ACC 221 Chapter Notes -Balance Sheet
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Prepare an Income Statement, Balance Sheet, and Statement of Changes in Shareholder's Equity. Analyze the results. The following information was obtained from the records of Shae, Inc.:
Merchandise Inventory | $132,000 |
Notes Payable, long term | $150,000 |
Sales | $450,000 |
Buildings and Equipment | $252,000 |
Selling, general, and administrative expenses | $36,000 |
Accounts Receivable | $60,000 |
Common Stock (21,000 shares) | $105,000 |
Income tax expense | $42,000 |
Cash | $96,000 |
Retained Earnings, 1/1/13 | $64,500 |
Accrued Liabilities | $9,000 |
Cost of Goods Sold | $270,000 |
Accumulated Depreciation | $108,000 |
Interest Expense | $24,000 |
Accounts Payable | $45,000 |
Dividends declared and paid during 2013 | $19,500 |
Except as otherwise indicates, assume that all Balance Sheet items reflect account balances at December 31, 2013, and that all Income Statement items reflect activities that occurred during the year ended December 31, 2013. There were no changes in paid-in capital during the year.
Required:
a. Prepare an Income Statement and Statement of Changes in Shareholder's Equity for the year ended December 31, 2013, and a Balance Sheet at December 31, 2013, for Shae, Inc.
Based on the financial statements that you have prepared for part a, answer the questions in parts b-e. Provide brief explanations for each of your answers and state any assumptions you believe are necessary to ensure that your answers are correct.
b. What is the company's average income tax rate?
c. What interest rate is charged on long-term debt?
d. What is the ar value per share of common stock?
e. What proportion of the company's earnings is used for dividends?
Six Financial Ratios
The balance sheet for Bearing Industries, Inc. at the end of20Y9 indicated the following:
Bonds payable, 7% (due in 30years) | $1,900,000 |
Preferred $5 stock, $50 par | 89,000 |
Common stock, $12 par | 66,216 |
Income before income tax was $172,900, and income taxes were$26,050 for the current year. Cash dividends paid on common stockduring the current year totaled $28,969.5. The common stock wasselling for $175 per share at the end of the year.
NOTE: To help you read the information above,you need to understand the following:
1) The percentage shown on the Bonds Payableline is the bond's contract rate (or coupon rate)--the annualpercentage of interest the bonds will pay, calculated on the totalliability shown on the right;
2) The amounts on the right are all in dollars(they are the amounts from the balance sheet). On the stock lines,they represent the total par value of each line. So, to calculatethe number of shares outstanding for each type of stock, you woulddivide the total par value by the per share par value shown on eachline on the left; and
3) The "$___ stock" notation on the Preferredstock line means that is the amount of dividend that will be paidper share of outstanding stock in the years the company paysdividends. Remember, preferred stockholders are paid before commonstockholders.
Determine each of the following. Round to one decimal placeexcept earnings per share and dividends per share, which should berounded to the nearest cent.
a. Number of timesbond interest charges are earned: | times | |||
b. Number of timespreferred dividends are earned | times | |||
c. Earnings pershare on common stock (Enter as dollars and cents.) | $ | |||
d. Price-earningsratio | ||||
e. Dividends pershare of common stock (Enter as dollars and cents.) | $ | |||
f. Dividendyield |
I'll rate posting for sec times just do last parts likecost and balance sheet ( account balance and cost incurred ) that'sit ready question carefully then answer all last partthanks
Charles Maxwell is starting a cheesecake bakery, Able BakerCharlie Company, to produce and sell different flavored cheesecakesto restaurants and the general public. He has just begun his studyof accounting, and is a bit confused about the many types ofreports he has read about and how they will help him run hisbusiness. He asks you to help him clarify what the differencesbetween managerial accounting and financial accounting are. Heâsalso wondering how to set up his inventory, how to classify thecosts of his business, and how to fill in some missinginformation.
