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<strong>ACC 205 Week One Exercise Assignment Basic Accounting Equations</strong>Week One Exercise AssignmentBasic Accounting Equations1. Basic concepts. Jean's Marine Supply specializes in the sale of boating equipment and acces­sories. Identify the items that follow as an asset (A), liability (L), revenue (R), or expense (E) from the firm's viewpoint.a. The inventory of boating supplies owned by the company.b. Monthly rental charges paid for store space.c. A loan owed to Citizens Bank.d. New computer equipment purchased to handle daily record keeping.e. Daily sales made to customers.f. Amounts due from customers.g. Land owned by the company to be used as a future store site.h. Weekly salaries paid to salespeople.2. Analysis of transactions.Set up the following headings across a piece of paper:Assets = Liabilities + Owner's EquityBy using "+" and "-," indicate the effect of each of the following transac­tions on total assets, liabilities, and owner's equity:a. Processed a $5,000 cash withdrawal for the owner.b. Recorded the receipt of May's utility bill, to be paid in June.c. Provided services to customers on account.d. Paid the current month's advertising charges.e. Purchased a $27,000 delivery truck by paying $5,000 down and securing a loan for the remaining balance.f. Received $11,000 cash from the owner as an investment in the business.g. Returned a new computer and printer purchased earlier in the month on account. The bill had not as yet been paid.h. Paid the utility bill recorded previously in (b).3. Balance sheet preparation.The following data relate to Preston Company as of December 31, 19XX:Building $44,000 Accounts receivable $24,000Cash 17,000 Loan payable 30,000J. Preston, capital 65,000 Land 21,000Accounts payable ?Prepare a balance sheet in good form as of December 31, 19XX.4. Statement preparationThe following information is taken from the accounting records of Grimball Cardiology at the close of business on December 31, 19X1:Accounts payable $ 14,700Surgery revenue $175,000Surgical expenses 80,000Cash 60,000Surgical equipment 37,000Office Equipment 118,000Salaries expense 30,000Rent expense 15,000Accounts receivable 135,000Loan payable 10,300Utilities expense 5,000All equipment was acquired just prior to year-end. Conversations with the practice's bookkeeper revealed the data that follow.Rose Grimball, capital (January 1, 19X1) $300,00019X1 owner investments 2,00019X1 owner withdrawals 22,000Instructionsa. Prepare the income statement for Grimball Cardiology in good form.b. Prepare a statement of owner's equity in good form.c. Prepare Grimball's balance sheet in good form.5. Recognition of normal balancesThe following items appeared in the accounting records of Triguero's, a retail music store that also sponsors concerts. Classify each of the items as an asset, liability; revenue; or expense from the company's viewpoint. Also indicate the normal account balance of each item.a. The albums, tapes, and CDs held for sale to customers.b. A long-term loan owed to Citizens Bank.c. Promotional costs to publicize a concert.d. Daily receipts for merchandise sold,e. Amounts due from customers,f. Land held as an investment,g. A new fax machine purchased for office use.h. Amounts to be paid in 10 days to suppliers,i. Amounts paid to a mall for rent.6. Basic journal entriesThe following transactions pertain to the Jennifer Royall Company:Apr. 1Received cash of $15,000 and land valued at $10,000 fromJenni­fer Royall as an investment in the business.5 Provided $1,200 of services to Jason Ratchford, a client.Ratchford agreed to pay $800 in 15 days and the remaining amount in May.9 Paid $250 of salaries to an employee.14 Acquired a new computer for $3,200; Royall will pay the dealer in May.20 Collected $800 from Jason Ratchford for services provided on April 5.24 Borrowed $7,500 from BestBanc by securing a six-month loan.Prepare journal entries (and explanations) to record the preceding transactions and events.7. Journal entry preparationOn January 1 of the current year, MuniServ began operations with $100,000 cash. The cash was obtained from an owner investment by Peter Houston of $70,000 and a $30,000 bank loan. Shortly thereafter, the company ac­quired selected assets of a bankrupt competitor. The acquisition included land ($15,000), a building ($40,000), and vehicles ($10,000). MuniServ paid $45,000 at the time of the transaction and agreed to remit the remaining balance due of $20,000 (an account payable) by February 15.During January, the company had additional cash outlays for the follow­ing items:Purchases of store equipment $4,600Loan payment, including $100 interest 500Salaries expense 2,300Advertising expense 700The January utilities bill of $200 was received on January 31 and will be paid on February 10. MuniServ rendered services to clients on account amounting to $9,400. All customers have been billed; by month-end, $3,700 had been received in settlement of account balances.Instructionsa. Present journal entries that reflect MuniServ's January transactions, in­cluding the $100,000 raised from the owner investment and loan.b. Compute the total debits, total credits, and ending balance that would befound in the company's Cash account.c. Determine the amount that would be shown on the January 31 trial balance for Accounts Payable. Is the balance a debit or a credit?8. Balance Sheet Review - Select a public company and down a copy of the company’s most recent annual report. You will use these financial statements throughout the rest of this course. As you are aware of the Balance Sheet lists the assets, liabilities, and owner’s equity of the company. Review the company’s balance sheet over a period of three years. Based on your review, what account experienced the largest increase? What account experienced the largest decrease? As a potential investor would either the increase or decrease be considered a positive or negative? Write a 150-200 word summary of the results of your balance sheet analysis.<strong>ACC 205 Week 1 DQs</strong>Week 1 DQ 1As you have learned in this week’s readings the Accounting Equation is Assets = Liabilities + Owners’ Equity. Is the accounting equation true in all instances? Provide sample transactions from your own experiences to demonstrate the validity of the Accounting Equation.Guided Response:Review several of your peers’ postings and identify some core components that you feel should be included in every transaction. Respond to at least two of your peers and provide recommendations to extend their thinking. Challenge your peers by asking a question that may cause them to reevaluate or add components to their transactions.Week 1 DQ 2What does the term account mean? What are the different classifications of accounts? How do the rules for debits and credits impact accounts? Please provide an example of how debits and credits impact accounts.Guided Response:Analyze several of your peers’ posts. Let at least two of your peers know if this knowledge could be used in their everyday lives. Is so, how? If not, why not?<strong>ACC 205 Week 1 JOURNAL</strong>JournalTo complete the following journal entry, go to this week's Journal link in the left navigation.Balance Sheet JournalThe balance sheet is a financial snap shot of a company at  a particular point in time.  The balance sheet lists the assets, liabilities, and equity of the company.  Reflect on your personal financial situation, can you apply the concepts of the balance sheet?  What did you learn from this reflection?<strong>ACC 205 Week Two Exercise Assignment Revenue and Expenses</strong>1.  Revenue and Expenses. Dave Morris began a law practice several years ago, shortly after graduating from law school. During 19X1, he was approached by Delores Silva, who had recently suffered a back injury in an automobile accident. Morris ac­cepted Silva as a client, and in 19X2 proceeded with a lawsuit against Maddox Motors. The suit alleged that Maddox had knowingly sold Silva an automobile with defective brakes. Late in 19X2, the courts awarded Silva $240,000 in damages. Morris was entitled to 40% of this settlement for his fees. In 19X3, Maddox Motors paid Silva and Morris their respective shares of the judgment. Morris incurred secretarial and photocopy charges in 19X2 of $12,000— all related to the Silva case. Of this amount, $8,000 was paid in 19X2 and the balance was paid in 19X3. Assuming that Morris uses the accrual basis of accounting, in what year(s) should the revenue and expense amounts be recognized? Why?2.  Accrual and modified cash basis. The following information pertains to Beta Company for October:Services rendered during October to customers on account $14,380Cash receipts fromOwner investment 7,000Customers on account 5,650Cash customers for services rendered in October 6,800Cash payments toCreditors for expenses incurred during October 4,400Creditors for expenses incurred prior to October 2,100Monroe Equipment for purchase of new machinery onOctober 1 8,400Expenses incurred during October, to be paid in future months 3,725The machinery is expected to have a service life of five years.InstructionsCalculate Beta's net income for October, using the following methods:a.  Accrual basis of accounting.b.  Modified cash basis of accounting.3.  Accounting for prepaid expenses and unearned revenues. Hawaii-Blue began business on January 1 of the current year and offers deep sea fishing trips to tourists. Tourists pay $125 in advance for an all-day outing off the coast of Maui. The company collected monies during January for 210 outings, with 30 of the tourists not planning to take their trips until early February. Hawaii-Blue rents its fishing boat from Pacific Yacht Supply. An agree­ment was signed at the beginning of the year, and $72,000 was paid for the rights to use the boat for two full years.a.  Prepare journal entries to record (1) the collection of monies from tourists and (2) the revenue generated during January.b.  Calculate Hawaii-Blue's total obligation to tourists at the end of January. On what financial statement and in which section would this amount appear?4.  Recognition of concepts. Ron Carroll operates a small company that books entertainers for theaters, parties, conventions, and so forth. The company's fiscal year ends on June 30 Consider the items that follow and classify each as either (1) prepaid expense, (2) unearned revenue, (3} accrued expense, (4) accrued revenue, or (5) none of the foregoing.a.  Amounts paid on June 30 for a one-year insurance policy.b.  Professional fees earned but not billed as of June 30.c.  Repairs to the firm's copy machine, incurred and paid in June.d.  An advance payment from a client for a performance next month at a convention.e.  The payment in item (d) from the client's point of view.f.  Interest owed on the company's bank loan, to be paid in early July.g.  The bank loan payable in item (f).h.  Office supplies on hand at year-end.i.  Bank reconciliations: Missing amountsj.  The following independent cases relate to bank reconciliations. Compute the missing amounts, assuming that no other reconciling items exist.Case ACase BCase CBalance per bank  $6,000$4,000$ ?Outstanding checks  5002,1001,400Deposits in transit  2,00071,000Balance per company records  ?8,0004505.  Bank reconciliation and entries. The following information was taken from the accounting records of Pal­metto Company for the month of January:Balance per bank  $6,150Balance per company records 3,580Bank service charge for January 20Deposits in transit 940Interest on note collected by bank 100Note collected by bank 1,000NSF check returned by the bank with the bank statement 650Outstanding checks 3,080a.  Prepare Palmetto's January bank reconciliation.b.  Prepare any necessary journal entries for Palmetto.6.  Allowance method: Income statement and balance sheet approaches. Tempe Company reported accounts receivable of $300,000 and an allow­ance for uncollectible accounts of $31,000 (credit) on the December 31, 19X2, balance sheet. The following data pertain to 19X3 activities and operations:Sales on account $2,000,000Cash collections from credit customers 1,600,000Sales discounts 50,000Sales returns & allowances 100,000Uncollectible accounts written off 29,000Collections on accounts that were previously written off 2,700Instructionsa.  Prepare journal entries to record the sales- and receivables-related trans­actions from 19X3.b.  Prepare the December 31, 19X3, adjusting entry for uncollectible ac­counts assuming that uncollectibles are estimated to be 2% of net credit sales.c.  Prepare the December 31, 19X3, adjusting entry for uncollectible ac­counts assuming that uncollectibles are estimated at 1% of year-end accounts receivable.d.  Compute the amount of the adjusting entry in part (c) assuming that $46,000, rather than $29,000, of accounts were written off in 19X3.7.  Income Statement Review. Using the annual report of the company that you selected in week 1 please review the company’s income statement over a three year period.  Did sales increase during this time?  Did Cost of Good Sold increase significantly?  Has the company been profitable?  Do you notice any positives based on your analysis of the income statement?  Are there any negatives that potential investors should be aware of?  Write a 150-200 summary of the results of your income statement analysis.<strong>ACC 205 Week 2 JOURNAL</strong>Income Statement JournalThe income statement measures the income and expenses of a company over a specific period of time.  Reflecting on your personal financial statement for the past month, can you apply the principles of the income statement?  What did you learn from this experience?<strong>ACC 205 Week 2 DQs</strong>Week 2 DQ1 Accounting CycleFinancial statements are a product of the accounting cycle.  Think about two different companies: a manufacturing company, and a retail company.  Why would different companies have different accounting cycles?  Would you expect the steps of the accounting cycle to be the same for each company?  Why or why not?Week 2 DQ 2 Bank ReconciliationWhat is the purpose of a bank reconciliation?  What are the reasons for differences between the cash reported in the accounting records and the cash balance in the bank statements?<strong>ACC 205 Week Three Exercise Assignment Inventory</strong>1.  Inventory.Inventory valuation methods: Basic computations.The January beginning inventory of the White Company consisted of 300 units costing $40 each. During the first quarter, the company purchased two batches of goods: 700 units at $44 on February 21 and 800 units at $50 on March 28. Sales during the first quarter were 1,400 units at $75 per unit. The White Company uses a periodic inventory system.Using the White Company data, fill in the chart that follows to compare the results obtained under the FIFO, LIFO, and weighted-average inventory methods.FIFOLIFOWeighted AverageGoods available for sale$$$Ending inventory, March 31Cost of goods sold2.  Analysis of LIFO versus FIFO. Indicate whether LIFO or FIFO best describes each of the following:a.  Gives highest profits when prices fall.b.  Yields lowest income taxes when prices rise.c.  Generates an ending inventory valuation that somewhat approximates replacement cost.d.  Matches recent costs against current selling prices on the income state­ment.e.  Comes closest to approximating the physical flow of goods of a fruit andvegetable dealer.f.  Results in lowest cost of goods sold in inflationary periods.3.  Inventory Errors. The income statements of Diamond Company for the years ended Decem­ber 31, 19X1, and 19X2 follow.19X119X2Net salesCost of goods soldBeginning inventoryAdd: Net purchases$ 95,000 380,000$440,000$109,000 404,000$483,000Goods available forsaleLess: Ending inventory$475,000 109,000$513,000 127,000Cost of goods sold366,000386,000Gross profitOperating expenses$ 74,000 58,000$ 97,000 67,000Net income$ 16,000$ 30,000Diamond uses a periodic inventory system. A detailed review of theaccounting records disclosed the following:a.  A review of 19X1 purchase invoices revealed that a clerk had incor­rectly recorded a $12,600 purchase as $1,260.b.  A $4,800 purchase was made on December 30, 19X2, terms F.O.B. ship­ping point. The invoice was not recorded in 19X2 nor were the goods included in the 19X2 ending physical inventory count. Both the goods and invoice were received in early 19X3, with the invoice being re­corded at that time.c.  Goods costing $3,000 were accidentally excluded from the 19X1 ending physical inventory count. These goods were sold during 19X2, and all aspects of the sale were properly recorded.Instructions:Prepare corrected income statements for 19X1 and 19X2.Determine the impact of the preceding errors on the December 31, 19X2, owner's equity balance.4.  Inventory valuation methods.  Computations and concepts. Wave Riders Surf Board Company began business on January 1 of the current year. Purchases of surf boards were as follows:3100 boards <& $125Mar. 1750 boards @ $130May 9246 boards @ $140July 3400 boards @ $150Oct. 2374 boards @ $160Wave Riders sold 710 boards at an average price of $250 per board. The company uses a periodic inventory system.Instructions:Calculate cost of goods sold, ending inventory, and gross profit under each of the following inventory valuation methods: First-in, first-out<strong>ACC 205 Week 3 JOURNAL</strong>Inventory JournalReflect for a moment on the LIFO (Last in First Out) and FIFO (First in First Out) inventory methods.  If you were starting a small manufacturing company, what inventory method do you believe would provide the most accurate financial statements?  Why do you believe this is the case?<strong>ACC 205 Week 3 DQs</strong>Week 3 DQ 1 LIFO vs. FIFOThe controller of Sagehen Enterprises believes that the company should switch from the LIFO method to the FIFO method.  The controller’s bonus is based on the next income.  It is the controller’s belief that the switch in inventory methods would increase the net income of the company.  What are the differences between the LIFO and FIFO methods?Week 3 DQ 2 DepreciationA variety of depreciation methods are used to allocate the cost of an asset to all of the accounting periods benefited by the use of the asset.  Your client has just purchased a piece of equipment for $100,000.   Explain the concept of depreciation.  Which of the following depreciation methods would you recommend: straight-line depreciation, double declining balance method, or an alternative method?<strong>ACC 205 Week Four Exercise Assignment Liability</strong>1.  Prepayments by customers.Greenland Enterprises began a new magazine in the fourth quarter of 19X2. Annual subscriptions, which cost $18 each, were sold as follows:Number ofSubscriptionsSoldOctober400November700December1,000If subscriptions begin (and magazines are sent) in the month of sale:a.  Present the necessary journal entry to record the magazine subscriptions sold during the fourth quarter.b.  Determine how much subscription revenue Greenland earned by the end of 19X2.c.  Compute Greenland's liability to subscribers at the end of 19X2.2.  Notes payable. Sentry Security Systems purchased $72,000 of office equipment on April 1, 19X3, by signing a three-year, 12% note payable to Sharp, Inc. One-third of the principal, along with interest on the outstanding balance, is payable each April 1 until maturity. (The first payment is due in 19X4.)a.  Fill in the following table to reflect Sentry's liabilities, assuming a March 31 year-end.March 3119X4   19X5  19X6Current liabilitiesCurrent portion of long-term debtInterest payableLong-term liabilitiesLong-term debtb.  Assuming that interest is properly recorded at the end of each year, present the proper journal entry to record the last payment on April 1, 19X6.3.  Notes payable. Red Bank Enterprises was involved in the following transactions during the fiscal year ended October 31:Aug. 2Borrowed $75,000 from the Bank of Kingsville by signing a 120-day note for $79,000.20Issued a $40,000 note to Harris Motors for the purchase of a $40,000 delivery truck. The note is due in 180 days and car­ries a 12% interest rate.Sept. 10Purchased merchandise from Pans Enterprises in the amount of $15,000. Issued a 30-day, 12% note in settlement of the balance owed.11Issued a $60,000 note to Datatex Equipment in settlement of an overdue account payable of the same amount. The note is due in 30 days and carries a 14% interest rate.Oct. 10The note to Paris Enterprises was paid in full.11The note to Datatex Equipment was due today, but insuffi­cient funds were available for payment. Management autho­rized the issuance of a new 20-day, 18% note for $60,700, the maturity value of the original obligation.31The new note to Datatex Equipment was paid in full.Instructions:a.  Prepare journal entries to record the transactions.b.  Prepare adjusting entries on October 31 to record accrued interest.c.  Prepare the current liability section of Red Bank's balance sheet as of October 31.Assume the Accounts Payable account totals $203,600 on this date.4.  Partner investments; journal entries. The LP partnership was formed on January 1, 19X7, by investments from Bill Levy and Marv Parcells. Levy contributed $30,000 cash and $80,000 of land. Parcells contributed various assets from a business that he had operated over the past five years. A balance sheet from that business disclosed the following:Accounts receivable  $ 27,000Allowance for uncollectibles  (3,200)Equipment  68,000Accumulated depreciation  (24,000)The partners confirmed that the allowance for uncollectible accounts should be decreased by $600. In addition, an independent appraisal deter­mined that fair market values of the land and equipment on January 1 were $125,000 and $35,000, respectively.Prepare the journal entries needed to record the investments of Levy and Parcells.5.  Income distribution: Different arrangements. Frank, Gatti, and Hogan recently invested 530,000 each and formed the Apex partnership. During the first year of operation, the business gener­ated a net income of $39,000. Determine the proper division of income among the partners for the following independent cases:a.  Income is divided on the basis of a ratio of the beginning capital invest­ments.b.  Partners are allowed 12% interest on their investments; the remaining profits and losses are allocated on a 6 :1 :3 basis.c.  Frank and Hogan each receive salary allowances of $24,000 per year; the remaining profits and losses are shared equally.6.  Investment by partners; financial statements. Abram, Haas, and Tidwell formed a partnership to practice law by com­bining their respective sole proprietorships. The assets and liabilities con­tributed to the firm on January 2, 19X4, the date of formation, follow.AbramLandBook Value$40,000FairMarket Value$115,000Mortgage payable38,00038,000HaasOffice supplies42,00030,000Office equipment64,00048,000TidwellCash50,00050,000Accounts receivable20,00018,000Short-term investments4,0007,000Instructions:a.  Prepare journal entries to record the investments of Abram, Haas Tidwell in the new partnership.b.  Prepare a classified balance sheet for the partnership immediately after the investments are recorded.c.  The partners share profits and losses equally, and the first year's n income was $66,000. Cash withdrawals of $5,000 were made by Abram,$22,000 by Haas, and $17,000 by Tidwell. Prepare the December 31 19X4, statement of partners' equity for the firm<strong>ACC 205 Week 4 JOURNAL</strong>Future Obligations JournalThe current liability section of the balance sheet lists the liabilities that are due within the next 12 months.  Reflecting on your current financial situation, apply the concept of current liabilities.  What does this analysis tell you about your future obligations?  What did you learn from this experience?<strong>ACC 205 Week 4 DQs</strong>Week 4 DQ 1 Current LiabilityWhat is a current liability?  