Balance Sheet
December 31, 2014Assets-Liabilities = Equity
Income Statement
For the Year ending December 31, 2014Revenues - Expenses = Net Income
Types of Revenues
Services to customersInterest Revenue
Expenses
SalariesRentOther operating expenses
Statement of Retained Earnings
For the Year ending December 31, 2014
year end: Retained earnings =
Beg Retained earnings + Net Income- Dividends
Statement of Cash Flows
For the Year ending December 31, 2014
Statement of Cash FlowsIncludes....
Operating activitiesInvesting activitiesFinancing activities
Operating Activities
Receipts received from customerCash received for interestDividend incomeTrading securities Cash paid for salariesCash paid for rentA/RA/PWages PayableSalesCOGSWagesIncome Taxes
Investing activities
Purchase of landEquipmentLong term stock/bond investment
Financial activities
DividendsIssuing stocks/bondsPic excessRetained earnings
DEAD
Debits increaseExpensesAssetsDividends
Credits increase
LiabilitiesRevenuesEquity
Issue stock to shareholders
Debit:Cash Credit: Capital Stock
Paid for initial advertising programs
Debit:Advertising Expense Credit: Cash
Provide services to customer for cash
Debit: Cash Credit: Service Revenue
Received bill for utility cost incurred (Jan 15) $1000
Debit:Utilities Expense 1,000 Credit: A/P 1,000
Provided Services to customers on account (Jan 17) $8000
Debit:A/R 8,000 Credit: Service Revenue 8,000
Paid half the utility bill received on Jan 15 ($1000)
Debit: A/P 500 Credit: Cash 500
Received 60% of the amount due on the receivable that was established on Jan 17 ($8000)
Debit:Cash 4,800 Credit: A/R 4,800
Purchase land ($15,000) by giving $5,000 cash and promising to pay the reminder in 90 days
Debit: Land 15,000 Credit: Cash 5,000 Credit: Notes payable 10,000
Multi-Period Items (3)
1-Prepaid expenses: Prepaid Insurance, Prepaid rent, supplies2-Depreciation3-Unearned Revenue
Accrued Items (2)
1-Unrecorded Expenses: Accrued Salaries/Accrued Interest/Accrued Rent2-Unrecorded Revenues: Accrued Revenue
Prepaid mowing 3 months journal entry $300
06-01 Debit: Prepaid Mowing 300 Credit: Cash 30006-31 Debit: Mowing Expense 100 Credit: Prepaid Mowing 10007-31 Debit: Mowing Expense 100 Credit: Prepaid Mowing 100(one more)
Prepaid Insurance $9000 for 3 yrs
01-01-14 Debit: Prepaid Insurance 9000 Credit: Cash 900012-31-14 Debit: Insurance Expense 3000 Credit: Prepaid Insurance 300012-31-15 Debit: Insurance Expense 3000 Credit: Prepaid Insurance 3000(one more)
Prepaid rent $3000 for 2 months
06-01 Debit: Prepaid Rent 3000 Credit: Cash 300006-31 Debit: Rent Expense 1500 Credit: Prepaid Rent 150007-31 Debit: Rent Expense 1500 Credit: Prepaid Rent 1500
1) $900 supplies purchased/ $700 used2) $1000 supplies purchased/ end of year $300 left
01-01-14 Debit: Supplies 900 Credit: Cash 90012-31-14 Debit: Supplies Expense 700 Credit: Supplies 70001-01-15 Debit: Supplies 1000 Credit: Cash 100012-31-15 Debit: Suppies expense 900 Credit: Supplies 900
$150,000 truck w/ 3 yr life (straight-line)
01-01-14 Debit: Equipment 150,000 _____________Credit: Cash 150,00012-31-14 Debit: Depreciation Expense 50,000 _____________Credit: Accumulated Depreciation 50,000
(March 1st) sold 1 yr software license for $1,200. Record JE for sale & EOY.
04-01-14 Debit: Cash 1,200 __________Credit: Unearned Revenue 1,20012-31-14 Debit: Unearned Revenue 900 __________Credit: Revenue 900($100/month)Unearned Revenue shows the company has a liability to deliver product in the future (send magazine subscription)
Company owes workers total salaries of $3000 end of the yr.
12-31-14 Debit: Salaries Expense 3,000 ______Credit: Salaries Payable 3,000
*$100,000 borrowed at 6%/yr. for 18 months starting on July 1st
07-01-14 Debit: Cash 100,000 ____________Credit: Loan Payable 100,00012-31-14 Debit: Interest Expense 3,000 ____________Credit: Interest Payable 3,00012-31-15 Debit: Interest Expense 6,000???????? Debit: Interest Payable 3,000 ?????? Debit: Loan Payable 100,000 ____________Credit: Cash 109,000(Total interest = Principal X Rate X Time = 9,000)
Rent paid 10 days after end of each month at rate of $400/month
12-31-14 Debit: Rent Expense 400 ______________Credit: Rent Payable 40001-10-14 Debit: Rent Payable 400 ______________Credit: Cash 400
12-31-14 Debit: Unearned Revenue 500...................................Credit: Revenue 500
12-31-14 Debit: A/R 500.......................Credit: Revenue 500
0
..Beg inventory+Net Purchases=Goods available for sale=Ending inventory+COGS(Ending inventory + COGS = Goods available for sale)
Gross Profit
Rev - COGS
Net Profit
The amount left after operating expenses are subtracted from the gross profit
Gross Profit Margin =
Gross Profit/ Net Sales
Gross Margin Percentage =
( Sales-COGS ) / Sales
Current Assets
CashShort-term investmentsA/RInventoriesPrepaid insurance
Current Liabilities
A/PSalaries PayableInterest PayableTaxes Payable
Current Ratio =
Current assets/Current liabliites
Working capital
Current assets - current liabilities
Allowance methodsAS A PERCENTAGE OF TOTAL RECEIVABLES:Q: add or subtract?