Required: | |
1. | Choose whether thecharacteristics on the Managerial vs. Financial panel are mostoften associated with managerial accounting or financialaccounting. |
2. | Charles has provided some ofthe costs he expects to incur on the Cost Classification panel.Decide on the classifications that could be applied to each ofthese costs using the table provided. The cost object in each caseis the cheesecake. |
3. | Charles found some sampleincome statements and balance sheets on the Internet, and askedwhich of them might be most appropriate for a manufacturingbusiness like his. Review income statements A and B on the IncomeStatements panel, and balance sheets C and D on the Balance Sheetspanel. Determine which income statement and balance sheet would bemost appropriate for a manufacturing business like Able BakerCharlie. Then, on the Financial Statements panel, denote whichincome statement and balance sheet would be most appropriate for amanufacturing business. |
4. | At the end of February, afterthe second month of operations of Able Baker Charlie Company,Charles shows you the data heâs collected, but he was unable tofigure out some of the amounts. On the Costs and Balances panel,determine the missing amounts. Note: It may behelpful to use T accounts to map the flow of the amounts throughthe manufacturing accounts and solve for the missing dollarvalues. |
Managerial vs. Financial
Choose whether the following characteristics are most oftenassociated with managerial accounting or financial accounting.
Managerial Accounting | Financial Accounting | ||
---|---|---|---|
Primarily used for internal decision making | |||
Generally Accepted Accounting Principles (GAAP) must beused | |||
Prepared statements usually pertain to the company as a wholerather than individual departments or products | |||
Information provided will often be subjective, such asestimated future results | |||
Often prepared on an as-needed basis rather than at fixedintervals | |||
Use principles of the Sustainability Accounting Standards Board(SASB) to provide sustainability information to external financialstatement users | |||
Consideration of sustainability practices to contribute to thecompanyâs long-term success | |||
Using eco-efficiency measures to reduce expenses |
Cost Classification
Charles has provided some of the costs he expects to incur asfollows. Decide on the classifications that could be applied toeach of these costs using the table provided. The cost object ineach case is the cheesecake.
Cost | Product | Period | Direct | Direct | Factory | Selling | Administrative | Direct | Indirect | Prime | Conversion | |
---|---|---|---|---|---|---|---|---|---|---|---|---|
Cost | Cost | Materials | Labor | Overhead | Expense | Expense | Cost | Cost | Cost | Cost | ||
Eggs used to make cheesecakes | ||||||||||||
Bakerâs wages | ||||||||||||
Delivery driver wages | ||||||||||||
Depreciation of office computers | ||||||||||||
Power to run the cheesecake ovens | ||||||||||||
Presidentâs salary | ||||||||||||
Sales commissions | ||||||||||||
Factory supervisor salary |
Financial Statements
Charles found some sample income statements and balance sheetson the Internet, and asked which of them might be most appropriatefor a manufacturing business like his. Review income statements Aand B on the Income Statements panel, and balance sheets C and D onthe Balance Sheets panel. Determine which income statement andbalance sheet would be most appropriate for a manufacturingbusiness like Able Baker Charlie Company.
Which income statement is most appropriate for a manufacturingbusiness?
Income statement A
Income statement B
Which balance sheet is most appropriate for a manufacturingbusiness?