From the perspective of a user of financial statements, why do you believe current liabilities are separated from long-term liabilities?  Based on your current experience as well as and any additional research you may have done provide two examples of situations where businesses collect monies from customers and employees and report these amounts as a current liability.Guided Response:Review several of your peers’ posts and identify the core components of a current liability.  Respond to at least two of your peers and provide recommendations to extend their thinking.  Challenge your peers by asking a question that may cause them to reevaluate if their example is a current liability.Week 4 DQ 2 Client RecommendationsA client comes to you thinking about starting a consulting business.  Your client is specifically  interested in what type of entity should be created for this new business.  Based on your readings or any additional research you may have done, discuss the advantages and disadvantages of the following: sole proprietorship, partnership, and corporation.  Based on these advantages and disadvantages provide a clear recommendation to your client.Let at least two of your peers posts know if an alternative choice of entity would be possible.  What would be the benefits of this new entity choice?  Would there be any disadvantages associated with this new entity selection.Guided Response:Let at least two of your peers know if an alternative choice of entity would be possible?  What would be the benefits of this new entity choice?  Would there be any disadvantages associated with this new entity selection?<strong>ACC 205 Week Five Exercise Assignment Financial Ratios</strong>1.  Liquidity ratios. Edison, Stagg, and Thornton have the following financial information at the close of business on July 10:EdisonStaggThorntonCash$4,000$2,500$1,000Short-term investments3,0002,5002,000Accounts receivable2,0002,5003,000Inventory1,0002,5004,000Prepaid expenses800800800Accounts payable200200200Notes payable: short-term3,1003,1003,100Accrued payables300300300Long-term liabilities3,8003,8003,800Compute the current and quick ratios for each of the three companies. (Round calculations to two decimal places.) Which firm is the most liquid? Why? Suppose Thornton is using FIFO for inventory valuation and Edison is using LIFO. Comment on the comparability of information between these two companies. If all short-term notes payable are due on July 11 at 8 a.m., comment on each company's ability to settle its obligation in a timely manner. 2.  Computation and evaluation of activity ratios. The following data relate to Alaska Products, Inc:19X519X4Net credit sales$832,000$760,000Cost of goods sold440,000350,000Cash, Dec. 31125,000110,000Accounts receivable, Dec. 31180,000140,000Inventory, Dec. 3170,00050,000Accounts payable, Dec. 31115,000108,000The company is planning to borrow $300,000 via a 90-day bank loan to cover short-term operating needs.Compute the accounts receivable and inventory turnover ratios for 19X5. Alaska rounds all calculations to two decimal places. Study the ratios from part (a) and comment on the company's ability to repay a bank loan in 90 days. Suppose that Alaska's major line of business involves the processing and distribution of fresh and frozen fish throughout the United States. Do you have any concerns about the company's inventory turnover ratio? Briefly discuss. 3.  Profitability ratios, trading on the equity. Digital Relay has both preferred and common stock outstanding. The com­pany reported the following information for 19X7:Net sales$1,500,000Interest expense120,000Income tax expense80,000Preferred dividends25,000Net income130,000Average assets1,100,000Average common stockholders' equity400,000Compute the profit margin on sales and the rates of return on assets and common stockholders' equity, rounding calculations to two decimal places. Does the firm have positive or negative financial leverage? Briefly ex­plain. 4.  Financial statement construction via ratios. Incomplete financial statements of Lock Box, Inc., are presented below.LOCK BOX, INC.Income StatementFor the Year Ended December 31, 19X3Sales$ ?Cost of goods sold?Gross profit$15,000,000Operating expenses & interest?Income before tax$ ?Income taxes, 40%?Net income$ ?LOCK BOX, INC.Balance SheetDecember 31, 19X3AssetsCashAccounts receivableInventoryProperty, plant, &. equipmentTotal assets$ ???8,000,000$24,000,000Liabilities & Stockholders' EquityAccounts payableNotes payable (short-term)Bonds payableCommon stockRetained earningsTotal liabilities & stockholders' equity$ ?600,000 4,600,0002,000,000?$24,000,000Further information:Cost of goods sold is 60% of sales. All sales are on account. The company's beginning inventory is $5 million; inventory turnover is 4. The debt to total assets ratio is 70%. The profit margin on sales is 6%. The firm's accounts receivable turnover is 5. Receivables increased by $400,000 during the year.Instructions:Using the preceding data, complete the income statement and the balance sheet.<strong>ACC 205 WK 5 JOURNAL</strong>Most Important Ratio JournalReflect for a moment on the ratios (working capital, current ratio, quick ratio, debt to asset, debt to equity, times interest earned, gross margin and net margin) presented this week.  If you were considering investing in a company what ratio would be the most important to you?  Formulate and argument to defend your position.<strong>ACC 205 Week 5 Boeing Financial Statement Analysis</strong><strong>ACC 205 Week 5 DQs</strong>Week 5 DQ 1 RatiosRatios provide the users of financial statements with a great deal of information about the entity.  Do ratios tell the whole story?  How could liquidity ratios be used by investors to determine whether or not to invest in a company?Guided Response:Let at least two of your peers know how debt service ratios can be used by a lender in determining whether or not to lend money to a company.Week 5 DQ 2 Profit Margin<table width="431"><tbody><tr><td width="128"> </td><td width="91">Year Ending December 2012</td><td width="106">Year Ending December 2011</td><td width="106">Year Ending December 2010</td></tr><tr><td width="128">Revenues</td><td width="91">40,000</td><td width="106">35,000</td><td width="106">33,000</td></tr><tr><td width="128">Operating Expenses</td><td width="91"> </td><td width="106"> </td><td width="106"> </td></tr><tr><td width="128">Salaries</td><td width="91">15,000</td><td width="106">10,000</td><td width="106">9,000</td></tr><tr><td width="128">Maintenance and Repairs</td><td width="91">6,000</td><td width="106">9,000</td><td width="106">10,000</td></tr><tr><td width="128">Rental Expense</td><td width="91">2,500</td><td width="106">2,500</td><td width="106">2,500</td></tr><tr><td width="128">Depreciation</td><td width="91">2,000</td><td width="106">2,000</td><td width="106">2,000</td></tr><tr><td width="128">Fuel</td><td width="91">4,000</td><td width="106">3,500</td><td width="106">2,500</td></tr><tr><td width="128">Total Operating Expenses</td><td width="91">29,500</td><td width="106">27,000</td><td width="106">26,000</td></tr><tr><td width="128">Operating Income</td><td width="91">10,500</td><td width="106">8,000</td><td width="106">7,000</td></tr><tr><td width="128">Sales and Administrative Expenses</td><td width="91">6,000</td><td width="106">4,000</td><td width="106">3,000</td></tr><tr><td width="128">Interest Expense</td><td width="91">2,500</td><td width="106">2,000</td><td width="106">1,000</td></tr><tr><td width="128">Net Income</td><td width="91">2,000</td><td width="106">2,000</td><td width="106">3,000</td></tr></tbody></table>Above is a comparative income statement for Cecil, Inc. for the years 2010, 2011, and 2012.  Calculate the profit margin for each of these years.  Comment on the profit margin trend.Guided Response:Let at least two of your peers posts know what you changes you would recommend to improve the net margin of the company.
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<strong>ACC 205 Week One Exercise Assignment Basic Accounting Equations</strong>Week One Exercise AssignmentBasic Accounting Equations1. Basic concepts. Jean's Marine Supply specializes in the sale of boating equipment and acces­sories. Identify the items that follow as an asset (A), liability (L), revenue (R), or expense (E) from the firm's viewpoint.a. The inventory of boating supplies owned by the company.b. Monthly rental charges paid for store space.c. A loan owed to Citizens Bank.d. New computer equipment purchased to handle daily record keeping.e. Daily sales made to customers.f. Amounts due from customers.g. Land owned by the company to be used as a future store site.h. Weekly salaries paid to salespeople.2. Analysis of transactions.Set up the following headings across a piece of paper:Assets = Liabilities + Owner's EquityBy using "+" and "-," indicate the effect of each of the following transac­tions on total assets, liabilities, and owner's equity:a. Processed a $5,000 cash withdrawal for the owner.b. Recorded the receipt of May's utility bill, to be paid in June.c. Provided services to customers on account.d. Paid the current month's advertising charges.e. Purchased a $27,000 delivery truck by paying $5,000 down and securing a loan for the remaining balance.f. Received $11,000 cash from the owner as an investment in the business.g. Returned a new computer and printer purchased earlier in the month on account. The bill had not as yet been paid.h. Paid the utility bill recorded previously in (b).3. Balance sheet preparation.The following data relate to Preston Company as of December 31, 19XX:Building $44,000 Accounts receivable $24,000Cash 17,000 Loan payable 30,000J. Preston, capital 65,000 Land 21,000Accounts payable ?Prepare a balance sheet in good form as of December 31, 19XX.4. Statement preparationThe following information is taken from the accounting records of Grimball Cardiology at the close of business on December 31, 19X1:Accounts payable $ 14,700Surgery revenue $175,000Surgical expenses 80,000Cash 60,000Surgical equipment 37,000Office Equipment 118,000Salaries expense 30,000Rent expense 15,000Accounts receivable 135,000Loan payable 10,300Utilities expense 5,000All equipment was acquired just prior to year-end. Conversations with the practice's bookkeeper revealed the data that follow.Rose Grimball, capital (January 1, 19X1) $300,00019X1 owner investments 2,00019X1 owner withdrawals 22,000Instructionsa. Prepare the income statement for Grimball Cardiology in good form.b. Prepare a statement of owner's equity in good form.c. Prepare Grimball's balance sheet in good form.5. Recognition of normal balancesThe following items appeared in the accounting records of Triguero's, a retail music store that also sponsors concerts. Classify each of the items as an asset, liability; revenue; or expense from the company's viewpoint. Also indicate the normal account balance of each item.a. The albums, tapes, and CDs held for sale to customers.b. A long-term loan owed to Citizens Bank.c. Promotional costs to publicize a concert.d. Daily receipts for merchandise sold,e. Amounts due from customers,f. Land held as an investment,g. A new fax machine purchased for office use.h. Amounts to be paid in 10 days to suppliers,i. Amounts paid to a mall for rent.6. Basic journal entriesThe following transactions pertain to the Jennifer Royall Company:Apr. 1Received cash of $15,000 and land valued at $10,000 fromJenni­fer Royall as an investment in the business.5 Provided $1,200 of services to Jason Ratchford, a client.Ratchford agreed to pay $800 in 15 days and the remaining amount in May.9 Paid $250 of salaries to an employee.14 Acquired a new computer for $3,200; Royall will pay the dealer in May.20 Collected $800 from Jason Ratchford for services provided on April 5.24 Borrowed $7,500 from BestBanc by securing a six-month loan.Prepare journal entries (and explanations) to record the preceding transactions and events.7. Journal entry preparationOn January 1 of the current year, MuniServ began operations with $100,000 cash. The cash was obtained from an owner investment by Peter Houston of $70,000 and a $30,000 bank loan. Shortly thereafter, the company ac­quired selected assets of a bankrupt competitor. The acquisition included land ($15,000), a building ($40,000), and vehicles ($10,000). MuniServ paid $45,000 at the time of the transaction and agreed to remit the remaining balance due of $20,000 (an account payable) by February 15.During January, the company had additional cash outlays for the follow­ing items:Purchases of store equipment $4,600Loan payment, including $100 interest 500Salaries expense 2,300Advertising expense 700The January utilities bill of $200 was received on January 31 and will be paid on February 10. MuniServ rendered services to clients on account amounting to $9,400. All customers have been billed; by month-end, $3,700 had been received in settlement of account balances.Instructionsa. Present journal entries that reflect MuniServ's January transactions, in­cluding the $100,000 raised from the owner investment and loan.b. Compute the total debits, total credits, and ending balance that would befound in the company's Cash account.c. Determine the amount that would be shown on the January 31 trial balance for Accounts Payable. Is the balance a debit or a credit?8. Balance Sheet Review - Select a public company and down a copy of the company’s most recent annual report. You will use these financial statements throughout the rest of this course. As you are aware of the Balance Sheet lists the assets, liabilities, and owner’s equity of the company. Review the company’s balance sheet over a period of three years. Based on your review, what account experienced the largest increase? What account experienced the largest decrease? As a potential investor would either the increase or decrease be considered a positive or negative? Write a 150-200 word summary of the results of your balance sheet analysis.<strong>ACC 205 Week 1 DQs</strong>Week 1 DQ 1As you have learned in this week’s readings the Accounting Equation is Assets = Liabilities + Owners’ Equity. Is the accounting equation true in all instances? Provide sample transactions from your own experiences to demonstrate the validity of the Accounting Equation.Guided Response:Review several of your peers’ postings and identify some core components that you feel should be included in every transaction. Respond to at least two of your peers and provide recommendations to extend their thinking. Challenge your peers by asking a question that may cause them to reevaluate or add components to their transactions.Week 1 DQ 2What does the term account mean? What are the different classifications of accounts? How do the rules for debits and credits impact accounts? Please provide an example of how debits and credits impact accounts.Guided Response:Analyze several of your peers’ posts. Let at least two of your peers know if this knowledge could be used in their everyday lives. Is so, how? If not, why not?<strong>ACC 205 Week 1 JOURNAL</strong>JournalTo complete the following journal entry, go to this week's Journal link in the left navigation.Balance Sheet JournalThe balance sheet is a financial snap shot of a company at  a particular point in time.  The balance sheet lists the assets, liabilities, and equity of the company.  Reflect on your personal financial situation, can you apply the concepts of the balance sheet?  What did you learn from this reflection?<strong>ACC 205 Week Two Exercise Assignment Revenue and Expenses</strong>1.  Revenue and Expenses. Dave Morris began a law practice several years ago, shortly after graduating from law school. During 19X1, he was approached by Delores Silva, who had recently suffered a back injury in an automobile accident. Morris ac­cepted Silva as a client, and in 19X2 proceeded with a lawsuit against Maddox Motors. The suit alleged that Maddox had knowingly sold Silva an automobile with defective brakes. Late in 19X2, the courts awarded Silva $240,000 in damages. Morris was entitled to 40% of this settlement for his fees. In 19X3, Maddox Motors paid Silva and Morris their respective shares of the judgment. Morris incurred secretarial and photocopy charges in 19X2 of $12,000— all related to the Silva case. Of this amount, $8,000 was paid in 19X2 and the balance was paid in 19X3. Assuming that Morris uses the accrual basis of accounting, in what year(s) should the revenue and expense amounts be recognized? Why?2.  Accrual and modified cash basis. The following information pertains to Beta Company for October:Services rendered during October to customers on account $14,380Cash receipts fromOwner investment 7,000Customers on account 5,650Cash customers for services rendered in October 6,800Cash payments toCreditors for expenses incurred during October 4,400Creditors for expenses incurred prior to October 2,100Monroe Equipment for purchase of new machinery onOctober 1 8,400Expenses incurred during October, to be paid in future months 3,725The machinery is expected to have a service life of five years.InstructionsCalculate Beta's net income for October, using the following methods:a.  Accrual basis of accounting.b.  Modified cash basis of accounting.3.  Accounting for prepaid expenses and unearned revenues. Hawaii-Blue began business on January 1 of the current year and offers deep sea fishing trips to tourists. Tourists pay $125 in advance for an all-day outing off the coast of Maui. The company collected monies during January for 210 outings, with 30 of the tourists not planning to take their trips until early February. Hawaii-Blue rents its fishing boat from Pacific Yacht Supply. An agree­ment was signed at the beginning of the year, and $72,000 was paid for the rights to use the boat for two full years.a.  Prepare journal entries to record (1) the collection of monies from tourists and (2) the revenue generated during January.b.  Calculate Hawaii-Blue's total obligation to tourists at the end of January. On what financial statement and in which section would this amount appear?4.  Recognition of concepts. Ron Carroll operates a small company that books entertainers for theaters, parties, conventions, and so forth. The company's fiscal year ends on June 30 Consider the items that follow and classify each as either (1) prepaid expense, (2) unearned revenue, (3} accrued expense, (4) accrued revenue, or (5) none of the foregoing.a.  Amounts paid on June 30 for a one-year insurance policy.b.  Professional fees earned but not billed as of June 30.c.  Repairs to the firm's copy machine, incurred and paid in June.d.  An advance payment from a client for a performance next month at a convention.e.  The payment in item (d) from the client's point of view.f.  Interest owed on the company's bank loan, to be paid in early July.g.  The bank loan payable in item (f).h.  Office supplies on hand at year-end.i.  Bank reconciliations: Missing amountsj.  The following independent cases relate to bank reconciliations. Compute the missing amounts, assuming that no other reconciling items exist.Case ACase BCase CBalance per bank  $6,000$4,000$ ?Outstanding checks  5002,1001,400Deposits in transit  2,00071,000Balance per company records  ?8,0004505.  Bank reconciliation and entries. The following information was taken from the accounting records of Pal­metto Company for the month of January:Balance per bank  $6,150Balance per company records 3,580Bank service charge for January 20Deposits in transit 940Interest on note collected by bank 100Note collected by bank 1,000NSF check returned by the bank with the bank statement 650Outstanding checks 3,080a.  Prepare Palmetto's January bank reconciliation.b.  Prepare any necessary journal entries for Palmetto.6.  Allowance method: Income statement and balance sheet approaches. Tempe Company reported accounts receivable of $300,000 and an allow­ance for uncollectible accounts of $31,000 (credit) on the December 31, 19X2, balance sheet. The following data pertain to 19X3 activities and operations:Sales on account $2,000,000Cash collections from credit customers 1,600,000Sales discounts 50,000Sales returns & allowances 100,000Uncollectible accounts written off 29,000Collections on accounts that were previously written off 2,700Instructionsa.  Prepare journal entries to record the sales- and receivables-related trans­actions from 19X3.b.  Prepare the December 31, 19X3, adjusting entry for uncollectible ac­counts assuming that uncollectibles are estimated to be 2% of net credit sales.c.  Prepare the December 31, 19X3, adjusting entry for uncollectible ac­counts assuming that uncollectibles are estimated at 1% of year-end accounts receivable.d.  Compute the amount of the adjusting entry in part (c) assuming that $46,000, rather than $29,000, of accounts were written off in 19X3.7.  Income Statement Review. Using the annual report of the company that you selected in week 1 please review the company’s income statement over a three year period.  Did sales increase during this time?  Did Cost of Good Sold increase significantly?  Has the company been profitable?  Do you notice any positives based on your analysis of the income statement?  Are there any negatives that potential investors should be aware of?  Write a 150-200 summary of the results of your income statement analysis.<strong>ACC 205 Week 2 JOURNAL</strong>Income Statement JournalThe income statement measures the income and expenses of a company over a specific period of time.  Reflecting on your personal financial statement for the past month, can you apply the principles of the income statement?  What did you learn from this experience?<strong>ACC 205 Week 2 DQs</strong>Week 2 DQ1 Accounting CycleFinancial statements are a product of the accounting cycle.  Think about two different companies: a manufacturing company, and a retail company.  Why would different companies have different accounting cycles?  Would you expect the steps of the accounting cycle to be the same for each company?  Why or why not?Week 2 DQ 2 Bank ReconciliationWhat is the purpose of a bank reconciliation?  What are the reasons for differences between the cash reported in the accounting records and the cash balance in the bank statements?<strong>ACC 205 Week Three Exercise Assignment Inventory</strong>1.  Inventory.Inventory valuation methods: Basic computations.The January beginning inventory of the White Company consisted of 300 units costing $40 each. During the first quarter, the company purchased two batches of goods: 700 units at $44 on February 21 and 800 units at $50 on March 28. Sales during the first quarter were 1,400 units at $75 per unit. The White Company uses a periodic inventory system.Using the White Company data, fill in the chart that follows to compare the results obtained under the FIFO, LIFO, and weighted-average inventory methods.FIFOLIFOWeighted AverageGoods available for sale$$$Ending inventory, March 31Cost of goods sold2.  Analysis of LIFO versus FIFO. Indicate whether LIFO or FIFO best describes each of the following:a.  Gives highest profits when prices fall.b.  Yields lowest income taxes when prices rise.c.  Generates an ending inventory valuation that somewhat approximates replacement cost.d.  Matches recent costs against current selling prices on the income state­ment.e.  Comes closest to approximating the physical flow of goods of a fruit andvegetable dealer.f.  Results in lowest cost of goods sold in inflationary periods.3.  Inventory Errors. The income statements of Diamond Company for the years ended Decem­ber 31, 19X1, and 19X2 follow.19X119X2Net salesCost of goods soldBeginning inventoryAdd: Net purchases$ 95,000 380,000$440,000$109,000 404,000$483,000Goods available forsaleLess: Ending inventory$475,000 109,000$513,000 127,000Cost of goods sold366,000386,000Gross profitOperating expenses$ 74,000 58,000$ 97,000 67,000Net income$ 16,000$ 30,000Diamond uses a periodic inventory system. A detailed review of theaccounting records disclosed the following:a.  