Some companies anticipate that a certain percentage of outstanding receivables will prove uncollectible. In Ito's case, maybe 6% ($425,000 x 6% = $25,500).
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Current asset1-def
converted into cash (or consumed) w/in 1 year or the operating cycle
Fifo (perpetual/periodic)Beg...100...@..$101/.....200...@..$112/.....300...@..$12S/.....200...@..$203/.....100...@..$14(JE to)
Perpetual=2100 Periodic=2100JE: COGS....2100.............Merchandise inv: 2100
Lifo (perpetual/periodic)Beg...100...@..$101/.....200...@..$112/.....300...@..$12S/.....200...@..$203/.....100...@..$14
Perpetual=2400Periodic=2600
Weighted AverageBeg...100...@..$101/.....200...@..$112/.....300...@..$12S/.....200...@..$203/.....100...@..$14
Perpetual=2266Per Unit = 11.33Remaining under inv=4532Periodic=2342.86Per Unit = 11.71Remaining under inv=5855
Bonds AmoritizingPurchased a bond 100 Bond @ 8%
Bond payable...100,000.......cash...............100,000int expense...8000.......cash.............8000Cash........100,000.......bonds payable...100,000
Note Payable$25,000 @ 10%3 payments of $10,053
Cash....25,000.......Note Payable......25,000int expense...2500Note payable...7553............cash.............10053int expense....1744.7Note payable...8308.3............cash.............10053
A company issued1,000 shares of $2 par value common stock for $10 per share. When the stock was issued, Cash would be debited for $10,000.
Cash...10,000........Common stock....2000.........Pic/Common Stock.8000
Stephens Company1,000 shares of $100 par value 9% of cumulative preferred stock and 10,000 shares of $5 par value common stock.First 2 yrs2010=$60002011=$20,000
Suppose to pay 9,000/yr (pref)2010- Pref 6000..........Owed 3000 Preferred2011- Paid 20000...........pref 12000............common 8000
Bond face value= $
1000
Issue a bond=Purchase a bond=
borrowing moneyReceive IOU to be paid back later
Closing entries
Debit:Revenue/Income summaryCredit: Expenses/retained earnings/dividends
How to close dividends
Debit: retained earningsCredit: Dividends
Under stockholders equity
Capital StockRetained earnings
Gross Profit=
Revenues - COGS
Gross Margin=
Sales-COGS
Petty cash ($635 needed returned)Supplies 390gas 155drinks 70
Supplies exp..390Fuel exp........155Misc exp........70Cash short (over).20...........................Cash....635
Types of deductions from salary expense to arrive at net pay
Federal income taxFICA tax for Social SecurityFICA tax for Medicare
Declaration of Dividend (JE)
Debit: DividendsCredit: Dividends payable
Acquisition of 40,000 treasury shares @ $25/share (JE)
Debit: Treasury Stock 1,000,000Credit: Cash 1,000,000
Stock Split 2-for-1
Double the number of shares/Half the par value per share
10% Stock dividend1,000,000 shares / $1 par value stockmarket price $20/share(JE)
Debit: Retained Earnings 2,000,000(1,000,000 10% 20).........Credit: Common Stock 100,000(1,000,000 10% 1).........Credit: Pic in Excess of Par 1,900,000Pic = paid in capital
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Balance Sheet..Skip...
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Assets
LandBuildingsEquipment
Liablilites
Loans payable
Stockholders equity
Capital StockRetained Earnings
Income Statementwhats on it?
Revenues........Services to customers.........Interest RevenueExpenses........Salaries.........Rent
Statement of Retained earningswhats on it?
Beg retained earnings+Net income-Dividends
Collect A/RAffect on balance sheet
Increase AssetDecrease asset
Buy equipment via LoanAffect on balance sheet
Increase AssetIncrease liability
Provide services on accountAffect on balance sheet
Increase AssetIncrease Equity
Pay expensesAffect on balance sheet
Decrease AssetDecrease Equity
Merchandisse inventory 1-debited2-credited?
1-Freight-in1-Freight-out
Shipping expense1-debited2-credited?
1-Freight-in2-Freight-out
FICA SS (cap on max)Employeer match dollar-for-dollar?
YesYes
FICA Medicare (cap on max)?Employeer match dollar-for-dollar?
NoYess
JE for Payroll
Debit: Salaries expCredit: Federal income tax payableCredit: Social Security tax payableCredit: Medicare tax payable
Zeto Company acquired a new construction crane. The crane cost $1,000,000. In addition, Zeto paid a delivery cost of $50,000, setup and installation of $75,000, and truck repairs of $5,000 (it seems that during setup, a large beam was accidentally dropped on the hood of one of Zeto's trucks). Zeto should record the crane in its accounting records at
$1,125,000EquipmentDeliveryinstallationinitial setup/calibration/programmingPermits
Which tax withholding applies to both employee and employer
SS
Product cost
DLDMManuf Overhead
Period cost
Can't be applied to productsDebited as exposesbest match revenueexpirationwhen period cycle is over