Balance sheet C
Balance sheet D
Income Statements
Income Statement A (scroll down for Income StatementB):
Sample Company A |
Income Statement |
For the Year Ended December 31, 20Y8 |
1 | Sales | $42,000.00 | |
2 | Beginning finished goods inventory | $5,250.00 | |
3 | Plus cost of goods manufactured | 6,400.00 | |
4 | Cost of finished goods available for sale | $11,650.00 | |
5 | Less ending finished goods inventory | 400.00 | |
6 | Cost of goods sold | 11,250.00 | |
7 | Gross profit | $30,750.00 | |
8 | Operating expenses: | ||
9 | Selling expenses | $6,400.00 | |
10 | Administrative expenses | 5,250.00 | |
11 | Total operating expenses | 11,650.00 | |
12 | Net income | $19,100.00 |
Income Statement B:
Sample Company B |
Income Statement |
For the Year Ended December 31, 20Y8 |
1 | Sales | $42,000.00 | |
2 | Beginning merchandise inventory | $5,250.00 | |
3 | Plus net purchases | 6,400.00 | |
4 | Merchandise available for sale | $11,650.00 | |
5 | Less ending merchandise inventory | 400.00 | |
6 | Cost of merchandise sold | 11,250.00 | |
7 | Gross profit | $30,750.00 | |
8 | Operating expenses: | ||
9 | Selling expenses | $6,400.00 | |
10 | Administrative expenses | 5,250.00 | |
11 | Total operating expenses | 11,650.00 | |
12 | Net income | $19,100.00 |
Balance Sheets
Balance Sheet C (scroll down for Balance SheetD):
Sample Company C |
Balance Sheet |
December 31, 20Y8 |
1 | Assets | ||
2 | Cash | $20,800.00 | |
3 | Accounts receivable (net) | 10,000.00 | |
4 | Merchandise inventory | 6,000.00 | |
5 | Supplies | 2,100.00 | |
6 | Land | 17,000.00 | |
7 | Total assets | $55,900.00 | |
8 | Liabilities | ||
9 | Accounts payable | $17,800.00 | |
10 | Stockholdersâ Equity | ||
11 | Common stock | $19,000.00 | |
12 | Retained earnings | 19,100.00 | |
13 | Total stockholdersâ equity | 38,100.00 | |
14 | Total liabilities and stockholdersâ equity | $55,900.00 |
Balance Sheet D:
Sample Company D |
Balance Sheet |
December 31, 20Y8 |
1 | Assets | ||
2 | Cash | $20,800.00 | |
3 | Accounts receivable (net) | 10,000.00 | |
4 | Inventories: | ||
5 | Finished goods | $2,000.00 | |
6 | Work in process | 1,500.00 | |
7 | Materials | 2,500.00 | 6,000.00 |
8 | Supplies | 2,100.00 | |
9 | Land | 17,000.00 | |
10 | Total assets | $55,900.00 | |
11 | Liabilities | ||
12 | Accounts payable | $17,800.00 | |
13 | Stockholdersâ Equity | ||
14 | Common stock | $19,000.00 | |
15 | Retained earnings | 19,100.00 | |
16 | Total stockholdersâ equity | 38,100.00 | |
17 | Total liabilities and stockholdersâ equity | $55,900.00 |
Costs and Balances
At the end of February, after the second month of operationsof Able Baker Charlie Company, Charles shows you the data heâscollected, but he was unable to figure out some of the amounts.Review the following data and fill in the missing amounts on thechart for Able Baker Charlie Company. Note: It maybe helpful to use T accounts to map the flow of the amounts throughthe manufacturing accounts and solve for the missing dollar values.It may also be helpful to review the steps for determining the costof materials used, total manufacturing cost incurred, and cost ofgoods manufactured.
Data forFebruary | |
---|---|
Decrease in materialsinventory | $3,300 |
Materials inventory on Feb. 28 | 50% of materials inventory on Jan.31 |
Direct materials purchased | $12,600 |
Direct materials used | 3 times the direct laborincurred |
Total manufacturing costs incurredin period | $29,400 |
Total manufacturing costs incurredin period | 70% of Cost of GoodsManufactured |
Total manufacturing costs incurredin period | $7,000 less than Cost of GoodsSold |
Account | Account Balances | Costs Incurred | ||
---|---|---|---|---|
Jan.31 | Feb.28 | |||
Materials Inventory | DirectMaterials Used | |||
Work inProcess Inventory | $27,000 | DirectLabor Incurred | ||
FinishedGoods Inventory | $16,000 | FactoryOverhead Incurred | ||
Cost ofGoods Sold |