A review of 19X1 purchase invoices revealed that a clerk had incor­rectly recorded a $12,600 purchase as $1,260.b.  A $4,800 purchase was made on December 30, 19X2, terms F.O.B. ship­ping point. The invoice was not recorded in 19X2 nor were the goods included in the 19X2 ending physical inventory count. Both the goods and invoice were received in early 19X3, with the invoice being re­corded at that time.c.  Goods costing $3,000 were accidentally excluded from the 19X1 ending physical inventory count. These goods were sold during 19X2, and all aspects of the sale were properly recorded.Instructions:Prepare corrected income statements for 19X1 and 19X2.Determine the impact of the preceding errors on the December 31, 19X2, owner's equity balance.4.  Inventory valuation methods.  Computations and concepts. Wave Riders Surf Board Company began business on January 1 of the current year. Purchases of surf boards were as follows:3100 boards <& $125Mar. 1750 boards @ $130May 9246 boards @ $140July 3400 boards @ $150Oct. 2374 boards @ $160Wave Riders sold 710 boards at an average price of $250 per board. The company uses a periodic inventory system.Instructions:Calculate cost of goods sold, ending inventory, and gross profit under each of the following inventory valuation methods: First-in, first-out<strong>ACC 205 Week 3 JOURNAL</strong>Inventory JournalReflect for a moment on the LIFO (Last in First Out) and FIFO (First in First Out) inventory methods.  If you were starting a small manufacturing company, what inventory method do you believe would provide the most accurate financial statements?  Why do you believe this is the case?<strong>ACC 205 Week 3 DQs</strong>Week 3 DQ 1 LIFO vs. FIFOThe controller of Sagehen Enterprises believes that the company should switch from the LIFO method to the FIFO method.  The controller’s bonus is based on the next income.  It is the controller’s belief that the switch in inventory methods would increase the net income of the company.  What are the differences between the LIFO and FIFO methods?Week 3 DQ 2 DepreciationA variety of depreciation methods are used to allocate the cost of an asset to all of the accounting periods benefited by the use of the asset.  Your client has just purchased a piece of equipment for $100,000.   Explain the concept of depreciation.  Which of the following depreciation methods would you recommend: straight-line depreciation, double declining balance method, or an alternative method?<strong>ACC 205 Week Four Exercise Assignment Liability</strong>1.  Prepayments by customers.Greenland Enterprises began a new magazine in the fourth quarter of 19X2. Annual subscriptions, which cost $18 each, were sold as follows:Number ofSubscriptionsSoldOctober400November700December1,000If subscriptions begin (and magazines are sent) in the month of sale:a.  Present the necessary journal entry to record the magazine subscriptions sold during the fourth quarter.b.  Determine how much subscription revenue Greenland earned by the end of 19X2.c.  Compute Greenland's liability to subscribers at the end of 19X2.2.  Notes payable. Sentry Security Systems purchased $72,000 of office equipment on April 1, 19X3, by signing a three-year, 12% note payable to Sharp, Inc. One-third of the principal, along with interest on the outstanding balance, is payable each April 1 until maturity. (The first payment is due in 19X4.)a.  Fill in the following table to reflect Sentry's liabilities, assuming a March 31 year-end.March 3119X4   19X5  19X6Current liabilitiesCurrent portion of long-term debtInterest payableLong-term liabilitiesLong-term debtb.  Assuming that interest is properly recorded at the end of each year, present the proper journal entry to record the last payment on April 1, 19X6.3.  Notes payable. Red Bank Enterprises was involved in the following transactions during the fiscal year ended October 31:Aug. 2Borrowed $75,000 from the Bank of Kingsville by signing a 120-day note for $79,000.20Issued a $40,000 note to Harris Motors for the purchase of a $40,000 delivery truck. The note is due in 180 days and car­ries a 12% interest rate.Sept. 10Purchased merchandise from Pans Enterprises in the amount of $15,000. Issued a 30-day, 12% note in settlement of the balance owed.11Issued a $60,000 note to Datatex Equipment in settlement of an overdue account payable of the same amount. The note is due in 30 days and carries a 14% interest rate.Oct. 10The note to Paris Enterprises was paid in full.11The note to Datatex Equipment was due today, but insuffi­cient funds were available for payment. Management autho­rized the issuance of a new 20-day, 18% note for $60,700, the maturity value of the original obligation.31The new note to Datatex Equipment was paid in full.Instructions:a.  Prepare journal entries to record the transactions.b.  Prepare adjusting entries on October 31 to record accrued interest.c.  Prepare the current liability section of Red Bank's balance sheet as of October 31.Assume the Accounts Payable account totals $203,600 on this date.4.  Partner investments; journal entries. The LP partnership was formed on January 1, 19X7, by investments from Bill Levy and Marv Parcells. Levy contributed $30,000 cash and $80,000 of land. Parcells contributed various assets from a business that he had operated over the past five years. A balance sheet from that business disclosed the following:Accounts receivable  $ 27,000Allowance for uncollectibles  (3,200)Equipment  68,000Accumulated depreciation  (24,000)The partners confirmed that the allowance for uncollectible accounts should be decreased by $600. In addition, an independent appraisal deter­mined that fair market values of the land and equipment on January 1 were $125,000 and $35,000, respectively.Prepare the journal entries needed to record the investments of Levy and Parcells.5.  Income distribution: Different arrangements. Frank, Gatti, and Hogan recently invested 530,000 each and formed the Apex partnership. During the first year of operation, the business gener­ated a net income of $39,000. Determine the proper division of income among the partners for the following independent cases:a.  Income is divided on the basis of a ratio of the beginning capital invest­ments.b.  Partners are allowed 12% interest on their investments; the remaining profits and losses are allocated on a 6 :1 :3 basis.c.  Frank and Hogan each receive salary allowances of $24,000 per year; the remaining profits and losses are shared equally.6.  Investment by partners; financial statements. Abram, Haas, and Tidwell formed a partnership to practice law by com­bining their respective sole proprietorships. The assets and liabilities con­tributed to the firm on January 2, 19X4, the date of formation, follow.AbramLandBook Value$40,000FairMarket Value$115,000Mortgage payable38,00038,000HaasOffice supplies42,00030,000Office equipment64,00048,000TidwellCash50,00050,000Accounts receivable20,00018,000Short-term investments4,0007,000Instructions:a.  Prepare journal entries to record the investments of Abram, Haas Tidwell in the new partnership.b.  Prepare a classified balance sheet for the partnership immediately after the investments are recorded.c.  The partners share profits and losses equally, and the first year's n income was $66,000. Cash withdrawals of $5,000 were made by Abram,$22,000 by Haas, and $17,000 by Tidwell. Prepare the December 31 19X4, statement of partners' equity for the firm<strong>ACC 205 Week 4 JOURNAL</strong>Future Obligations JournalThe current liability section of the balance sheet lists the liabilities that are due within the next 12 months.  Reflecting on your current financial situation, apply the concept of current liabilities.  What does this analysis tell you about your future obligations?  What did you learn from this experience?<strong>ACC 205 Week 4 DQs</strong>Week 4 DQ 1 Current LiabilityWhat is a current liability?  From the perspective of a user of financial statements, why do you believe current liabilities are separated from long-term liabilities?  Based on your current experience as well as and any additional research you may have done provide two examples of situations where businesses collect monies from customers and employees and report these amounts as a current liability.Guided Response:Review several of your peers’ posts and identify the core components of a current liability.  Respond to at least two of your peers and provide recommendations to extend their thinking.  Challenge your peers by asking a question that may cause them to reevaluate if their example is a current liability.Week 4 DQ 2 Client RecommendationsA client comes to you thinking about starting a consulting business.  Your client is specifically  interested in what type of entity should be created for this new business.  Based on your readings or any additional research you may have done, discuss the advantages and disadvantages of the following: sole proprietorship, partnership, and corporation.  Based on these advantages and disadvantages provide a clear recommendation to your client.Let at least two of your peers posts know if an alternative choice of entity would be possible.  What would be the benefits of this new entity choice?  Would there be any disadvantages associated with this new entity selection.Guided Response:Let at least two of your peers know if an alternative choice of entity would be possible?  What would be the benefits of this new entity choice?  Would there be any disadvantages associated with this new entity selection?<strong>ACC 205 Week Five Exercise Assignment Financial Ratios</strong>1.  Liquidity ratios. Edison, Stagg, and Thornton have the following financial information at the close of business on July 10:EdisonStaggThorntonCash$4,000$2,500$1,000Short-term investments3,0002,5002,000Accounts receivable2,0002,5003,000Inventory1,0002,5004,000Prepaid expenses800800800Accounts payable200200200Notes payable: short-term3,1003,1003,100Accrued payables300300300Long-term liabilities3,8003,8003,800Compute the current and quick ratios for each of the three companies. (Round calculations to two decimal places.) Which firm is the most liquid? Why? Suppose Thornton is using FIFO for inventory valuation and Edison is using LIFO. Comment on the comparability of information between these two companies. If all short-term notes payable are due on July 11 at 8 a.m., comment on each company's ability to settle its obligation in a timely manner. 2.  Computation and evaluation of activity ratios. The following data relate to Alaska Products, Inc:19X519X4Net credit sales$832,000$760,000Cost of goods sold440,000350,000Cash, Dec. 31125,000110,000Accounts receivable, Dec. 31180,000140,000Inventory, Dec. 3170,00050,000Accounts payable, Dec. 31115,000108,000The company is planning to borrow $300,000 via a 90-day bank loan to cover short-term operating needs.Compute the accounts receivable and inventory turnover ratios for 19X5. Alaska rounds all calculations to two decimal places. Study the ratios from part (a) and comment on the company's ability to repay a bank loan in 90 days. Suppose that Alaska's major line of business involves the processing and distribution of fresh and frozen fish throughout the United States. Do you have any concerns about the company's inventory turnover ratio? Briefly discuss. 3.  Profitability ratios, trading on the equity. Digital Relay has both preferred and common stock outstanding. The com­pany reported the following information for 19X7:Net sales$1,500,000Interest expense120,000Income tax expense80,000Preferred dividends25,000Net income130,000Average assets1,100,000Average common stockholders' equity400,000Compute the profit margin on sales and the rates of return on assets and common stockholders' equity, rounding calculations to two decimal places. Does the firm have positive or negative financial leverage? Briefly ex­plain. 4.  Financial statement construction via ratios. Incomplete financial statements of Lock Box, Inc., are presented below.LOCK BOX, INC.Income StatementFor the Year Ended December 31, 19X3Sales$ ?Cost of goods sold?Gross profit$15,000,000Operating expenses & interest?Income before tax$ ?Income taxes, 40%?Net income$ ?LOCK BOX, INC.Balance SheetDecember 31, 19X3AssetsCashAccounts receivableInventoryProperty, plant, &. equipmentTotal assets$ ???8,000,000$24,000,000Liabilities & Stockholders' EquityAccounts payableNotes payable (short-term)Bonds payableCommon stockRetained earningsTotal liabilities & stockholders' equity$ ?600,000 4,600,0002,000,000?$24,000,000Further information:Cost of goods sold is 60% of sales. All sales are on account. The company's beginning inventory is $5 million; inventory turnover is 4. The debt to total assets ratio is 70%. The profit margin on sales is 6%. The firm's accounts receivable turnover is 5. Receivables increased by $400,000 during the year.Instructions:Using the preceding data, complete the income statement and the balance sheet.<strong>ACC 205 WK 5 JOURNAL</strong>Most Important Ratio JournalReflect for a moment on the ratios (working capital, current ratio, quick ratio, debt to asset, debt to equity, times interest earned, gross margin and net margin) presented this week.  If you were considering investing in a company what ratio would be the most important to you?  Formulate and argument to defend your position.<strong>ACC 205 Week 5 Boeing Financial Statement Analysis</strong><strong>ACC 205 Week 5 DQs</strong>Week 5 DQ 1 RatiosRatios provide the users of financial statements with a great deal of information about the entity.  Do ratios tell the whole story?  How could liquidity ratios be used by investors to determine whether or not to invest in a company?Guided Response:Let at least two of your peers know how debt service ratios can be used by a lender in determining whether or not to lend money to a company.Week 5 DQ 2 Profit Margin<table width="431"><tbody><tr><td width="128"> </td><td width="91">Year Ending December 2012</td><td width="106">Year Ending December 2011</td><td width="106">Year Ending December 2010</td></tr><tr><td width="128">Revenues</td><td width="91">40,000</td><td width="106">35,000</td><td width="106">33,000</td></tr><tr><td width="128">Operating Expenses</td><td width="91"> </td><td width="106"> </td><td width="106"> </td></tr><tr><td width="128">Salaries</td><td width="91">15,000</td><td width="106">10,000</td><td width="106">9,000</td></tr><tr><td width="128">Maintenance and Repairs</td><td width="91">6,000</td><td width="106">9,000</td><td width="106">10,000</td></tr><tr><td width="128">Rental Expense</td><td width="91">2,500</td><td width="106">2,500</td><td width="106">2,500</td></tr><tr><td width="128">Depreciation</td><td width="91">2,000</td><td width="106">2,000</td><td width="106">2,000</td></tr><tr><td width="128">Fuel</td><td width="91">4,000</td><td width="106">3,500</td><td width="106">2,500</td></tr><tr><td width="128">Total Operating Expenses</td><td width="91">29,500</td><td width="106">27,000</td><td width="106">26,000</td></tr><tr><td width="128">Operating Income</td><td width="91">10,500</td><td width="106">8,000</td><td width="106">7,000</td></tr><tr><td width="128">Sales and Administrative Expenses</td><td width="91">6,000</td><td width="106">4,000</td><td width="106">3,000</td></tr><tr><td width="128">Interest Expense</td><td width="91">2,500</td><td width="106">2,000</td><td width="106">1,000</td></tr><tr><td width="128">Net Income</td><td width="91">2,000</td><td width="106">2,000</td><td width="106">3,000</td></tr></tbody></table>Above is a comparative income statement for Cecil, Inc. for the years 2010, 2011, and 2012.  Calculate the profit margin for each of these years.  Comment on the profit margin trend.Guided Response:Let at least two of your peers posts know what you changes you would recommend to improve the net margin of the company.
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<strong>ACC 205 Week One Exercise Assignment Basic Accounting Equations</strong>Week One Exercise AssignmentBasic Accounting Equations1. Basic concepts. Jean's Marine Supply specializes in the sale of boating equipment and acces­sories. Identify the items that follow as an asset (A), liability (L), revenue (R), or expense (E) from the firm's viewpoint.a. The inventory of boating supplies owned by the company.b. Monthly rental charges paid for store space.c. A loan owed to Citizens Bank.d. New computer equipment purchased to handle daily record keeping.e. Daily sales made to customers.f. Amounts due from customers.g. Land owned by the company to be used as a future store site.h. Weekly salaries paid to salespeople.2. Analysis of transactions.Set up the following headings across a piece of paper:Assets = Liabilities + Owner's EquityBy using "+" and "-," indicate the effect of each of the following transac­tions on total assets, liabilities, and owner's equity:a. Processed a $5,000 cash withdrawal for the owner.b. Recorded the receipt of May's utility bill, to be paid in June.c. Provided services to customers on account.d. Paid the current month's advertising charges.e. Purchased a $27,000 delivery truck by paying $5,000 down and securing a loan for the remaining balance.f. Received $11,000 cash from the owner as an investment in the business.g. Returned a new computer and printer purchased earlier in the month on account. The bill had not as yet been paid.h. Paid the utility bill recorded previously in (b).3. Balance sheet preparation.The following data relate to Preston Company as of December 31, 19XX:Building $44,000 Accounts receivable $24,000Cash 17,000 Loan payable 30,000J. Preston, capital 65,000 Land 21,000Accounts payable ?Prepare a balance sheet in good form as of December 31, 19XX.4. Statement preparationThe following information is taken from the accounting records of Grimball Cardiology at the close of business on December 31, 19X1:Accounts payable $ 14,700Surgery revenue $175,000Surgical expenses 80,000Cash 60,000Surgical equipment 37,000Office Equipment 118,000Salaries expense 30,000Rent expense 15,000Accounts receivable 135,000Loan payable 10,300Utilities expense 5,000All equipment was acquired just prior to year-end. Conversations with the practice's bookkeeper revealed the data that follow.Rose Grimball, capital (January 1, 19X1) $300,00019X1 owner investments 2,00019X1 owner withdrawals 22,000Instructionsa. Prepare the income statement for Grimball Cardiology in good form.b. Prepare a statement of owner's equity in good form.c. Prepare Grimball's balance sheet in good form.5. Recognition of normal balancesThe following items appeared in the accounting records of Triguero's, a retail music store that also sponsors concerts. Classify each of the items as an asset, liability; revenue; or expense from the company's viewpoint. Also indicate the normal account balance of each item.a. The albums, tapes, and CDs held for sale to customers.b. A long-term loan owed to Citizens Bank.c. Promotional costs to publicize a concert.d. Daily receipts for merchandise sold,e. Amounts due from customers,f. Land held as an investment,g. A new fax machine purchased for office use.h. Amounts to be paid in 10 days to suppliers,i. Amounts paid to a mall for rent.6. Basic journal entriesThe following transactions pertain to the Jennifer Royall Company:Apr. 1Received cash of $15,000 and land valued at $10,000 fromJenni­fer Royall as an investment in the business.5 Provided $1,200 of services to Jason Ratchford, a client.Ratchford agreed to pay $800 in 15 days and the remaining amount in May.9 Paid $250 of salaries to an employee.14 Acquired a new computer for $3,200; Royall will pay the dealer in May.20 Collected $800 from Jason Ratchford for services provided on April 5.24 Borrowed $7,500 from BestBanc by securing a six-month loan.Prepare journal entries (and explanations) to record the preceding transactions and events.7. Journal entry preparationOn January 1 of the current year, MuniServ began operations with $100,000 cash. The cash was obtained from an owner investment by Peter Houston of $70,000 and a $30,000 bank loan. Shortly thereafter, the company ac­quired selected assets of a bankrupt competitor. The acquisition included land ($15,000), a building ($40,000), and vehicles ($10,000). MuniServ paid $45,000 at the time of the transaction and agreed to remit the remaining balance due of $20,000 (an account payable) by February 15.During January, the company had additional cash outlays for the follow­ing items:Purchases of store equipment $4,600Loan payment, including $100 interest 500Salaries expense 2,300Advertising expense 700The January utilities bill of $200 was received on January 31 and will be paid on February 10. MuniServ rendered services to clients on account amounting to $9,400. All customers have been billed; by month-end, $3,700 had been received in settlement of account balances.Instructionsa. Present journal entries that reflect MuniServ's January transactions, in­cluding the $100,000 raised from the owner investment and loan.b. Compute the total debits, total credits, and ending balance that would befound in the company's Cash account.c. Determine the amount that would be shown on the January 31 trial balance for Accounts Payable. Is the balance a debit or a credit?8. Balance Sheet Review - Select a public company and down a copy of the company’s most recent annual report. You will use these financial statements throughout the rest of this course. As you are aware of the Balance Sheet lists the assets, liabilities, and owner’s equity of the company. Review the company’s balance sheet over a period of three years. Based on your review, what account experienced the largest increase? What account experienced the largest decrease? As a potential investor would either the increase or decrease be considered a positive or negative? Write a 150-200 word summary of the results of your balance sheet analysis.<strong>ACC 205 Week 1 DQs</strong>Week 1 DQ 1As you have learned in this week’s readings the Accounting Equation is Assets = Liabilities + Owners’ Equity. Is the accounting equation true in all instances? Provide sample transactions from your own experiences to demonstrate the validity of the Accounting Equation.Guided Response:Review several of your peers’ postings and identify some core components that you feel should be included in every transaction. Respond to at least two of your peers and provide recommendations to extend their thinking. Challenge your peers by asking a question that may cause them to reevaluate or add components to their transactions.Week 1 DQ 2What does the term account mean? What are the different classifications of accounts? How do the rules for debits and credits impact accounts? Please provide an example of how debits and credits impact accounts.Guided Response:Analyze several of your peers’ posts. Let at least two of your peers know if this knowledge could be used in their everyday lives. Is so, how? If not, why not?<strong>ACC 205 Week 1 JOURNAL</strong>JournalTo complete the following journal entry, go to this week's Journal link in the left navigation.Balance Sheet JournalThe balance sheet is a financial snap shot of a company at  a particular point in time.  The balance sheet lists the assets, liabilities, and equity of the company.  Reflect on your personal financial situation, can you apply the concepts of the balance sheet?  What did you learn from this reflection?<strong>ACC 205 Week Two Exercise Assignment Revenue and Expenses</strong>1.  