1
Sales $ 10,850,000 $10,000,000
Cost of goods sold (6,000,000) (5,450,000)
Gross profit $ 4,850,000 $ 4,550,000
Selling expenses $ (2,170,000) $ (2,000,000)
Administrative expenses (1,627,500) (1,500,000)
Total operating expenses $(3,797,500) $ (3,500,000)
Operating income $ 1,052,500 $ 1,050,000
Other revenue and expense:    
Other revenue 99,500 20,000
Other expense (interest) (132,000) (120,000)
Income before income tax expense $ 1,020,000 $ 950,000
Income tax expense (420,000) (400,000)
Net income $ 600,000 $ 550,000

  

  

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
  20Y2 20Y1
Assets  
Current assets:    
Cash $1,050,000 $ 950,000
Marketable securities 301,000 420,000
Accounts receivable (net) 585,000 500,000
Inventories 420,000 380,000
Prepaid expenses 108,000 20,000
Total current assets $ 2,464,000 $2,270,000
Long-term investments 800,000 800,000
Property, plant, and equipment (net) 5,760,000 5,184,000
Total assets $ 9,024,000 $8,254,000
Liabilities  
Current liabilities $ 880,000 $ 800,000
Long-term liabilities:    
Mortgage note payable, 6% $ 200,000 $ 0
Bonds payable, 4% 3,000,000 3,000,000
Total long-term liabilities $ 3,200,000 $3,000,000
Total liabilities $ 4,080,000 $3,800,000
Stockholders’ Equity  
Preferred 4% stock, $5 par $ 250,000 $ 250,000
Common stock, $5 par 500,000 500,000
Retained earnings 4,194,000 3,704,000
Total stockholders’ equity $ 4,944,000 $4,454,000
Total liabilities and stockholders’ equity $ 9,024,000 $8,254,000

Determine the following measures for 20Y2. Round to one decimal place, including percentages, except for per-share amounts, which should be rounded to the nearest cent.

1. Working Capital $  
2. Current ratio  
3. Quick ratio  
4. Accounts receivable turnover  
5. Number of days’ sales in receivables  
6. Inventory turnover  
7. Number of days’ sales in inventory  
8. Ratio of fixed assets to long-term liabilities  
9. Ratio of liabilities to stockholders’ equity  
10. Times interest earned  
11. Asset turnover  
12. Return on total assets %
13. Return on stockholders’ equity %
14. Return on common stockholders’ equity %
15. Earnings per share on common stock $  
16. Price-earnings ratio  
17. Dividends per share of common stock $  
18. Dividend yield

Problem 1-33Interrelationships among financial statements Crawford Enterprises started the 2014 accounting period with $75,000 of assets (all cash), $15,000 of liabilities, and $25,000 of common stock. During the year, Crawford earned cash revenues of $46,000, paid cash expenses of $26,000, and paid a cash dividend to stockholders of $5,000. Crawford also acquired $15,000 of additional cash from the sale of common stock and paid $10,000 cash to reduce the liability owed to a bank. Required a.Prepare an income statement, statement of changes in stockholders’ equity, period-end balance sheet, and statement of cash flows for the 2014 accounting period. (Hint: Determine the amount of beginning retained earnings before considering the effects of the current period events. It also might help to record all events under an accounting equation before preparing the statements.) b.Determine the percentage of total assets that were provided by creditors, investors, and earnings. c.Determine the balance in the Revenue, Expense, and Dividends accounts as of January 1, 2015. LO 1-2, 1-3, 1-4, 1-5, 1-6, 1-7 CHECK FIGURES a. Net Income: $19,000 e. Net Cash Flow from Operating Activities: $19,000

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 $79,000 52,000 $74,000 48,000 26,000 27,000 8,500 12.000 Sales ..... . Cost of goods sold ........ Gross margin .......................... Selling and administrative expenses: Selling expenses ... Administrative expenses ................ Total selling and administrative expenses.... Net operating income.... Interest expense.......... Net income before taxes ................. Income taxes ........ Net Income .......... Dividends to common stockholders ......... Net income added to retained eamings ...... Beginning retained earnings .............. Ending retained earnings ................. 20,500 6,500 600 5,900 2,360 8,000 11,000 19,000 7,000 600 6,400 2,560 3,840 3,540 320 320 3,220 26,660 $29,880 3,240 23,420 $26,660 Required: Compute the following financial data and ratios for this year. 1. Working capital. 2. Current ratio. 3. Acid-test ratio.