Revenue and Expenses. Dave Morris began a law practice several years ago, shortly after graduating from law school. During 19X1, he was approached by Delores Silva, who had recently suffered a back injury in an automobile accident. Morris ac­cepted Silva as a client, and in 19X2 proceeded with a lawsuit against Maddox Motors. The suit alleged that Maddox had knowingly sold Silva an automobile with defective brakes. Late in 19X2, the courts awarded Silva $240,000 in damages. Morris was entitled to 40% of this settlement for his fees. In 19X3, Maddox Motors paid Silva and Morris their respective shares of the judgment. Morris incurred secretarial and photocopy charges in 19X2 of $12,000— all related to the Silva case. Of this amount, $8,000 was paid in 19X2 and the balance was paid in 19X3. Assuming that Morris uses the accrual basis of accounting, in what year(s) should the revenue and expense amounts be recognized? Why?2.  Accrual and modified cash basis. The following information pertains to Beta Company for October:Services rendered during October to customers on account $14,380Cash receipts fromOwner investment 7,000Customers on account 5,650Cash customers for services rendered in October 6,800Cash payments toCreditors for expenses incurred during October 4,400Creditors for expenses incurred prior to October 2,100Monroe Equipment for purchase of new machinery onOctober 1 8,400Expenses incurred during October, to be paid in future months 3,725The machinery is expected to have a service life of five years.InstructionsCalculate Beta's net income for October, using the following methods:a.  Accrual basis of accounting.b.  Modified cash basis of accounting.3.  Accounting for prepaid expenses and unearned revenues. Hawaii-Blue began business on January 1 of the current year and offers deep sea fishing trips to tourists. Tourists pay $125 in advance for an all-day outing off the coast of Maui. The company collected monies during January for 210 outings, with 30 of the tourists not planning to take their trips until early February. Hawaii-Blue rents its fishing boat from Pacific Yacht Supply. An agree­ment was signed at the beginning of the year, and $72,000 was paid for the rights to use the boat for two full years.a.  Prepare journal entries to record (1) the collection of monies from tourists and (2) the revenue generated during January.b.  Calculate Hawaii-Blue's total obligation to tourists at the end of January. On what financial statement and in which section would this amount appear?4.  Recognition of concepts. Ron Carroll operates a small company that books entertainers for theaters, parties, conventions, and so forth. The company's fiscal year ends on June 30 Consider the items that follow and classify each as either (1) prepaid expense, (2) unearned revenue, (3} accrued expense, (4) accrued revenue, or (5) none of the foregoing.a.  Amounts paid on June 30 for a one-year insurance policy.b.  Professional fees earned but not billed as of June 30.c.  Repairs to the firm's copy machine, incurred and paid in June.d.  An advance payment from a client for a performance next month at a convention.e.  The payment in item (d) from the client's point of view.f.  Interest owed on the company's bank loan, to be paid in early July.g.  The bank loan payable in item (f).h.  Office supplies on hand at year-end.i.  Bank reconciliations: Missing amountsj.  The following independent cases relate to bank reconciliations. Compute the missing amounts, assuming that no other reconciling items exist.Case ACase BCase CBalance per bank  $6,000$4,000$ ?Outstanding checks  5002,1001,400Deposits in transit  2,00071,000Balance per company records  ?8,0004505.  Bank reconciliation and entries. The following information was taken from the accounting records of Pal­metto Company for the month of January:Balance per bank  $6,150Balance per company records 3,580Bank service charge for January 20Deposits in transit 940Interest on note collected by bank 100Note collected by bank 1,000NSF check returned by the bank with the bank statement 650Outstanding checks 3,080a.  Prepare Palmetto's January bank reconciliation.b.  Prepare any necessary journal entries for Palmetto.6.  Allowance method: Income statement and balance sheet approaches. Tempe Company reported accounts receivable of $300,000 and an allow­ance for uncollectible accounts of $31,000 (credit) on the December 31, 19X2, balance sheet. The following data pertain to 19X3 activities and operations:Sales on account $2,000,000Cash collections from credit customers 1,600,000Sales discounts 50,000Sales returns & allowances 100,000Uncollectible accounts written off 29,000Collections on accounts that were previously written off 2,700Instructionsa.  Prepare journal entries to record the sales- and receivables-related trans­actions from 19X3.b.  Prepare the December 31, 19X3, adjusting entry for uncollectible ac­counts assuming that uncollectibles are estimated to be 2% of net credit sales.c.  Prepare the December 31, 19X3, adjusting entry for uncollectible ac­counts assuming that uncollectibles are estimated at 1% of year-end accounts receivable.d.  Compute the amount of the adjusting entry in part (c) assuming that $46,000, rather than $29,000, of accounts were written off in 19X3.7.  Income Statement Review. Using the annual report of the company that you selected in week 1 please review the company’s income statement over a three year period.  Did sales increase during this time?  Did Cost of Good Sold increase significantly?  Has the company been profitable?  Do you notice any positives based on your analysis of the income statement?  Are there any negatives that potential investors should be aware of?  Write a 150-200 summary of the results of your income statement analysis.<strong>ACC 205 Week 2 JOURNAL</strong>Income Statement JournalThe income statement measures the income and expenses of a company over a specific period of time.  Reflecting on your personal financial statement for the past month, can you apply the principles of the income statement?  What did you learn from this experience?<strong>ACC 205 Week 2 DQs</strong>Week 2 DQ1 Accounting CycleFinancial statements are a product of the accounting cycle.  Think about two different companies: a manufacturing company, and a retail company.  Why would different companies have different accounting cycles?  Would you expect the steps of the accounting cycle to be the same for each company?  Why or why not?Week 2 DQ 2 Bank ReconciliationWhat is the purpose of a bank reconciliation?  What are the reasons for differences between the cash reported in the accounting records and the cash balance in the bank statements?<strong>ACC 205 Week Three Exercise Assignment Inventory</strong>1.  Inventory.Inventory valuation methods: Basic computations.The January beginning inventory of the White Company consisted of 300 units costing $40 each. During the first quarter, the company purchased two batches of goods: 700 units at $44 on February 21 and 800 units at $50 on March 28. Sales during the first quarter were 1,400 units at $75 per unit. The White Company uses a periodic inventory system.Using the White Company data, fill in the chart that follows to compare the results obtained under the FIFO, LIFO, and weighted-average inventory methods.FIFOLIFOWeighted AverageGoods available for sale$$$Ending inventory, March 31Cost of goods sold2.  Analysis of LIFO versus FIFO. Indicate whether LIFO or FIFO best describes each of the following:a.  Gives highest profits when prices fall.b.  Yields lowest income taxes when prices rise.c.  Generates an ending inventory valuation that somewhat approximates replacement cost.d.  Matches recent costs against current selling prices on the income state­ment.e.  Comes closest to approximating the physical flow of goods of a fruit andvegetable dealer.f.  Results in lowest cost of goods sold in inflationary periods.3.  Inventory Errors. The income statements of Diamond Company for the years ended Decem­ber 31, 19X1, and 19X2 follow.19X119X2Net salesCost of goods soldBeginning inventoryAdd: Net purchases$ 95,000 380,000$440,000$109,000 404,000$483,000Goods available forsaleLess: Ending inventory$475,000 109,000$513,000 127,000Cost of goods sold366,000386,000Gross profitOperating expenses$ 74,000 58,000$ 97,000 67,000Net income$ 16,000$ 30,000Diamond uses a periodic inventory system. A detailed review of theaccounting records disclosed the following:a.  A review of 19X1 purchase invoices revealed that a clerk had incor­rectly recorded a $12,600 purchase as $1,260.b.  A $4,800 purchase was made on December 30, 19X2, terms F.O.B. ship­ping point. The invoice was not recorded in 19X2 nor were the goods included in the 19X2 ending physical inventory count. Both the goods and invoice were received in early 19X3, with the invoice being re­corded at that time.c.  Goods costing $3,000 were accidentally excluded from the 19X1 ending physical inventory count. These goods were sold during 19X2, and all aspects of the sale were properly recorded.Instructions:Prepare corrected income statements for 19X1 and 19X2.Determine the impact of the preceding errors on the December 31, 19X2, owner's equity balance.4.  Inventory valuation methods.  Computations and concepts. Wave Riders Surf Board Company began business on January 1 of the current year. Purchases of surf boards were as follows:3100 boards <& $125Mar. 1750 boards @ $130May 9246 boards @ $140July 3400 boards @ $150Oct. 2374 boards @ $160Wave Riders sold 710 boards at an average price of $250 per board. The company uses a periodic inventory system.Instructions:Calculate cost of goods sold, ending inventory, and gross profit under each of the following inventory valuation methods: First-in, first-out<strong>ACC 205 Week 3 JOURNAL</strong>Inventory JournalReflect for a moment on the LIFO (Last in First Out) and FIFO (First in First Out) inventory methods.  If you were starting a small manufacturing company, what inventory method do you believe would provide the most accurate financial statements?  Why do you believe this is the case?<strong>ACC 205 Week 3 DQs</strong>Week 3 DQ 1 LIFO vs. FIFOThe controller of Sagehen Enterprises believes that the company should switch from the LIFO method to the FIFO method.  The controller’s bonus is based on the next income.  It is the controller’s belief that the switch in inventory methods would increase the net income of the company.  What are the differences between the LIFO and FIFO methods?Week 3 DQ 2 DepreciationA variety of depreciation methods are used to allocate the cost of an asset to all of the accounting periods benefited by the use of the asset.  Your client has just purchased a piece of equipment for $100,000.   Explain the concept of depreciation.  Which of the following depreciation methods would you recommend: straight-line depreciation, double declining balance method, or an alternative method?<strong>ACC 205 Week Four Exercise Assignment Liability</strong>1.  Prepayments by customers.Greenland Enterprises began a new magazine in the fourth quarter of 19X2. Annual subscriptions, which cost $18 each, were sold as follows:Number ofSubscriptionsSoldOctober400November700December1,000If subscriptions begin (and magazines are sent) in the month of sale:a.  Present the necessary journal entry to record the magazine subscriptions sold during the fourth quarter.b.  Determine how much subscription revenue Greenland earned by the end of 19X2.c.  Compute Greenland's liability to subscribers at the end of 19X2.2.  Notes payable. Sentry Security Systems purchased $72,000 of office equipment on April 1, 19X3, by signing a three-year, 12% note payable to Sharp, Inc. One-third of the principal, along with interest on the outstanding balance, is payable each April 1 until maturity. (The first payment is due in 19X4.)a.  Fill in the following table to reflect Sentry's liabilities, assuming a March 31 year-end.March 3119X4   19X5  19X6Current liabilitiesCurrent portion of long-term debtInterest payableLong-term liabilitiesLong-term debtb.  Assuming that interest is properly recorded at the end of each year, present the proper journal entry to record the last payment on April 1, 19X6.3.  Notes payable. Red Bank Enterprises was involved in the following transactions during the fiscal year ended October 31:Aug. 2Borrowed $75,000 from the Bank of Kingsville by signing a 120-day note for $79,000.20Issued a $40,000 note to Harris Motors for the purchase of a $40,000 delivery truck. The note is due in 180 days and car­ries a 12% interest rate.Sept. 10Purchased merchandise from Pans Enterprises in the amount of $15,000. Issued a 30-day, 12% note in settlement of the balance owed.11Issued a $60,000 note to Datatex Equipment in settlement of an overdue account payable of the same amount. The note is due in 30 days and carries a 14% interest rate.Oct. 10The note to Paris Enterprises was paid in full.11The note to Datatex Equipment was due today, but insuffi­cient funds were available for payment. Management autho­rized the issuance of a new 20-day, 18% note for $60,700, the maturity value of the original obligation.31The new note to Datatex Equipment was paid in full.Instructions:a.  Prepare journal entries to record the transactions.b.  Prepare adjusting entries on October 31 to record accrued interest.c.  Prepare the current liability section of Red Bank's balance sheet as of October 31.Assume the Accounts Payable account totals $203,600 on this date.4.  Partner investments; journal entries. The LP partnership was formed on January 1, 19X7, by investments from Bill Levy and Marv Parcells. Levy contributed $30,000 cash and $80,000 of land. Parcells contributed various assets from a business that he had operated over the past five years. A balance sheet from that business disclosed the following:Accounts receivable  $ 27,000Allowance for uncollectibles  (3,200)Equipment  68,000Accumulated depreciation  (24,000)The partners confirmed that the allowance for uncollectible accounts should be decreased by $600. In addition, an independent appraisal deter­mined that fair market values of the land and equipment on January 1 were $125,000 and $35,000, respectively.Prepare the journal entries needed to record the investments of Levy and Parcells.5.  Income distribution: Different arrangements. Frank, Gatti, and Hogan recently invested 530,000 each and formed the Apex partnership. During the first year of operation, the business gener­ated a net income of $39,000. Determine the proper division of income among the partners for the following independent cases:a.  Income is divided on the basis of a ratio of the beginning capital invest­ments.b.  Partners are allowed 12% interest on their investments; the remaining profits and losses are allocated on a 6 :1 :3 basis.c.  Frank and Hogan each receive salary allowances of $24,000 per year; the remaining profits and losses are shared equally.6.  Investment by partners; financial statements. Abram, Haas, and Tidwell formed a partnership to practice law by com­bining their respective sole proprietorships. The assets and liabilities con­tributed to the firm on January 2, 19X4, the date of formation, follow.AbramLandBook Value$40,000FairMarket Value$115,000Mortgage payable38,00038,000HaasOffice supplies42,00030,000Office equipment64,00048,000TidwellCash50,00050,000Accounts receivable20,00018,000Short-term investments4,0007,000Instructions:a.  Prepare journal entries to record the investments of Abram, Haas Tidwell in the new partnership.b.  Prepare a classified balance sheet for the partnership immediately after the investments are recorded.c.  The partners share profits and losses equally, and the first year's n income was $66,000. Cash withdrawals of $5,000 were made by Abram,$22,000 by Haas, and $17,000 by Tidwell. Prepare the December 31 19X4, statement of partners' equity for the firm<strong>ACC 205 Week 4 JOURNAL</strong>Future Obligations JournalThe current liability section of the balance sheet lists the liabilities that are due within the next 12 months.  Reflecting on your current financial situation, apply the concept of current liabilities.  What does this analysis tell you about your future obligations?  What did you learn from this experience?<strong>ACC 205 Week 4 DQs</strong>Week 4 DQ 1 Current LiabilityWhat is a current liability?  From the perspective of a user of financial statements, why do you believe current liabilities are separated from long-term liabilities?  Based on your current experience as well as and any additional research you may have done provide two examples of situations where businesses collect monies from customers and employees and report these amounts as a current liability.Guided Response:Review several of your peers’ posts and identify the core components of a current liability.  Respond to at least two of your peers and provide recommendations to extend their thinking.  Challenge your peers by asking a question that may cause them to reevaluate if their example is a current liability.Week 4 DQ 2 Client RecommendationsA client comes to you thinking about starting a consulting business.  Your client is specifically  interested in what type of entity should be created for this new business.  Based on your readings or any additional research you may have done, discuss the advantages and disadvantages of the following: sole proprietorship, partnership, and corporation.  Based on these advantages and disadvantages provide a clear recommendation to your client.Let at least two of your peers posts know if an alternative choice of entity would be possible.  What would be the benefits of this new entity choice?  Would there be any disadvantages associated with this new entity selection.Guided Response:Let at least two of your peers know if an alternative choice of entity would be possible?  What would be the benefits of this new entity choice?  Would there be any disadvantages associated with this new entity selection?<strong>ACC 205 Week Five Exercise Assignment Financial Ratios</strong>1.  Liquidity ratios. Edison, Stagg, and Thornton have the following financial information at the close of business on July 10:EdisonStaggThorntonCash$4,000$2,500$1,000Short-term investments3,0002,5002,000Accounts receivable2,0002,5003,000Inventory1,0002,5004,000Prepaid expenses800800800Accounts payable200200200Notes payable: short-term3,1003,1003,100Accrued payables300300300Long-term liabilities3,8003,8003,800Compute the current and quick ratios for each of the three companies. (Round calculations to two decimal places.) Which firm is the most liquid? Why? Suppose Thornton is using FIFO for inventory valuation and Edison is using LIFO. Comment on the comparability of information between these two companies. If all short-term notes payable are due on July 11 at 8 a.m., comment on each company's ability to settle its obligation in a timely manner. 2.  Computation and evaluation of activity ratios. The following data relate to Alaska Products, Inc:19X519X4Net credit sales$832,000$760,000Cost of goods sold440,000350,000Cash, Dec. 31125,000110,000Accounts receivable, Dec. 31180,000140,000Inventory, Dec. 3170,00050,000Accounts payable, Dec. 31115,000108,000The company is planning to borrow $300,000 via a 90-day bank loan to cover short-term operating needs.Compute the accounts receivable and inventory turnover ratios for 19X5. Alaska rounds all calculations to two decimal places. Study the ratios from part (a) and comment on the company's ability to repay a bank loan in 90 days. Suppose that Alaska's major line of business involves the processing and distribution of fresh and frozen fish throughout the United States. Do you have any concerns about the company's inventory turnover ratio? Briefly discuss. 3.  Profitability ratios, trading on the equity. Digital Relay has both preferred and common stock outstanding. The com­pany reported the following information for 19X7:Net sales$1,500,000Interest expense120,000Income tax expense80,000Preferred dividends25,000Net income130,000Average assets1,100,000Average common stockholders' equity400,000Compute the profit margin on sales and the rates of return on assets and common stockholders' equity, rounding calculations to two decimal places. Does the firm have positive or negative financial leverage? Briefly ex­plain. 4.  Financial statement construction via ratios. Incomplete financial statements of Lock Box, Inc., are presented below.LOCK BOX, INC.Income StatementFor the Year Ended December 31, 19X3Sales$ ?Cost of goods sold?Gross profit$15,000,000Operating expenses & interest?Income before tax$ ?Income taxes, 40%?Net income$ ?LOCK BOX, INC.Balance SheetDecember 31, 19X3AssetsCashAccounts receivableInventoryProperty, plant, &. equipmentTotal assets$ ???8,000,000$24,000,000Liabilities & Stockholders' EquityAccounts payableNotes payable (short-term)Bonds payableCommon stockRetained earningsTotal liabilities & stockholders' equity$ ?600,000 4,600,0002,000,000?$24,000,000Further information:Cost of goods sold is 60% of sales. All sales are on account. The company's beginning inventory is $5 million; inventory turnover is 4. The debt to total assets ratio is 70%. The profit margin on sales is 6%. The firm's accounts receivable turnover is 5. Receivables increased by $400,000 during the year.Instructions:Using the preceding data, complete the income statement and the balance sheet.<strong>ACC 205 WK 5 JOURNAL</strong>Most Important Ratio JournalReflect for a moment on the ratios (working capital, current ratio, quick ratio, debt to asset, debt to equity, times interest earned, gross margin and net margin) presented this week.  If you were considering investing in a company what ratio would be the most important to you?  Formulate and argument to defend your position.<strong>ACC 205 Week 5 Boeing Financial Statement Analysis</strong><strong>ACC 205 Week 5 DQs</strong>Week 5 DQ 1 RatiosRatios provide the users of financial statements with a great deal of information about the entity.  Do ratios tell the whole story?  How could liquidity ratios be used by investors to determine whether or not to invest in a company?Guided Response:Let at least two of your peers know how debt service ratios can be used by a lender in determining whether or not to lend money to a company.Week 5 DQ 2 Profit Margin<table width="431"><tbody><tr><td width="128"> </td><td width="91">Year Ending December 2012</td><td width="106">Year Ending December 2011</td><td width="106">Year Ending December 2010</td></tr><tr><td width="128">Revenues</td><td width="91">40,000</td><td width="106">35,000</td><td width="106">33,000</td></tr><tr><td width="128">Operating Expenses</td><td width="91"> </td><td width="106"> </td><td width="106"> </td></tr><tr><td width="128">Salaries</td><td width="91">15,000</td><td width="106">10,000</td><td width="106">9,000</td></tr><tr><td width="128">Maintenance and Repairs</td><td width="91">6,000</td><td width="106">9,000</td><td width="106">10,000</td></tr><tr><td width="128">Rental Expense</td><td width="91">2,500</td><td width="106">2,500</td><td width="106">2,500</td></tr><tr><td width="128">Depreciation</td><td width="91">2,000</td><td width="106">2,000</td><td width="106">2,000</td></tr><tr><td width="128">Fuel</td><td width="91">4,000</td><td width="106">3,500</td><td width="106">2,500</td></tr><tr><td width="128">Total Operating Expenses</td><td width="91">29,500</td><td width="106">27,000</td><td width="106">26,000</td></tr><tr><td width="128">Operating Income</td><td width="91">10,500</td><td width="106">8,000</td><td width="106">7,000</td></tr><tr><td width="128">Sales and Administrative Expenses</td><td width="91">6,000</td><td width="106">4,000</td><td width="106">3,000</td></tr><tr><td width="128">Interest Expense</td><td width="91">2,500</td><td width="106">2,000</td><td width="106">1,000</td></tr><tr><td width="128">Net Income</td><td width="91">2,000</td><td width="106">2,000</td><td width="106">3,000</td></tr></tbody></table>Above is a comparative income statement for Cecil, Inc. for the years 2010, 2011, and 2012.  Calculate the profit margin for each of these years.  Comment on the profit margin trend.Guided Response:Let at least two of your peers posts know what you changes you would recommend to improve the net margin of the company.
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<strong>ACC 205 Week One Exercise Assignment Basic Accounting Equations</strong>Week One Exercise AssignmentBasic Accounting Equations1. Basic concepts. Jean's Marine Supply specializes in the sale of boating equipment and acces­sories. Identify the items that follow as an asset (A), liability (L), revenue (R), or expense (E) from the firm's viewpoint.a. The inventory of boating supplies owned by the company.b. Monthly rental charges paid for store space.c. A loan owed to Citizens Bank.d. New computer equipment purchased to handle daily record keeping.e. Daily sales made to customers.f. Amounts due from customers.g. Land owned by the company to be used as a future store site.h. Weekly salaries paid to salespeople.2. Analysis of transactions.Set up the following headings across a piece of paper:Assets = Liabilities + Owner's EquityBy using "+" and "-," indicate the effect of each of the following transac­tions on total assets, liabilities, and owner's equity:a. Processed a $5,000 cash withdrawal for the owner.b. Recorded the receipt of May's utility bill, to be paid in June.c. Provided services to customers on account.d. Paid the current month's advertising charges.e. Purchased a $27,000 delivery truck by paying $5,000 down and securing a loan for the remaining balance.f. Received $11,000 cash from the owner as an investment in the business.g. Returned a new computer and printer purchased earlier in the month on account. The bill had not as yet been paid.h. Paid the utility bill recorded previously in (b).3. Balance sheet preparation.The following data relate to Preston Company as of December 31, 19XX:Building $44,000 Accounts receivable $24,000Cash 17,000 Loan payable 30,000J. Preston, capital 65,000 Land 21,000Accounts payable ?Prepare a balance sheet in good form as of December 31, 19XX.4. Statement preparationThe following information is taken from the accounting records of Grimball Cardiology at the close of business on December 31, 19X1:Accounts payable $ 14,700Surgery revenue $175,000Surgical expenses 80,000Cash 60,000Surgical equipment 37,000Office Equipment 118,000Salaries expense 30,000Rent expense 15,000Accounts receivable 135,000Loan payable 10,300Utilities expense 5,000All equipment was acquired just prior to year-end. Conversations with the practice's bookkeeper revealed the data that follow.Rose Grimball, capital (January 1, 19X1) $300,00019X1 owner investments 2,00019X1 owner withdrawals 22,000Instructionsa. Prepare the income statement for Grimball Cardiology in good form.b. Prepare a statement of owner's equity in good form.c. Prepare Grimball's balance sheet in good form.5. Recognition of normal balancesThe following items appeared in the accounting records of Triguero's, a retail music store that also sponsors concerts. Classify each of the items as an asset, liability; revenue; or expense from the company's viewpoint. Also indicate the normal account balance of each item.a. The albums, tapes, and CDs held for sale to customers.b. A long-term loan owed to Citizens Bank.c. Promotional costs to publicize a concert.d. Daily receipts for merchandise sold,e. Amounts due from customers,f. Land held as an investment,g. A new fax machine purchased for office use.h. Amounts to be paid in 10 days to suppliers,i. Amounts paid to a mall for rent.6. Basic journal entriesThe following transactions pertain to the Jennifer Royall Company:Apr. 1Received cash of $15,000 and land valued at $10,000 fromJenni­fer Royall as an investment in the business.5 Provided $1,200 of services to Jason Ratchford, a client.Ratchford agreed to pay $800 in 15 days and the remaining amount in May.9 Paid $250 of salaries to an employee.14 Acquired a new computer for $3,200; Royall will pay the dealer in May.20 Collected $800 from Jason Ratchford for services provided on April 5.24 Borrowed $7,500 from BestBanc by securing a six-month loan.Prepare journal entries (and explanations) to record the preceding transactions and events.7. Journal entry preparationOn January 1 of the current year, MuniServ began operations with $100,000 cash. The cash was obtained from an owner investment by Peter Houston of $70,000 and a $30,000 bank loan. Shortly thereafter, the company ac­quired selected assets of a bankrupt competitor. The acquisition included land ($15,000), a building ($40,000), and vehicles ($10,000). MuniServ paid $45,000 at the time of the transaction and agreed to remit the remaining balance due of $20,000 (an account payable) by February 15.During January, the company had additional cash outlays for the follow­ing items:Purchases of store equipment $4,600Loan payment, including $100 interest 500Salaries expense 2,300Advertising expense 700The January utilities bill of $200 was received on January 31 and will be paid on February 10. MuniServ rendered services to clients on account amounting to $9,400. All customers have been billed; by month-end, $3,700 had been received in settlement of account balances.Instructionsa. Present journal entries that reflect MuniServ's January transactions, in­cluding the $100,000 raised from the owner investment and loan.b. Compute the total debits, total credits, and ending balance that would befound in the company's Cash account.c. Determine the amount that would be shown on the January 31 trial balance for Accounts Payable. Is the balance a debit or a credit?8. Balance Sheet Review - Select a public company and down a copy of the company’s most recent annual report. You will use these financial statements throughout the rest of this course. As you are aware of the Balance Sheet lists the assets, liabilities, and owner’s equity of the company. Review the company’s balance sheet over a period of three years. Based on your review, what account experienced the largest increase? What account experienced the largest decrease? As a potential investor would either the increase or decrease be considered a positive or negative? Write a 150-200 word summary of the results of your balance sheet analysis.<strong>ACC 205 Week 1 DQs</strong>Week 1 DQ 1As you have learned in this week’s readings the Accounting Equation is Assets = Liabilities + Owners’ Equity. Is the accounting equation true in all instances? Provide sample transactions from your own experiences to demonstrate the validity of the Accounting Equation.Guided Response:Review several of your peers’ postings and identify some core components that you feel should be included in every transaction. Respond to at least two of your peers and provide recommendations to extend their thinking. Challenge your peers by asking a question that may cause them to reevaluate or add components to their transactions.Week 1 DQ 2What does the term account mean? What are the different classifications of accounts? How do the rules for debits and credits impact accounts? Please provide an example of how debits and credits impact accounts.Guided Response:Analyze several of your peers’ posts. Let at least two of your peers know if this knowledge could be used in their everyday lives. Is so, how? If not, why not?<strong>ACC 205 Week 1 JOURNAL</strong>JournalTo complete the following journal entry, go to this week's Journal link in the left navigation.Balance Sheet JournalThe balance sheet is a financial snap shot of a company at  a particular point in time.  The balance sheet lists the assets, liabilities, and equity of the company.  Reflect on your personal financial situation, can you apply the concepts of the balance sheet?  What did you learn from this reflection?<strong>ACC 205 Week Two Exercise Assignment Revenue and Expenses</strong>1.  Revenue and Expenses. Dave Morris began a law practice several years ago, shortly after graduating from law school. During 19X1, he was approached by Delores Silva, who had recently suffered a back injury in an automobile accident. Morris ac­cepted Silva as a client, and in 19X2 proceeded with a lawsuit against Maddox Motors. The suit alleged that Maddox had knowingly sold Silva an automobile with defective brakes. Late in 19X2, the courts awarded Silva $240,000 in damages. Morris was entitled to 40% of this settlement for his fees. In 19X3, Maddox Motors paid Silva and Morris their respective shares of the judgment. Morris incurred secretarial and photocopy charges in 19X2 of $12,000— all related to the Silva case. Of this amount, $8,000 was paid in 19X2 and the balance was paid in 19X3. Assuming that Morris uses the accrual basis of accounting, in what year(s) should the revenue and expense amounts be recognized? Why?2.  Accrual and modified cash basis. The following information pertains to Beta Company for October:Services rendered during October to customers on account $14,380Cash receipts fromOwner investment 7,000Customers on account 5,650Cash customers for services rendered in October 6,800Cash payments toCreditors for expenses incurred during October 4,400Creditors for expenses incurred prior to October 2,100Monroe Equipment for purchase of new machinery onOctober 1 8,400Expenses incurred during October, to be paid in future months 3,725The machinery is expected to have a service life of five years.InstructionsCalculate Beta's net income for October, using the following methods:a.  Accrual basis of accounting.b.  Modified cash basis of accounting.3.  Accounting for prepaid expenses and unearned revenues. Hawaii-Blue began business on January 1 of the current year and offers deep sea fishing trips to tourists. Tourists pay $125 in advance for an all-day outing off the coast of Maui. The company collected monies during January for 210 outings, with 30 of the tourists not planning to take their trips until early February. Hawaii-Blue rents its fishing boat from Pacific Yacht Supply. An agree­ment was signed at the beginning of the year, and $72,000 was paid for the rights to use the boat for two full years.a.  Prepare journal entries to record (1) the collection of monies from tourists and (2) the revenue generated during January.b.  Calculate Hawaii-Blue's total obligation to tourists at the end of January. On what financial statement and in which section would this amount appear?4.  Recognition of concepts. Ron Carroll operates a small company that books entertainers for theaters, parties, conventions, and so forth. The company's fiscal year ends on June 30 Consider the items that follow and classify each as either (1) prepaid expense, (2) unearned revenue, (3} accrued expense, (4) accrued revenue, or (5) none of the foregoing.a.  Amounts paid on June 30 for a one-year insurance policy.b.  Professional fees earned but not billed as of June 30.c.  Repairs to the firm's copy machine, incurred and paid in June.d.  An advance payment from a client for a performance next month at a convention.e.  The payment in item (d) from the client's point of view.f.  Interest owed on the company's bank loan, to be paid in early July.g.  The bank loan payable in item (f).h.  Office supplies on hand at year-end.i.  Bank reconciliations: Missing amountsj.  The following independent cases relate to bank reconciliations. Compute the missing amounts, assuming that no other reconciling items exist.Case ACase BCase CBalance per bank  $6,000$4,000$ ?Outstanding checks  5002,1001,400Deposits in transit  2,00071,000Balance per company records  ?8,0004505.  Bank reconciliation and entries. The following information was taken from the accounting records of Pal­metto Company for the month of January:Balance per bank  $6,150Balance per company records 3,580Bank service charge for January 20Deposits in transit 940Interest on note collected by bank 100Note collected by bank 1,000NSF check returned by the bank with the bank statement 650Outstanding checks 3,080a.  Prepare Palmetto's January bank reconciliation.b.  Prepare any necessary journal entries for Palmetto.6.  Allowance method: Income statement and balance sheet approaches. Tempe Company reported accounts receivable of $300,000 and an allow­ance for uncollectible accounts of $31,000 (credit) on the December 31, 19X2, balance sheet. The following data pertain to 19X3 activities and operations:Sales on account $2,000,000Cash collections from credit customers 1,600,000Sales discounts 50,000Sales returns & allowances 100,000Uncollectible accounts written off 29,000Collections on accounts that were previously written off 2,700Instructionsa.  Prepare journal entries to record the sales- and receivables-related trans­actions from 19X3.b.  Prepare the December 31, 19X3, adjusting entry for uncollectible ac­counts assuming that uncollectibles are estimated to be 2% of net credit sales.c.  Prepare the December 31, 19X3, adjusting entry for uncollectible ac­counts assuming that uncollectibles are estimated at 1% of year-end accounts receivable.d.  Compute the amount of the adjusting entry in part (c) assuming that $46,000, rather than $29,000, of accounts were written off in 19X3.7.  Income Statement Review. Using the annual report of the company that you selected in week 1 please review the company’s income statement over a three year period.  Did sales increase during this time?  Did Cost of Good Sold increase significantly?  Has the company been profitable?  Do you notice any positives based on your analysis of the income statement?  Are there any negatives that potential investors should be aware of?  Write a 150-200 summary of the results of your income statement analysis.<strong>ACC 205 Week 2 JOURNAL</strong>Income Statement JournalThe income statement measures the income and expenses of a company over a specific period of time.  Reflecting on your personal financial statement for the past month, can you apply the principles of the income statement?  What did you learn from this experience?<strong>ACC 205 Week 2 DQs</strong>Week 2 DQ1 Accounting CycleFinancial statements are a product of the accounting cycle.  Think about two different companies: a manufacturing company, and a retail company.  Why would different companies have different accounting cycles?  Would you expect the steps of the accounting cycle to be the same for each company?  Why or why not?Week 2 DQ 2 Bank ReconciliationWhat is the purpose of a bank reconciliation?  What are the reasons for differences between the cash reported in the accounting records and the cash balance in the bank statements?<strong>ACC 205 Week Three Exercise Assignment Inventory</strong>1.  Inventory.Inventory valuation methods: Basic computations.The January beginning inventory of the White Company consisted of 300 units costing $40 each. During the first quarter, the company purchased two batches of goods: 700 units at $44 on February 21 and 800 units at $50 on March 28. Sales during the first quarter were 1,400 units at $75 per unit. The White Company uses a periodic inventory system.Using the White Company data, fill in the chart that follows to compare the results obtained under the FIFO, LIFO, and weighted-average inventory methods.FIFOLIFOWeighted AverageGoods available for sale$$$Ending inventory, March 31Cost of goods sold2.  Analysis of LIFO versus FIFO. Indicate whether LIFO or FIFO best describes each of the following:a.  Gives highest profits when prices fall.b.  Yields lowest income taxes when prices rise.c.  Generates an ending inventory valuation that somewhat approximates replacement cost.d.  Matches recent costs against current selling prices on the income state­ment.e.  Comes closest to approximating the physical flow of goods of a fruit andvegetable dealer.f.  Results in lowest cost of goods sold in inflationary periods.3.  Inventory Errors. The income statements of Diamond Company for the years ended Decem­ber 31, 19X1, and 19X2 follow.19X119X2Net salesCost of goods soldBeginning inventoryAdd: Net purchases$ 95,000 380,000$440,000$109,000 404,000$483,000Goods available forsaleLess: Ending inventory$475,000 109,000$513,000 127,000Cost of goods sold366,000386,000Gross profitOperating expenses$ 74,000 58,000$ 97,000 67,000Net income$ 16,000$ 30,000Diamond uses a periodic inventory system. A detailed review of theaccounting records disclosed the following:a.  A review of 19X1 purchase invoices revealed that a clerk had incor­rectly recorded a $12,600 purchase as $1,260.b.  A $4,800 purchase was made on December 30, 19X2, terms F.O.B. ship­ping point. The invoice was not recorded in 19X2 nor were the goods included in the 19X2 ending physical inventory count. Both the goods and invoice were received in early 19X3, with the invoice being re­corded at that time.c.  Goods costing $3,000 were accidentally excluded from the 19X1 ending physical inventory count. These goods were sold during 19X2, and all aspects of the sale were properly recorded.Instructions:Prepare corrected income statements for 19X1 and 19X2.Determine the impact of the preceding errors on the December 31, 19X2, owner's equity balance.4.  Inventory valuation methods.  Computations and concepts. Wave Riders Surf Board Company began business on January 1 of the current year. Purchases of surf boards were as follows:3100 boards <& $125Mar. 1750 boards @ $130May 9246 boards @ $140July 3400 boards @ $150Oct. 2374 boards @ $160Wave Riders sold 710 boards at an average price of $250 per board. The company uses a periodic inventory system.Instructions:Calculate cost of goods sold, ending inventory, and gross profit under each of the following inventory valuation methods: First-in, first-out<strong>ACC 205 Week 3 JOURNAL</strong>Inventory JournalReflect for a moment on the LIFO (Last in First Out) and FIFO (First in First Out) inventory methods.  If you were starting a small manufacturing company, what inventory method do you believe would provide the most accurate financial statements?  Why do you believe this is the case?<strong>ACC 205 Week 3 DQs</strong>Week 3 DQ 1 LIFO vs. FIFOThe controller of Sagehen Enterprises believes that the company should switch from the LIFO method to the FIFO method.  The controller’s bonus is based on the next income.  It is the controller’s belief that the switch in inventory methods would increase the net income of the company.  What are the differences between the LIFO and FIFO methods?Week 3 DQ 2 DepreciationA variety of depreciation methods are used to allocate the cost of an asset to all of the accounting periods benefited by the use of the asset.  Your client has just purchased a piece of equipment for $100,000.   Explain the concept of depreciation.  Which of the following depreciation methods would you recommend: straight-line depreciation, double declining balance method, or an alternative method?<strong>ACC 205 Week Four Exercise Assignment Liability</strong>1.  Prepayments by customers.Greenland Enterprises began a new magazine in the fourth quarter of 19X2. Annual subscriptions, which cost $18 each, were sold as follows:Number ofSubscriptionsSoldOctober400November700December1,000If subscriptions begin (and magazines are sent) in the month of sale:a.  Present the necessary journal entry to record the magazine subscriptions sold during the fourth quarter.b.  Determine how much subscription revenue Greenland earned by the end of 19X2.c.  Compute Greenland's liability to subscribers at the end of 19X2.2.  Notes payable. Sentry Security Systems purchased $72,000 of office equipment on April 1, 19X3, by signing a three-year, 12% note payable to Sharp, Inc. One-third of the principal, along with interest on the outstanding balance, is payable each April 1 until maturity. (The first payment is due in 19X4.)a.  Fill in the following table to reflect Sentry's liabilities, assuming a March 31 year-end.March 3119X4   19X5  19X6Current liabilitiesCurrent portion of long-term debtInterest payableLong-term liabilitiesLong-term debtb.  Assuming that interest is properly recorded at the end of each year, present the proper journal entry to record the last payment on April 1, 19X6.3.  Notes payable. Red Bank Enterprises was involved in the following transactions during the fiscal year ended October 31:Aug. 2Borrowed $75,000 from the Bank of Kingsville by signing a 120-day note for $79,000.20Issued a $40,000 note to Harris Motors for the purchase of a $40,000 delivery truck. The note is due in 180 days and car­ries a 12% interest rate.Sept. 10Purchased merchandise from Pans Enterprises in the amount of $15,000. Issued a 30-day, 12% note in settlement of the balance owed.11Issued a $60,000 note to Datatex Equipment in settlement of an overdue account payable of the same amount. The note is due in 30 days and carries a 14% interest rate.Oct. 10The note to Paris Enterprises was paid in full.11The note to Datatex Equipment was due today, but insuffi­cient funds were available for payment. Management autho­rized the issuance of a new 20-day, 18% note for $60,700, the maturity value of the original obligation.31The new note to Datatex Equipment was paid in full.Instructions:a.  Prepare journal entries to record the transactions.b.  Prepare adjusting entries on October 31 to record accrued interest.c.  Prepare the current liability section of Red Bank's balance sheet as of October 31.Assume the Accounts Payable account totals $203,600 on this date.4.  Partner investments; journal entries. The LP partnership was formed on January 1, 19X7, by investments from Bill Levy and Marv Parcells. Levy contributed $30,000 cash and $80,000 of land. Parcells contributed various assets from a business that he had operated over the past five years. A balance sheet from that business disclosed the following:Accounts receivable  $ 27,000Allowance for uncollectibles  (3,200)Equipment  68,000Accumulated depreciation  (24,000)The partners confirmed that the allowance for uncollectible accounts should be decreased by $600. In addition, an independent appraisal deter­mined that fair market values of the land and equipment on January 1 were $125,000 and $35,000, respectively.Prepare the journal entries needed to record the investments of Levy and Parcells.5.  Income distribution: Different arrangements. Frank, Gatti, and Hogan recently invested 530,000 each and formed the Apex partnership. During the first year of operation, the business gener­ated a net income of $39,000. Determine the proper division of income among the partners for the following independent cases:a.  Income is divided on the basis of a ratio of the beginning capital invest­ments.b.  Partners are allowed 12% interest on their investments; the remaining profits and losses are allocated on a 6 :1 :3 basis.c.  Frank and Hogan each receive salary allowances of $24,000 per year; the remaining profits and losses are shared equally.6.  Investment by partners; financial statements. Abram, Haas, and Tidwell formed a partnership to practice law by com­bining their respective sole proprietorships. The assets and liabilities con­tributed to the firm on January 2, 19X4, the date of formation, follow.AbramLandBook Value$40,000FairMarket Value$115,000Mortgage payable38,00038,000HaasOffice supplies42,00030,000Office equipment64,00048,000TidwellCash50,00050,000Accounts receivable20,00018,000Short-term investments4,0007,000Instructions:a.  Prepare journal entries to record the investments of Abram, Haas Tidwell in the new partnership.b.  Prepare a classified balance sheet for the partnership immediately after the investments are recorded.c.  The partners share profits and losses equally, and the first year's n income was $66,000. Cash withdrawals of $5,000 were made by Abram,$22,000 by Haas, and $17,000 by Tidwell. Prepare the December 31 19X4, statement of partners' equity for the firm<strong>ACC 205 Week 4 JOURNAL</strong>Future Obligations JournalThe current liability section of the balance sheet lists the liabilities that are due within the next 12 months.  Reflecting on your current financial situation, apply the concept of current liabilities.  What does this analysis tell you about your future obligations?  What did you learn from this experience?<strong>ACC 205 Week 4 DQs</strong>Week 4 DQ 1 Current LiabilityWhat is a current liability?  From the perspective of a user of financial statements, why do you believe current liabilities are separated from long-term liabilities?  Based on your current experience as well as and any additional research you may have done provide two examples of situations where businesses collect monies from customers and employees and report these amounts as a current liability.Guided Response:Review several of your peers’ posts and identify the core components of a current liability.  Respond to at least two of your peers and provide recommendations to extend their thinking.  Challenge your peers by asking a question that may cause them to reevaluate if their example is a current liability.Week 4 DQ 2 Client RecommendationsA client comes to you thinking about starting a consulting business.  Your client is specifically  interested in what type of entity should be created for this new business.  Based on your readings or any additional research you may have done, discuss the advantages and disadvantages of the following: sole proprietorship, partnership, and corporation.  Based on these advantages and disadvantages provide a clear recommendation to your client.Let at least two of your peers posts know if an alternative choice of entity would be possible.  What would be the benefits of this new entity choice?  Would there be any disadvantages associated with this new entity selection.Guided Response:Let at least two of your peers know if an alternative choice of entity would be possible?  What would be the benefits of this new entity choice?  Would there be any disadvantages associated with this new entity selection?<strong>ACC 205 Week Five Exercise Assignment Financial Ratios</strong>1.  Liquidity ratios. Edison, Stagg, and Thornton have the following financial information at the close of business on July 10:EdisonStaggThorntonCash$4,000$2,500$1,000Short-term investments3,0002,5002,000Accounts receivable2,0002,5003,000Inventory1,0002,5004,000Prepaid expenses800800800Accounts payable200200200Notes payable: short-term3,1003,1003,100Accrued payables300300300Long-term liabilities3,8003,8003,800Compute the current and quick ratios for each of the three companies. (Round calculations to two decimal places.) Which firm is the most liquid? Why? Suppose Thornton is using FIFO for inventory valuation and Edison is using LIFO. Comment on the comparability of information between these two companies. If all short-term notes payable are due on July 11 at 8 a.m., comment on each company's ability to settle its obligation in a timely manner. 2.  Computation and evaluation of activity ratios. The following data relate to Alaska Products, Inc:19X519X4Net credit sales$832,000$760,000Cost of goods sold440,000350,000Cash, Dec. 31125,000110,000Accounts receivable, Dec. 31180,000140,000Inventory, Dec. 3170,00050,000Accounts payable, Dec. 31115,000108,000The company is planning to borrow $300,000 via a 90-day bank loan to cover short-term operating needs.Compute the accounts receivable and inventory turnover ratios for 19X5. Alaska rounds all calculations to two decimal places. Study the ratios from part (a) and comment on the company's ability to repay a bank loan in 90 days. Suppose that Alaska's major line of business involves the processing and distribution of fresh and frozen fish throughout the United States. Do you have any concerns about the company's inventory turnover ratio? Briefly discuss. 3.  Profitability ratios, trading on the equity. Digital Relay has both preferred and common stock outstanding. The com­pany reported the following information for 19X7:Net sales$1,500,000Interest expense120,000Income tax expense80,000Preferred dividends25,000Net income130,000Average assets1,100,000Average common stockholders' equity400,000Compute the profit margin on sales and the rates of return on assets and common stockholders' equity, rounding calculations to two decimal places. Does the firm have positive or negative financial leverage? Briefly ex­plain. 4.  Financial statement construction via ratios. Incomplete financial statements of Lock Box, Inc., are presented below.LOCK BOX, INC.Income StatementFor the Year Ended December 31, 19X3Sales$ ?Cost of goods sold?Gross profit$15,000,000Operating expenses & interest?Income before tax$ ?Income taxes, 40%?Net income$ ?LOCK BOX, INC.Balance SheetDecember 31, 19X3AssetsCashAccounts receivableInventoryProperty, plant, &. equipmentTotal assets$ ???8,000,000$24,000,000Liabilities & Stockholders' EquityAccounts payableNotes payable (short-term)Bonds payableCommon stockRetained earningsTotal liabilities & stockholders' equity$ ?600,000 4,600,0002,000,000?$24,000,000Further information:Cost of goods sold is 60% of sales. All sales are on account. The company's beginning inventory is $5 million; inventory turnover is 4. The debt to total assets ratio is 70%. The profit margin on sales is 6%. The firm's accounts receivable turnover is 5. Receivables increased by $400,000 during the year.Instructions:Using the preceding data, complete the income statement and the balance sheet.<strong>ACC 205 WK 5 JOURNAL</strong>Most Important Ratio JournalReflect for a moment on the ratios (working capital, current ratio, quick ratio, debt to asset, debt to equity, times interest earned, gross margin and net margin) presented this week.  If you were considering investing in a company what ratio would be the most important to you?  Formulate and argument to defend your position.<strong>ACC 205 Week 5 Boeing Financial Statement Analysis</strong><strong>ACC 205 Week 5 DQs</strong>Week 5 DQ 1 RatiosRatios provide the users of financial statements with a great deal of information about the entity.  Do ratios tell the whole story?  How could liquidity ratios be used by investors to determine whether or not to invest in a company?Guided Response:Let at least two of your peers know how debt service ratios can be used by a lender in determining whether or not to lend money to a company.Week 5 DQ 2 Profit Margin<table width="431"><tbody><tr><td width="128"> </td><td width="91">Year Ending December 2012</td><td width="106">Year Ending December 2011</td><td width="106">Year Ending December 2010</td></tr><tr><td width="128">Revenues</td><td width="91">40,000</td><td width="106">35,000</td><td width="106">33,000</td></tr><tr><td width="128">Operating Expenses</td><td width="91"> </td><td width="106"> </td><td width="106"> </td></tr><tr><td width="128">Salaries</td><td width="91">15,000</td><td width="106">10,000</td><td width="106">9,000</td></tr><tr><td width="128">Maintenance and Repairs</td><td width="91">6,000</td><td width="106">9,000</td><td width="106">10,000</td></tr><tr><td width="128">Rental Expense</td><td width="91">2,500</td><td width="106">2,500</td><td width="106">2,500</td></tr><tr><td width="128">Depreciation</td><td width="91">2,000</td><td width="106">2,000</td><td width="106">2,000</td></tr><tr><td width="128">Fuel</td><td width="91">4,000</td><td width="106">3,500</td><td width="106">2,500</td></tr><tr><td width="128">Total Operating Expenses</td><td width="91">29,500</td><td width="106">27,000</td><td width="106">26,000</td></tr><tr><td width="128">Operating Income</td><td width="91">10,500</td><td width="106">8,000</td><td width="106">7,000</td></tr><tr><td width="128">Sales and Administrative Expenses</td><td width="91">6,000</td><td width="106">4,000</td><td width="106">3,000</td></tr><tr><td width="128">Interest Expense</td><td width="91">2,500</td><td width="106">2,000</td><td width="106">1,000</td></tr><tr><td width="128">Net Income</td><td width="91">2,000</td><td width="106">2,000</td><td width="106">3,000</td></tr></tbody></table>Above is a comparative income statement for Cecil, Inc. for the years 2010, 2011, and 2012.  Calculate the profit margin for each of these years.  Comment on the profit margin trend.Guided Response:Let at least two of your peers posts know what you changes you would recommend to improve the net margin of the company.
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<strong>ACC 205 Week One Exercise Assignment Basic Accounting Equations</strong>Week One Exercise AssignmentBasic Accounting Equations1. Basic concepts. Jean's Marine Supply specializes in the sale of boating equipment and acces­sories. Identify the items that follow as an asset (A), liability (L), revenue (R), or expense (E) from the firm's viewpoint.a. The inventory of boating supplies owned by the company.b. Monthly rental charges paid for store space.c. A loan owed to Citizens Bank.d. New computer equipment purchased to handle daily record keeping.e. Daily sales made to customers.f. Amounts due from customers.g. Land owned by the company to be used as a future store site.h. Weekly salaries paid to salespeople.2. Analysis of transactions.Set up the following headings across a piece of paper:Assets = Liabilities + Owner's EquityBy using "+" and "-," indicate the effect of each of the following transac­tions on total assets, liabilities, and owner's equity:a. Processed a $5,000 cash withdrawal for the owner.b. Recorded the receipt of May's utility bill, to be paid in June.c. Provided services to customers on account.d. Paid the current month's advertising charges.e. Purchased a $27,000 delivery truck by paying $5,000 down and securing a loan for the remaining balance.f. Received $11,000 cash from the owner as an investment in the business.g. Returned a new computer and printer purchased earlier in the month on account. The bill had not as yet been paid.h. Paid the utility bill recorded previously in (b).3. Balance sheet preparation.The following data relate to Preston Company as of December 31, 19XX:Building $44,000 Accounts receivable $24,000Cash 17,000 Loan payable 30,000J. Preston, capital 65,000 Land 21,000Accounts payable ?Prepare a balance sheet in good form as of December 31, 19XX.4. Statement preparationThe following information is taken from the accounting records of Grimball Cardiology at the close of business on December 31, 19X1:Accounts payable $ 14,700Surgery revenue $175,000Surgical expenses 80,000Cash 60,000Surgical equipment 37,000Office Equipment 118,000Salaries expense 30,000Rent expense 15,000Accounts receivable 135,000Loan payable 10,300Utilities expense 5,000All equipment was acquired just prior to year-end. Conversations with the practice's bookkeeper revealed the data that follow.Rose Grimball, capital (January 1, 19X1) $300,00019X1 owner investments 2,00019X1 owner withdrawals 22,000Instructionsa. Prepare the income statement for Grimball Cardiology in good form.b. Prepare a statement of owner's equity in good form.c. Prepare Grimball's balance sheet in good form.5. Recognition of normal balancesThe following items appeared in the accounting records of Triguero's, a retail music store that also sponsors concerts. Classify each of the items as an asset, liability; revenue; or expense from the company's viewpoint. Also indicate the normal account balance of each item.a. The albums, tapes, and CDs held for sale to customers.b. A long-term loan owed to Citizens Bank.c. Promotional costs to publicize a concert.d. Daily receipts for merchandise sold,e. Amounts due from customers,f. Land held as an investment,g. A new fax machine purchased for office use.h. Amounts to be paid in 10 days to suppliers,i. Amounts paid to a mall for rent.6. Basic journal entriesThe following transactions pertain to the Jennifer Royall Company:Apr. 1Received cash of $15,000 and land valued at $10,000 fromJenni­fer Royall as an investment in the business.5 Provided $1,200 of services to Jason Ratchford, a client.Ratchford agreed to pay $800 in 15 days and the remaining amount in May.9 Paid $250 of salaries to an employee.14 Acquired a new computer for $3,200; Royall will pay the dealer in May.20 Collected $800 from Jason Ratchford for services provided on April 5.24 Borrowed $7,500 from BestBanc by securing a six-month loan.Prepare journal entries (and explanations) to record the preceding transactions and events.7. Journal entry preparationOn January 1 of the current year, MuniServ began operations with $100,000 cash. The cash was obtained from an owner investment by Peter Houston of $70,000 and a $30,000 bank loan. Shortly thereafter, the company ac­quired selected assets of a bankrupt competitor. The acquisition included land ($15,000), a building ($40,000), and vehicles ($10,000). MuniServ paid $45,000 at the time of the transaction and agreed to remit the remaining balance due of $20,000 (an account payable) by February 15.During January, the company had additional cash outlays for the follow­ing items:Purchases of store equipment $4,600Loan payment, including $100 interest 500Salaries expense 2,300Advertising expense 700The January utilities bill of $200 was received on January 31 and will be paid on February 10. MuniServ rendered services to clients on account amounting to $9,400. All customers have been billed; by month-end, $3,700 had been received in settlement of account balances.Instructionsa. Present journal entries that reflect MuniServ's January transactions, in­cluding the $100,000 raised from the owner investment and loan.b. Compute the total debits, total credits, and ending balance that would befound in the company's Cash account.c. Determine the amount that would be shown on the January 31 trial balance for Accounts Payable. Is the balance a debit or a credit?8. Balance Sheet Review - Select a public company and down a copy of the company’s most recent annual report. You will use these financial statements throughout the rest of this course. As you are aware of the Balance Sheet lists the assets, liabilities, and owner’s equity of the company. Review the company’s balance sheet over a period of three years. Based on your review, what account experienced the largest increase? What account experienced the largest decrease? As a potential investor would either the increase or decrease be considered a positive or negative? Write a 150-200 word summary of the results of your balance sheet analysis.<strong>ACC 205 Week 1 DQs</strong>Week 1 DQ 1As you have learned in this week’s readings the Accounting Equation is Assets = Liabilities + Owners’ Equity. Is the accounting equation true in all instances? Provide sample transactions from your own experiences to demonstrate the validity of the Accounting Equation.Guided Response:Review several of your peers’ postings and identify some core components that you feel should be included in every transaction. Respond to at least two of your peers and provide recommendations to extend their thinking. Challenge your peers by asking a question that may cause them to reevaluate or add components to their transactions.Week 1 DQ 2What does the term account mean? What are the different classifications of accounts? How do the rules for debits and credits impact accounts? Please provide an example of how debits and credits impact accounts.Guided Response:Analyze several of your peers’ posts. Let at least two of your peers know if this knowledge could be used in their everyday lives. Is so, how? If not, why not?<strong>ACC 205 Week 1 JOURNAL</strong>JournalTo complete the following journal entry, go to this week's Journal link in the left navigation.Balance Sheet JournalThe balance sheet is a financial snap shot of a company at  a particular point in time.  The balance sheet lists the assets, liabilities, and equity of the company.  Reflect on your personal financial situation, can you apply the concepts of the balance sheet?  What did you learn from this reflection?<strong>ACC 205 Week Two Exercise Assignment Revenue and Expenses</strong>1.  Revenue and Expenses. Dave Morris began a law practice several years ago, shortly after graduating from law school. During 19X1, he was approached by Delores Silva, who had recently suffered a back injury in an automobile accident. Morris ac­cepted Silva as a client, and in 19X2 proceeded with a lawsuit against Maddox Motors. The suit alleged that Maddox had knowingly sold Silva an automobile with defective brakes. Late in 19X2, the courts awarded Silva $240,000 in damages. Morris was entitled to 40% of this settlement for his fees. In 19X3, Maddox Motors paid Silva and Morris their respective shares of the judgment. Morris incurred secretarial and photocopy charges in 19X2 of $12,000— all related to the Silva case. Of this amount, $8,000 was paid in 19X2 and the balance was paid in 19X3. Assuming that Morris uses the accrual basis of accounting, in what year(s) should the revenue and expense amounts be recognized? Why?2.  Accrual and modified cash basis. The following information pertains to Beta Company for October:Services rendered during October to customers on account $14,380Cash receipts fromOwner investment 7,000Customers on account 5,650Cash customers for services rendered in October 6,800Cash payments toCreditors for expenses incurred during October 4,400Creditors for expenses incurred prior to October 2,100Monroe Equipment for purchase of new machinery onOctober 1 8,400Expenses incurred during October, to be paid in future months 3,725The machinery is expected to have a service life of five years.InstructionsCalculate Beta's net income for October, using the following methods:a.  Accrual basis of accounting.b.  Modified cash basis of accounting.3.  Accounting for prepaid expenses and unearned revenues. Hawaii-Blue began business on January 1 of the current year and offers deep sea fishing trips to tourists. Tourists pay $125 in advance for an all-day outing off the coast of Maui. The company collected monies during January for 210 outings, with 30 of the tourists not planning to take their trips until early February. Hawaii-Blue rents its fishing boat from Pacific Yacht Supply. An agree­ment was signed at the beginning of the year, and $72,000 was paid for the rights to use the boat for two full years.a.  Prepare journal entries to record (1) the collection of monies from tourists and (2) the revenue generated during January.b.  Calculate Hawaii-Blue's total obligation to tourists at the end of January. On what financial statement and in which section would this amount appear?4.  Recognition of concepts. Ron Carroll operates a small company that books entertainers for theaters, parties, conventions, and so forth. The company's fiscal year ends on June 30 Consider the items that follow and classify each as either (1) prepaid expense, (2) unearned revenue, (3} accrued expense, (4) accrued revenue, or (5) none of the foregoing.a.  Amounts paid on June 30 for a one-year insurance policy.b.  Professional fees earned but not billed as of June 30.c.  Repairs to the firm's copy machine, incurred and paid in June.d.  An advance payment from a client for a performance next month at a convention.e.  The payment in item (d) from the client's point of view.f.  Interest owed on the company's bank loan, to be paid in early July.g.  The bank loan payable in item (f).h.  Office supplies on hand at year-end.i.  Bank reconciliations: Missing amountsj.  The following independent cases relate to bank reconciliations. Compute the missing amounts, assuming that no other reconciling items exist.Case ACase BCase CBalance per bank  $6,000$4,000$ ?Outstanding checks  5002,1001,400Deposits in transit  2,00071,000Balance per company records  ?8,0004505.  Bank reconciliation and entries. The following information was taken from the accounting records of Pal­metto Company for the month of January:Balance per bank  $6,150Balance per company records 3,580Bank service charge for January 20Deposits in transit 940Interest on note collected by bank 100Note collected by bank 1,000NSF check returned by the bank with the bank statement 650Outstanding checks 3,080a.  Prepare Palmetto's January bank reconciliation.b.  Prepare any necessary journal entries for Palmetto.6.  Allowance method: Income statement and balance sheet approaches. Tempe Company reported accounts receivable of $300,000 and an allow­ance for uncollectible accounts of $31,000 (credit) on the December 31, 19X2, balance sheet. The following data pertain to 19X3 activities and operations:Sales on account $2,000,000Cash collections from credit customers 1,600,000Sales discounts 50,000Sales returns & allowances 100,000Uncollectible accounts written off 29,000Collections on accounts that were previously written off 2,700Instructionsa.  Prepare journal entries to record the sales- and receivables-related trans­actions from 19X3.b.  Prepare the December 31, 19X3, adjusting entry for uncollectible ac­counts assuming that uncollectibles are estimated to be 2% of net credit sales.c.  Prepare the December 31, 19X3, adjusting entry for uncollectible ac­counts assuming that uncollectibles are estimated at 1% of year-end accounts receivable.d.  Compute the amount of the adjusting entry in part (c) assuming that $46,000, rather than $29,000, of accounts were written off in 19X3.7.  Income Statement Review. Using the annual report of the company that you selected in week 1 please review the company’s income statement over a three year period.  Did sales increase during this time?  Did Cost of Good Sold increase significantly?  Has the company been profitable?  Do you notice any positives based on your analysis of the income statement?  Are there any negatives that potential investors should be aware of?  Write a 150-200 summary of the results of your income statement analysis.<strong>ACC 205 Week 2 JOURNAL</strong>Income Statement JournalThe income statement measures the income and expenses of a company over a specific period of time.  Reflecting on your personal financial statement for the past month, can you apply the principles of the income statement?  What did you learn from this experience?<strong>ACC 205 Week 2 DQs</strong>Week 2 DQ1 Accounting CycleFinancial statements are a product of the accounting cycle.  Think about two different companies: a manufacturing company, and a retail company.  Why would different companies have different accounting cycles?  Would you expect the steps of the accounting cycle to be the same for each company?  Why or why not?Week 2 DQ 2 Bank ReconciliationWhat is the purpose of a bank reconciliation?  What are the reasons for differences between the cash reported in the accounting records and the cash balance in the bank statements?<strong>ACC 205 Week Three Exercise Assignment Inventory</strong>1.  Inventory.Inventory valuation methods: Basic computations.The January beginning inventory of the White Company consisted of 300 units costing $40 each. During the first quarter, the company purchased two batches of goods: 700 units at $44 on February 21 and 800 units at $50 on March 28. Sales during the first quarter were 1,400 units at $75 per unit. The White Company uses a periodic inventory system.Using the White Company data, fill in the chart that follows to compare the results obtained under the FIFO, LIFO, and weighted-average inventory methods.FIFOLIFOWeighted AverageGoods available for sale$$$Ending inventory, March 31Cost of goods sold2.  Analysis of LIFO versus FIFO. Indicate whether LIFO or FIFO best describes each of the following:a.  Gives highest profits when prices fall.b.  Yields lowest income taxes when prices rise.c.  Generates an ending inventory valuation that somewhat approximates replacement cost.d.  Matches recent costs against current selling prices on the income state­ment.e.  Comes closest to approximating the physical flow of goods of a fruit andvegetable dealer.f.  Results in lowest cost of goods sold in inflationary periods.3.  Inventory Errors. The income statements of Diamond Company for the years ended Decem­ber 31, 19X1, and 19X2 follow.19X119X2Net salesCost of goods soldBeginning inventoryAdd: Net purchases$ 95,000 380,000$440,000$109,000 404,000$483,000Goods available forsaleLess: Ending inventory$475,000 109,000$513,000 127,000Cost of goods sold366,000386,000Gross profitOperating expenses$ 74,000 58,000$ 97,000 67,000Net income$ 16,000$ 30,000Diamond uses a periodic inventory system. A detailed review of theaccounting records disclosed the following:a.  A review of 19X1 purchase invoices revealed that a clerk had incor­rectly recorded a $12,600 purchase as $1,260.b.  A $4,800 purchase was made on December 30, 19X2, terms F.O.B. ship­ping point. The invoice was not recorded in 19X2 nor were the goods included in the 19X2 ending physical inventory count. Both the goods and invoice were received in early 19X3, with the invoice being re­corded at that time.c.  Goods costing $3,000 were accidentally excluded from the 19X1 ending physical inventory count. These goods were sold during 19X2, and all aspects of the sale were properly recorded.Instructions:Prepare corrected income statements for 19X1 and 19X2.Determine the impact of the preceding errors on the December 31, 19X2, owner's equity balance.4.  Inventory valuation methods.  Computations and concepts. Wave Riders Surf Board Company began business on January 1 of the current year. Purchases of surf boards were as follows:3100 boards <& $125Mar. 1750 boards @ $130May 9246 boards @ $140July 3400 boards @ $150Oct. 2374 boards @ $160Wave Riders sold 710 boards at an average price of $250 per board. The company uses a periodic inventory system.Instructions:Calculate cost of goods sold, ending inventory, and gross profit under each of the following inventory valuation methods: First-in, first-out<strong>ACC 205 Week 3 JOURNAL</strong>Inventory JournalReflect for a moment on the LIFO (Last in First Out) and FIFO (First in First Out) inventory methods.  If you were starting a small manufacturing company, what inventory method do you believe would provide the most accurate financial statements?  Why do you believe this is the case?<strong>ACC 205 Week 3 DQs</strong>Week 3 DQ 1 LIFO vs. FIFOThe controller of Sagehen Enterprises believes that the company should switch from the LIFO method to the FIFO method.  The controller’s bonus is based on the next income.  It is the controller’s belief that the switch in inventory methods would increase the net income of the company.  What are the differences between the LIFO and FIFO methods?Week 3 DQ 2 DepreciationA variety of depreciation methods are used to allocate the cost of an asset to all of the accounting periods benefited by the use of the asset.  Your client has just purchased a piece of equipment for $100,000.   Explain the concept of depreciation.  Which of the following depreciation methods would you recommend: straight-line depreciation, double declining balance method, or an alternative method?<strong>ACC 205 Week Four Exercise Assignment Liability</strong>1.  Prepayments by customers.Greenland Enterprises began a new magazine in the fourth quarter of 19X2. Annual subscriptions, which cost $18 each, were sold as follows:Number ofSubscriptionsSoldOctober400November700December1,000If subscriptions begin (and magazines are sent) in the month of sale:a.  Present the necessary journal entry to record the magazine subscriptions sold during the fourth quarter.b.  Determine how much subscription revenue Greenland earned by the end of 19X2.c.  Compute Greenland's liability to subscribers at the end of 19X2.2.  Notes payable. Sentry Security Systems purchased $72,000 of office equipment on April 1, 19X3, by signing a three-year, 12% note payable to Sharp, Inc. One-third of the principal, along with interest on the outstanding balance, is payable each April 1 until maturity. (The first payment is due in 19X4.)a.  Fill in the following table to reflect Sentry's liabilities, assuming a March 31 year-end.March 3119X4   19X5  19X6Current liabilitiesCurrent portion of long-term debtInterest payableLong-term liabilitiesLong-term debtb.  Assuming that interest is properly recorded at the end of each year, present the proper journal entry to record the last payment on April 1, 19X6.3.  Notes payable. Red Bank Enterprises was involved in the following transactions during the fiscal year ended October 31:Aug. 2Borrowed $75,000 from the Bank of Kingsville by signing a 120-day note for $79,000.20Issued a $40,000 note to Harris Motors for the purchase of a $40,000 delivery truck. The note is due in 180 days and car­ries a 12% interest rate.Sept. 10Purchased merchandise from Pans Enterprises in the amount of $15,000. Issued a 30-day, 12% note in settlement of the balance owed.11Issued a $60,000 note to Datatex Equipment in settlement of an overdue account payable of the same amount. The note is due in 30 days and carries a 14% interest rate.Oct. 10The note to Paris Enterprises was paid in full.11The note to Datatex Equipment was due today, but insuffi­cient funds were available for payment. Management autho­rized the issuance of a new 20-day, 18% note for $60,700, the maturity value of the original obligation.31The new note to Datatex Equipment was paid in full.Instructions:a.  Prepare journal entries to record the transactions.b.  Prepare adjusting entries on October 31 to record accrued interest.c.  Prepare the current liability section of Red Bank's balance sheet as of October 31.Assume the Accounts Payable account totals $203,600 on this date.4.  Partner investments; journal entries. The LP partnership was formed on January 1, 19X7, by investments from Bill Levy and Marv Parcells. Levy contributed $30,000 cash and $80,000 of land. Parcells contributed various assets from a business that he had operated over the past five years. A balance sheet from that business disclosed the following:Accounts receivable  $ 27,000Allowance for uncollectibles  (3,200)Equipment  68,000Accumulated depreciation  (24,000)The partners confirmed that the allowance for uncollectible accounts should be decreased by $600. In addition, an independent appraisal deter­mined that fair market values of the land and equipment on January 1 were $125,000 and $35,000, respectively.Prepare the journal entries needed to record the investments of Levy and Parcells.5.  Income distribution: Different arrangements. Frank, Gatti, and Hogan recently invested 530,000 each and formed the Apex partnership. During the first year of operation, the business gener­ated a net income of $39,000. Determine the proper division of income among the partners for the following independent cases:a.  Income is divided on the basis of a ratio of the beginning capital invest­ments.b.  Partners are allowed 12% interest on their investments; the remaining profits and losses are allocated on a 6 :1 :3 basis.c.  Frank and Hogan each receive salary allowances of $24,000 per year; the remaining profits and losses are shared equally.6.  Investment by partners; financial statements. Abram, Haas, and Tidwell formed a partnership to practice law by com­bining their respective sole proprietorships. The assets and liabilities con­tributed to the firm on January 2, 19X4, the date of formation, follow.AbramLandBook Value$40,000FairMarket Value$115,000Mortgage payable38,00038,000HaasOffice supplies42,00030,000Office equipment64,00048,000TidwellCash50,00050,000Accounts receivable20,00018,000Short-term investments4,0007,000Instructions:a.  Prepare journal entries to record the investments of Abram, Haas Tidwell in the new partnership.b.  Prepare a classified balance sheet for the partnership immediately after the investments are recorded.c.  The partners share profits and losses equally, and the first year's n income was $66,000. Cash withdrawals of $5,000 were made by Abram,$22,000 by Haas, and $17,000 by Tidwell. Prepare the December 31 19X4, statement of partners' equity for the firm<strong>ACC 205 Week 4 JOURNAL</strong>Future Obligations JournalThe current liability section of the balance sheet lists the liabilities that are due within the next 12 months.  Reflecting on your current financial situation, apply the concept of current liabilities.  What does this analysis tell you about your future obligations?  What did you learn from this experience?<strong>ACC 205 Week 4 DQs</strong>Week 4 DQ 1 Current LiabilityWhat is a current liability?  From the perspective of a user of financial statements, why do you believe current liabilities are separated from long-term liabilities?  Based on your current experience as well as and any additional research you may have done provide two examples of situations where businesses collect monies from customers and employees and report these amounts as a current liability.Guided Response:Review several of your peers’ posts and identify the core components of a current liability.  Respond to at least two of your peers and provide recommendations to extend their thinking.  Challenge your peers by asking a question that may cause them to reevaluate if their example is a current liability.Week 4 DQ 2 Client RecommendationsA client comes to you thinking about starting a consulting business.  Your client is specifically  interested in what type of entity should be created for this new business.  Based on your readings or any additional research you may have done, discuss the advantages and disadvantages of the following: sole proprietorship, partnership, and corporation.  Based on these advantages and disadvantages provide a clear recommendation to your client.Let at least two of your peers posts know if an alternative choice of entity would be possible.  What would be the benefits of this new entity choice?  Would there be any disadvantages associated with this new entity selection.Guided Response:Let at least two of your peers know if an alternative choice of entity would be possible?  What would be the benefits of this new entity choice?  Would there be any disadvantages associated with this new entity selection?<strong>ACC 205 Week Five Exercise Assignment Financial Ratios</strong>1.  Liquidity ratios. Edison, Stagg, and Thornton have the following financial information at the close of business on July 10:EdisonStaggThorntonCash$4,000$2,500$1,000Short-term investments3,0002,5002,000Accounts receivable2,0002,5003,000Inventory1,0002,5004,000Prepaid expenses800800800Accounts payable200200200Notes payable: short-term3,1003,1003,100Accrued payables300300300Long-term liabilities3,8003,8003,800Compute the current and quick ratios for each of the three companies. (Round calculations to two decimal places.) Which firm is the most liquid? Why? Suppose Thornton is using FIFO for inventory valuation and Edison is using LIFO. Comment on the comparability of information between these two companies. If all short-term notes payable are due on July 11 at 8 a.m., comment on each company's ability to settle its obligation in a timely manner. 2.  Computation and evaluation of activity ratios. The following data relate to Alaska Products, Inc:19X519X4Net credit sales$832,000$760,000Cost of goods sold440,000350,000Cash, Dec. 31125,000110,000Accounts receivable, Dec. 31180,000140,000Inventory, Dec. 3170,00050,000Accounts payable, Dec. 31115,000108,000The company is planning to borrow $300,000 via a 90-day bank loan to cover short-term operating needs.Compute the accounts receivable and inventory turnover ratios for 19X5. Alaska rounds all calculations to two decimal places. Study the ratios from part (a) and comment on the company's ability to repay a bank loan in 90 days. Suppose that Alaska's major line of business involves the processing and distribution of fresh and frozen fish throughout the United States. Do you have any concerns about the company's inventory turnover ratio? Briefly discuss. 3.  Profitability ratios, trading on the equity. Digital Relay has both preferred and common stock outstanding. The com­pany reported the following information for 19X7:Net sales$1,500,000Interest expense120,000Income tax expense80,000Preferred dividends25,000Net income130,000Average assets1,100,000Average common stockholders' equity400,000Compute the profit margin on sales and the rates of return on assets and common stockholders' equity, rounding calculations to two decimal places. Does the firm have positive or negative financial leverage? Briefly ex­plain. 4.  Financial statement construction via ratios. Incomplete financial statements of Lock Box, Inc., are presented below.LOCK BOX, INC.Income StatementFor the Year Ended December 31, 19X3Sales$ ?Cost of goods sold?Gross profit$15,000,000Operating expenses & interest?Income before tax$ ?Income taxes, 40%?Net income$ ?LOCK BOX, INC.Balance SheetDecember 31, 19X3AssetsCashAccounts receivableInventoryProperty, plant, &. equipmentTotal assets$ ???8,000,000$24,000,000Liabilities & Stockholders' EquityAccounts payableNotes payable (short-term)Bonds payableCommon stockRetained earningsTotal liabilities & stockholders' equity$ ?600,000 4,600,0002,000,000?$24,000,000Further information:Cost of goods sold is 60% of sales. All sales are on account. The company's beginning inventory is $5 million; inventory turnover is 4. The debt to total assets ratio is 70%. The profit margin on sales is 6%. The firm's accounts receivable turnover is 5. Receivables increased by $400,000 during the year.Instructions:Using the preceding data, complete the income statement and the balance sheet.<strong>ACC 205 WK 5 JOURNAL</strong>Most Important Ratio JournalReflect for a moment on the ratios (working capital, current ratio, quick ratio, debt to asset, debt to equity, times interest earned, gross margin and net margin) presented this week.  If you were considering investing in a company what ratio would be the most important to you?  Formulate and argument to defend your position.<strong>ACC 205 Week 5 Boeing Financial Statement Analysis</strong><strong>ACC 205 Week 5 DQs</strong>Week 5 DQ 1 RatiosRatios provide the users of financial statements with a great deal of information about the entity.  Do ratios tell the whole story?  How could liquidity ratios be used by investors to determine whether or not to invest in a company?Guided Response:Let at least two of your peers know how debt service ratios can be used by a lender in determining whether or not to lend money to a company.Week 5 DQ 2 Profit Margin<table width="431"><tbody><tr><td width="128"> </td><td width="91">Year Ending December 2012</td><td width="106">Year Ending December 2011</td><td width="106">Year Ending December 2010</td></tr><tr><td width="128">Revenues</td><td width="91">40,000</td><td width="106">35,000</td><td width="106">33,000</td></tr><tr><td width="128">Operating Expenses</td><td width="91"> </td><td width="106"> </td><td width="106"> </td></tr><tr><td width="128">Salaries</td><td width="91">15,000</td><td width="106">10,000</td><td width="106">9,000</td></tr><tr><td width="128">Maintenance and Repairs</td><td width="91">6,000</td><td width="106">9,000</td><td width="106">10,000</td></tr><tr><td width="128">Rental Expense</td><td width="91">2,500</td><td width="106">2,500</td><td width="106">2,500</td></tr><tr><td width="128">Depreciation</td><td width="91">2,000</td><td width="106">2,000</td><td width="106">2,000</td></tr><tr><td width="128">Fuel</td><td width="91">4,000</td><td width="106">3,500</td><td width="106">2,500</td></tr><tr><td width="128">Total Operating Expenses</td><td width="91">29,500</td><td width="106">27,000</td><td width="106">26,000</td></tr><tr><td width="128">Operating Income</td><td width="91">10,500</td><td width="106">8,000</td><td width="106">7,000</td></tr><tr><td width="128">Sales and Administrative Expenses</td><td width="91">6,000</td><td width="106">4,000</td><td width="106">3,000</td></tr><tr><td width="128">Interest Expense</td><td width="91">2,500</td><td width="106">2,000</td><td width="106">1,000</td></tr><tr><td width="128">Net Income</td><td width="91">2,000</td><td width="106">2,000</td><td width="106">3,000</td></tr></tbody></table>Above is a comparative income statement for Cecil, Inc. for the years 2010, 2011, and 2012.  Calculate the profit margin for each of these years.  Comment on the profit margin trend.Guided Response:Let at least two of your peers posts know what you changes you would recommend to improve the net margin of the company.
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<strong>ACC 205 Week One Exercise Assignment Basic Accounting Equations</strong>Week One Exercise AssignmentBasic Accounting Equations1. Basic concepts. Jean's Marine Supply specializes in the sale of boating equipment and acces­sories. Identify the items that follow as an asset (A), liability (L), revenue (R), or expense (E) from the firm's viewpoint.a. The inventory of boating supplies owned by the company.b. Monthly rental charges paid for store space.c. A loan owed to Citizens Bank.d. New computer equipment purchased to handle daily record keeping.e. Daily sales made to customers.f. Amounts due from customers.g. Land owned by the company to be used as a future store site.h. Weekly salaries paid to salespeople.2. Analysis of transactions.Set up the following headings across a piece of paper:Assets = Liabilities + Owner's EquityBy using "+" and "-," indicate the effect of each of the following transac­tions on total assets, liabilities, and owner's equity:a. Processed a $5,000 cash withdrawal for the owner.b. Recorded the receipt of May's utility bill, to be paid in June.c. Provided services to customers on account.d. Paid the current month's advertising charges.e. Purchased a $27,000 delivery truck by paying $5,000 down and securing a loan for the remaining balance.f. Received $11,000 cash from the owner as an investment in the business.g. Returned a new computer and printer purchased earlier in the month on account. The bill had not as yet been paid.h. Paid the utility bill recorded previously in (b).3. Balance sheet preparation.The following data relate to Preston Company as of December 31, 19XX:Building $44,000 Accounts receivable $24,000Cash 17,000 Loan payable 30,000J. Preston, capital 65,000 Land 21,000Accounts payable ?Prepare a balance sheet in good form as of December 31, 19XX.4. Statement preparationThe following information is taken from the accounting records of Grimball Cardiology at the close of business on December 31, 19X1:Accounts payable $ 14,700Surgery revenue $175,000Surgical expenses 80,000Cash 60,000Surgical equipment 37,000Office Equipment 118,000Salaries expense 30,000Rent expense 15,000Accounts receivable 135,000Loan payable 10,300Utilities expense 5,000All equipment was acquired just prior to year-end. Conversations with the practice's bookkeeper revealed the data that follow.Rose Grimball, capital (January 1, 19X1) $300,00019X1 owner investments 2,00019X1 owner withdrawals 22,000Instructionsa. Prepare the income statement for Grimball Cardiology in good form.b. Prepare a statement of owner's equity in good form.c. Prepare Grimball's balance sheet in good form.5. Recognition of normal balancesThe following items appeared in the accounting records of Triguero's, a retail music store that also sponsors concerts. Classify each of the items as an asset, liability; revenue; or expense from the company's viewpoint. Also indicate the normal account balance of each item.a. The albums, tapes, and CDs held for sale to customers.b. A long-term loan owed to Citizens Bank.c. Promotional costs to publicize a concert.d. Daily receipts for merchandise sold,e. Amounts due from customers,f. Land held as an investment,g. A new fax machine purchased for office use.h. Amounts to be paid in 10 days to suppliers,i. Amounts paid to a mall for rent.6. Basic journal entriesThe following transactions pertain to the Jennifer Royall Company:Apr. 1Received cash of $15,000 and land valued at $10,000 fromJenni­fer Royall as an investment in the business.5 Provided $1,200 of services to Jason Ratchford, a client.Ratchford agreed to pay $800 in 15 days and the remaining amount in May.9 Paid $250 of salaries to an employee.14 Acquired a new computer for $3,200; Royall will pay the dealer in May.20 Collected $800 from Jason Ratchford for services provided on April 5.24 Borrowed $7,500 from BestBanc by securing a six-month loan.Prepare journal entries (and explanations) to record the preceding transactions and events.7. Journal entry preparationOn January 1 of the current year, MuniServ began operations with $100,000 cash. The cash was obtained from an owner investment by Peter Houston of $70,000 and a $30,000 bank loan. Shortly thereafter, the company ac­quired selected assets of a bankrupt competitor. The acquisition included land ($15,000), a building ($40,000), and vehicles ($10,000). MuniServ paid $45,000 at the time of the transaction and agreed to remit the remaining balance due of $20,000 (an account payable) by February 15.During January, the company had additional cash outlays for the follow­ing items:Purchases of store equipment $4,600Loan payment, including $100 interest 500Salaries expense 2,300Advertising expense 700The January utilities bill of $200 was received on January 31 and will be paid on February 10. MuniServ rendered services to clients on account amounting to $9,400. All customers have been billed; by month-end, $3,700 had been received in settlement of account balances.Instructionsa. Present journal entries that reflect MuniServ's January transactions, in­cluding the $100,000 raised from the owner investment and loan.b. Compute the total debits, total credits, and ending balance that would befound in the company's Cash account.c. Determine the amount that would be shown on the January 31 trial balance for Accounts Payable. Is the balance a debit or a credit?8. Balance Sheet Review - Select a public company and down a copy of the company’s most recent annual report. You will use these financial statements throughout the rest of this course. As you are aware of the Balance Sheet lists the assets, liabilities, and owner’s equity of the company. Review the company’s balance sheet over a period of three years. Based on your review, what account experienced the largest increase? What account experienced the largest decrease? As a potential investor would either the increase or decrease be considered a positive or negative? Write a 150-200 word summary of the results of your balance sheet analysis.<strong>ACC 205 Week 1 DQs</strong>Week 1 DQ 1As you have learned in this week’s readings the Accounting Equation is Assets = Liabilities + Owners’ Equity. Is the accounting equation true in all instances? Provide sample transactions from your own experiences to demonstrate the validity of the Accounting Equation.Guided Response:Review several of your peers’ postings and identify some core components that you feel should be included in every transaction. Respond to at least two of your peers and provide recommendations to extend their thinking. Challenge your peers by asking a question that may cause them to reevaluate or add components to their transactions.Week 1 DQ 2What does the term account mean? What are the different classifications of accounts? How do the rules for debits and credits impact accounts? Please provide an example of how debits and credits impact accounts.Guided Response:Analyze several of your peers’ posts. Let at least two of your peers know if this knowledge could be used in their everyday lives. Is so, how? If not, why not?<strong>ACC 205 Week 1 JOURNAL</strong>JournalTo complete the following journal entry, go to this week's Journal link in the left navigation.Balance Sheet JournalThe balance sheet is a financial snap shot of a company at  a particular point in time.  The balance sheet lists the assets, liabilities, and equity of the company.  Reflect on your personal financial situation, can you apply the concepts of the balance sheet?  What did you learn from this reflection?<strong>ACC 205 Week Two Exercise Assignment Revenue and Expenses</strong>1.  Revenue and Expenses. Dave Morris began a law practice several years ago, shortly after graduating from law school. During 19X1, he was approached by Delores Silva, who had recently suffered a back injury in an automobile accident. Morris ac­cepted Silva as a client, and in 19X2 proceeded with a lawsuit against Maddox Motors. The suit alleged that Maddox had knowingly sold Silva an automobile with defective brakes. Late in 19X2, the courts awarded Silva $240,000 in damages. Morris was entitled to 40% of this settlement for his fees. In 19X3, Maddox Motors paid Silva and Morris their respective shares of the judgment. Morris incurred secretarial and photocopy charges in 19X2 of $12,000— all related to the Silva case. Of this amount, $8,000 was paid in 19X2 and the balance was paid in 19X3. Assuming that Morris uses the accrual basis of accounting, in what year(s) should the revenue and expense amounts be recognized? Why?2.  Accrual and modified cash basis. The following information pertains to Beta Company for October:Services rendered during October to customers on account $14,380Cash receipts fromOwner investment 7,000Customers on account 5,650Cash customers for services rendered in October 6,800Cash payments toCreditors for expenses incurred during October 4,400Creditors for expenses incurred prior to October 2,100Monroe Equipment for purchase of new machinery onOctober 1 8,400Expenses incurred during October, to be paid in future months 3,725The machinery is expected to have a service life of five years.InstructionsCalculate Beta's net income for October, using the following methods:a.  Accrual basis of accounting.b.  Modified cash basis of accounting.3.  Accounting for prepaid expenses and unearned revenues. Hawaii-Blue began business on January 1 of the current year and offers deep sea fishing trips to tourists. Tourists pay $125 in advance for an all-day outing off the coast of Maui. The company collected monies during January for 210 outings, with 30 of the tourists not planning to take their trips until early February. Hawaii-Blue rents its fishing boat from Pacific Yacht Supply. An agree­ment was signed at the beginning of the year, and $72,000 was paid for the rights to use the boat for two full years.a.  Prepare journal entries to record (1) the collection of monies from tourists and (2) the revenue generated during January.b.  Calculate Hawaii-Blue's total obligation to tourists at the end of January. On what financial statement and in which section would this amount appear?4.  Recognition of concepts. Ron Carroll operates a small company that books entertainers for theaters, parties, conventions, and so forth. The company's fiscal year ends on June 30 Consider the items that follow and classify each as either (1) prepaid expense, (2) unearned revenue, (3} accrued expense, (4) accrued revenue, or (5) none of the foregoing.a.  Amounts paid on June 30 for a one-year insurance policy.b.  Professional fees earned but not billed as of June 30.c.  Repairs to the firm's copy machine, incurred and paid in June.d.  An advance payment from a client for a performance next month at a convention.e.  The payment in item (d) from the client's point of view.f.  Interest owed on the company's bank loan, to be paid in early July.g.  The bank loan payable in item (f).h.  Office supplies on hand at year-end.i.  Bank reconciliations: Missing amountsj.  The following independent cases relate to bank reconciliations. Compute the missing amounts, assuming that no other reconciling items exist.Case ACase BCase CBalance per bank  $6,000$4,000$ ?Outstanding checks  5002,1001,400Deposits in transit  2,00071,000Balance per company records  ?8,0004505.  Bank reconciliation and entries. The following information was taken from the accounting records of Pal­metto Company for the month of January:Balance per bank  $6,150Balance per company records 3,580Bank service charge for January 20Deposits in transit 940Interest on note collected by bank 100Note collected by bank 1,000NSF check returned by the bank with the bank statement 650Outstanding checks 3,080a.  Prepare Palmetto's January bank reconciliation.b.  Prepare any necessary journal entries for Palmetto.6.  Allowance method: Income statement and balance sheet approaches. Tempe Company reported accounts receivable of $300,000 and an allow­ance for uncollectible accounts of $31,000 (credit) on the December 31, 19X2, balance sheet. The following data pertain to 19X3 activities and operations:Sales on account $2,000,000Cash collections from credit customers 1,600,000Sales discounts 50,000Sales returns & allowances 100,000Uncollectible accounts written off 29,000Collections on accounts that were previously written off 2,700Instructionsa.  Prepare journal entries to record the sales- and receivables-related trans­actions from 19X3.b.  Prepare the December 31, 19X3, adjusting entry for uncollectible ac­counts assuming that uncollectibles are estimated to be 2% of net credit sales.c.  Prepare the December 31, 19X3, adjusting entry for uncollectible ac­counts assuming that uncollectibles are estimated at 1% of year-end accounts receivable.d.  Compute the amount of the adjusting entry in part (c) assuming that $46,000, rather than $29,000, of accounts were written off in 19X3.7.  Income Statement Review. Using the annual report of the company that you selected in week 1 please review the company’s income statement over a three year period.  Did sales increase during this time?  Did Cost of Good Sold increase significantly?  Has the company been profitable?  Do you notice any positives based on your analysis of the income statement?  Are there any negatives that potential investors should be aware of?  Write a 150-200 summary of the results of your income statement analysis.<strong>ACC 205 Week 2 JOURNAL</strong>Income Statement JournalThe income statement measures the income and expenses of a company over a specific period of time.  Reflecting on your personal financial statement for the past month, can you apply the principles of the income statement?  What did you learn from this experience?<strong>ACC 205 Week 2 DQs</strong>Week 2 DQ1 Accounting CycleFinancial statements are a product of the accounting cycle.  Think about two different companies: a manufacturing company, and a retail company.  Why would different companies have different accounting cycles?  Would you expect the steps of the accounting cycle to be the same for each company?  Why or why not?Week 2 DQ 2 Bank ReconciliationWhat is the purpose of a bank reconciliation?  What are the reasons for differences between the cash reported in the accounting records and the cash balance in the bank statements?<strong>ACC 205 Week Three Exercise Assignment Inventory</strong>1.  Inventory.Inventory valuation methods: Basic computations.The January beginning inventory of the White Company consisted of 300 units costing $40 each. During the first quarter, the company purchased two batches of goods: 700 units at $44 on February 21 and 800 units at $50 on March 28. Sales during the first quarter were 1,400 units at $75 per unit. The White Company uses a periodic inventory system.Using the White Company data, fill in the chart that follows to compare the results obtained under the FIFO, LIFO, and weighted-average inventory methods.FIFOLIFOWeighted AverageGoods available for sale$$$Ending inventory, March 31Cost of goods sold2.  Analysis of LIFO versus FIFO. Indicate whether LIFO or FIFO best describes each of the following:a.  Gives highest profits when prices fall.b.  Yields lowest income taxes when prices rise.c.  Generates an ending inventory valuation that somewhat approximates replacement cost.d.  Matches recent costs against current selling prices on the income state­ment.e.  Comes closest to approximating the physical flow of goods of a fruit andvegetable dealer.f.  Results in lowest cost of goods sold in inflationary periods.3.  Inventory Errors. The income statements of Diamond Company for the years ended Decem­ber 31, 19X1, and 19X2 follow.19X119X2Net salesCost of goods soldBeginning inventoryAdd: Net purchases$ 95,000 380,000$440,000$109,000 404,000$483,000Goods available forsaleLess: Ending inventory$475,000 109,000$513,000 127,000Cost of goods sold366,000386,000Gross profitOperating expenses$ 74,000 58,000$ 97,000 67,000Net income$ 16,000$ 30,000Diamond uses a periodic inventory system. A detailed review of theaccounting records disclosed the following:a.  A review of 19X1 purchase invoices revealed that a clerk had incor­rectly recorded a $12,600 purchase as $1,260.b.  A $4,800 purchase was made on December 30, 19X2, terms F.O.B. ship­ping point. The invoice was not recorded in 19X2 nor were the goods included in the 19X2 ending physical inventory count. Both the goods and invoice were received in early 19X3, with the invoice being re­corded at that time.c.  Goods costing $3,000 were accidentally excluded from the 19X1 ending physical inventory count. These goods were sold during 19X2, and all aspects of the sale were properly recorded.Instructions:Prepare corrected income statements for 19X1 and 19X2.Determine the impact of the preceding errors on the December 31, 19X2, owner's equity balance.4.  Inventory valuation methods.  Computations and concepts. Wave Riders Surf Board Company began business on January 1 of the current year. Purchases of surf boards were as follows:3100 boards <& $125Mar. 1750 boards @ $130May 9246 boards @ $140July 3400 boards @ $150Oct. 2374 boards @ $160Wave Riders sold 710 boards at an average price of $250 per board. The company uses a periodic inventory system.Instructions:Calculate cost of goods sold, ending inventory, and gross profit under each of the following inventory valuation methods: First-in, first-out<strong>ACC 205 Week 3 JOURNAL</strong>Inventory JournalReflect for a moment on the LIFO (Last in First Out) and FIFO (First in First Out) inventory methods.  If you were starting a small manufacturing company, what inventory method do you believe would provide the most accurate financial statements?  Why do you believe this is the case?<strong>ACC 205 Week 3 DQs</strong>Week 3 DQ 1 LIFO vs. FIFOThe controller of Sagehen Enterprises believes that the company should switch from the LIFO method to the FIFO method.  The controller’s bonus is based on the next income.  It is the controller’s belief that the switch in inventory methods would increase the net income of the company.  What are the differences between the LIFO and FIFO methods?Week 3 DQ 2 DepreciationA variety of depreciation methods are used to allocate the cost of an asset to all of the accounting periods benefited by the use of the asset.  Your client has just purchased a piece of equipment for $100,000.   Explain the concept of depreciation.  Which of the following depreciation methods would you recommend: straight-line depreciation, double declining balance method, or an alternative method?<strong>ACC 205 Week Four Exercise Assignment Liability</strong>1.  Prepayments by customers.Greenland Enterprises began a new magazine in the fourth quarter of 19X2. Annual subscriptions, which cost $18 each, were sold as follows:Number ofSubscriptionsSoldOctober400November700December1,000If subscriptions begin (and magazines are sent) in the month of sale:a.  Present the necessary journal entry to record the magazine subscriptions sold during the fourth quarter.b.  Determine how much subscription revenue Greenland earned by the end of 19X2.c.  Compute Greenland's liability to subscribers at the end of 19X2.2.  Notes payable. Sentry Security Systems purchased $72,000 of office equipment on April 1, 19X3, by signing a three-year, 12% note payable to Sharp, Inc. One-third of the principal, along with interest on the outstanding balance, is payable each April 1 until maturity. (The first payment is due in 19X4.)a.  Fill in the following table to reflect Sentry's liabilities, assuming a March 31 year-end.March 3119X4   19X5  19X6Current liabilitiesCurrent portion of long-term debtInterest payableLong-term liabilitiesLong-term debtb.  Assuming that interest is properly recorded at the end of each year, present the proper journal entry to record the last payment on April 1, 19X6.3.  Notes payable. Red Bank Enterprises was involved in the following transactions during the fiscal year ended October 31:Aug. 2Borrowed $75,000 from the Bank of Kingsville by signing a 120-day note for $79,000.20Issued a $40,000 note to Harris Motors for the purchase of a $40,000 delivery truck. The note is due in 180 days and car­ries a 12% interest rate.Sept. 10Purchased merchandise from Pans Enterprises in the amount of $15,000. Issued a 30-day, 12% note in settlement of the balance owed.11Issued a $60,000 note to Datatex Equipment in settlement of an overdue account payable of the same amount. The note is due in 30 days and carries a 14% interest rate.Oct. 10The note to Paris Enterprises was paid in full.11The note to Datatex Equipment was due today, but insuffi­cient funds were available for payment. Management autho­rized the issuance of a new 20-day, 18% note for $60,700, the maturity value of the original obligation.31The new note to Datatex Equipment was paid in full.Instructions:a.  Prepare journal entries to record the transactions.b.  Prepare adjusting entries on October 31 to record accrued interest.c.  Prepare the current liability section of Red Bank's balance sheet as of October 31.Assume the Accounts Payable account totals $203,600 on this date.4.  Partner investments; journal entries. The LP partnership was formed on January 1, 19X7, by investments from Bill Levy and Marv Parcells. Levy contributed $30,000 cash and $80,000 of land. Parcells contributed various assets from a business that he had operated over the past five years. A balance sheet from that business disclosed the following:Accounts receivable  $ 27,000Allowance for uncollectibles  (3,200)Equipment  68,000Accumulated depreciation  (24,000)The partners confirmed that the allowance for uncollectible accounts should be decreased by $600. In addition, an independent appraisal deter­mined that fair market values of the land and equipment on January 1 were $125,000 and $35,000, respectively.Prepare the journal entries needed to record the investments of Levy and Parcells.5.  Income distribution: Different arrangements. Frank, Gatti, and Hogan recently invested 530,000 each and formed the Apex partnership. During the first year of operation, the business gener­ated a net income of $39,000. Determine the proper division of income among the partners for the following independent cases:a.  Income is divided on the basis of a ratio of the beginning capital invest­ments.b.  Partners are allowed 12% interest on their investments; the remaining profits and losses are allocated on a 6 :1 :3 basis.c.  Frank and Hogan each receive salary allowances of $24,000 per year; the remaining profits and losses are shared equally.6.  Investment by partners; financial statements. Abram, Haas, and Tidwell formed a partnership to practice law by com­bining their respective sole proprietorships. The assets and liabilities con­tributed to the firm on January 2, 19X4, the date of formation, follow.AbramLandBook Value$40,000FairMarket Value$115,000Mortgage payable38,00038,000HaasOffice supplies42,00030,000Office equipment64,00048,000TidwellCash50,00050,000Accounts receivable20,00018,000Short-term investments4,0007,000Instructions:a.  Prepare journal entries to record the investments of Abram, Haas Tidwell in the new partnership.b.  Prepare a classified balance sheet for the partnership immediately after the investments are recorded.c.  The partners share profits and losses equally, and the first year's n income was $66,000. Cash withdrawals of $5,000 were made by Abram,$22,000 by Haas, and $17,000 by Tidwell. Prepare the December 31 19X4, statement of partners' equity for the firm<strong>ACC 205 Week 4 JOURNAL</strong>Future Obligations JournalThe current liability section of the balance sheet lists the liabilities that are due within the next 12 months.  Reflecting on your current financial situation, apply the concept of current liabilities.  What does this analysis tell you about your future obligations?  What did you learn from this experience?<strong>ACC 205 Week 4 DQs</strong>Week 4 DQ 1 Current LiabilityWhat is a current liability?  From the perspective of a user of financial statements, why do you believe current liabilities are separated from long-term liabilities?  Based on your current experience as well as and any additional research you may have done provide two examples of situations where businesses collect monies from customers and employees and report these amounts as a current liability.Guided Response:Review several of your peers’ posts and identify the core components of a current liability.  Respond to at least two of your peers and provide recommendations to extend their thinking.  Challenge your peers by asking a question that may cause them to reevaluate if their example is a current liability.Week 4 DQ 2 Client RecommendationsA client comes to you thinking about starting a consulting business.  Your client is specifically  interested in what type of entity should be created for this new business.  Based on your readings or any additional research you may have done, discuss the advantages and disadvantages of the following: sole proprietorship, partnership, and corporation.  Based on these advantages and disadvantages provide a clear recommendation to your client.Let at least two of your peers posts know if an alternative choice of entity would be possible.  What would be the benefits of this new entity choice?  Would there be any disadvantages associated with this new entity selection.Guided Response:Let at least two of your peers know if an alternative choice of entity would be possible?  What would be the benefits of this new entity choice?  Would there be any disadvantages associated with this new entity selection?<strong>ACC 205 Week Five Exercise Assignment Financial Ratios</strong>1.  Liquidity ratios. Edison, Stagg, and Thornton have the following financial information at the close of business on July 10:EdisonStaggThorntonCash$4,000$2,500$1,000Short-term investments3,0002,5002,000Accounts receivable2,0002,5003,000Inventory1,0002,5004,000Prepaid expenses800800800Accounts payable200200200Notes payable: short-term3,1003,1003,100Accrued payables300300300Long-term liabilities3,8003,8003,800Compute the current and quick ratios for each of the three companies. (Round calculations to two decimal places.) Which firm is the most liquid? Why? Suppose Thornton is using FIFO for inventory valuation and Edison is using LIFO. Comment on the comparability of information between these two companies. If all short-term notes payable are due on July 11 at 8 a.m., comment on each company's ability to settle its obligation in a timely manner. 2.  Computation and evaluation of activity ratios. The following data relate to Alaska Products, Inc:19X519X4Net credit sales$832,000$760,000Cost of goods sold440,000350,000Cash, Dec. 31125,000110,000Accounts receivable, Dec. 31180,000140,000Inventory, Dec. 3170,00050,000Accounts payable, Dec. 31115,000108,000The company is planning to borrow $300,000 via a 90-day bank loan to cover short-term operating needs.Compute the accounts receivable and inventory turnover ratios for 19X5. Alaska rounds all calculations to two decimal places. Study the ratios from part (a) and comment on the company's ability to repay a bank loan in 90 days. Suppose that Alaska's major line of business involves the processing and distribution of fresh and frozen fish throughout the United States. Do you have any concerns about the company's inventory turnover ratio? Briefly discuss. 3.  Profitability ratios, trading on the equity. Digital Relay has both preferred and common stock outstanding. The com­pany reported the following information for 19X7:Net sales$1,500,000Interest expense120,000Income tax expense80,000Preferred dividends25,000Net income130,000Average assets1,100,000Average common stockholders' equity400,000Compute the profit margin on sales and the rates of return on assets and common stockholders' equity, rounding calculations to two decimal places. Does the firm have positive or negative financial leverage? Briefly ex­plain. 4.  Financial statement construction via ratios. Incomplete financial statements of Lock Box, Inc., are presented below.LOCK BOX, INC.Income StatementFor the Year Ended December 31, 19X3Sales$ ?Cost of goods sold?Gross profit$15,000,000Operating expenses & interest?Income before tax$ ?Income taxes, 40%?Net income$ ?LOCK BOX, INC.Balance SheetDecember 31, 19X3AssetsCashAccounts receivableInventoryProperty, plant, &. equipmentTotal assets$ ???8,000,000$24,000,000Liabilities & Stockholders' EquityAccounts payableNotes payable (short-term)Bonds payableCommon stockRetained earningsTotal liabilities & stockholders' equity$ ?600,000 4,600,0002,000,000?$24,000,000Further information:Cost of goods sold is 60% of sales. All sales are on account. The company's beginning inventory is $5 million; inventory turnover is 4. The debt to total assets ratio is 70%. The profit margin on sales is 6%. The firm's accounts receivable turnover is 5. Receivables increased by $400,000 during the year.Instructions:Using the preceding data, complete the income statement and the balance sheet.<strong>ACC 205 WK 5 JOURNAL</strong>Most Important Ratio JournalReflect for a moment on the ratios (working capital, current ratio, quick ratio, debt to asset, debt to equity, times interest earned, gross margin and net margin) presented this week.  If you were considering investing in a company what ratio would be the most important to you?  Formulate and argument to defend your position.<strong>ACC 205 Week 5 Boeing Financial Statement Analysis</strong><strong>ACC 205 Week 5 DQs</strong>Week 5 DQ 1 RatiosRatios provide the users of financial statements with a great deal of information about the entity.  Do ratios tell the whole story?  How could liquidity ratios be used by investors to determine whether or not to invest in a company?Guided Response:Let at least two of your peers know how debt service ratios can be used by a lender in determining whether or not to lend money to a company.Week 5 DQ 2 Profit Margin<table width="431"><tbody><tr><td width="128"> </td><td width="91">Year Ending December 2012</td><td width="106">Year Ending December 2011</td><td width="106">Year Ending December 2010</td></tr><tr><td width="128">Revenues</td><td width="91">40,000</td><td width="106">35,000</td><td width="106">33,000</td></tr><tr><td width="128">Operating Expenses</td><td width="91"> </td><td width="106"> </td><td width="106"> </td></tr><tr><td width="128">Salaries</td><td width="91">15,000</td><td width="106">10,000</td><td width="106">9,000</td></tr><tr><td width="128">Maintenance and Repairs</td><td width="91">6,000</td><td width="106">9,000</td><td width="106">10,000</td></tr><tr><td width="128">Rental Expense</td><td width="91">2,500</td><td width="106">2,500</td><td width="106">2,500</td></tr><tr><td width="128">Depreciation</td><td width="91">2,000</td><td width="106">2,000</td><td width="106">2,000</td></tr><tr><td width="128">Fuel</td><td width="91">4,000</td><td width="106">3,500</td><td width="106">2,500</td></tr><tr><td width="128">Total Operating Expenses</td><td width="91">29,500</td><td width="106">27,000</td><td width="106">26,000</td></tr><tr><td width="128">Operating Income</td><td width="91">10,500</td><td width="106">8,000</td><td width="106">7,000</td></tr><tr><td width="128">Sales and Administrative Expenses</td><td width="91">6,000</td><td width="106">4,000</td><td width="106">3,000</td></tr><tr><td width="128">Interest Expense</td><td width="91">2,500</td><td width="106">2,000</td><td width="106">1,000</td></tr><tr><td width="128">Net Income</td><td width="91">2,000</td><td width="106">2,000</td><td width="106">3,000</td></tr></tbody></table>Above is a comparative income statement for Cecil, Inc. for the years 2010, 2011, and 2012.  Calculate the profit margin for each of these years.  Comment on the profit margin trend.Guided Response:Let at least two of your peers posts know what you changes you would recommend to improve the net margin of the company.
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