Financial Accounting, 12th Edition C William Thomas Instructor Manual

Type:

Instructor Manual

Resource:

Financial Accounting

Edition:

12th Edition

Author(s):

William Thomas Wendy M. Tietz Walter Harrison

Introduction to the Instructor’s Resource Manual Below is a brief guide that will help you use the resources associated with the Instructor’s Resource Manual and to utilize your time most effectively: Sample Syllabi The sample syllabi provides instructors with a class-ready document in which they can enter their own course-specific information to begin a new term. Sample syllabi for the introductory financial accounting course and the introductory managerial accounting course (Appendix A) include suggested course schedules and related assignments for a 16-week term and a 10-week term. These syllabi are developed for an online course but can easily be adapted for hybrid or in-class courses.

Student Handouts The student handouts are designed to ease your communication with students.  MyLab Accounting Registration will guide students through registering and logging into MyLab Accounting for the first time.  Tips on How to get an A in the course Flipping the Classroom Tips for taking your course from a traditional/in-class course to a hybrid, blended, or fully online format.

Discussion Board Prompts Chapter-specific suggestions for getting an online discussion started for your course.

Directed Reading Worksheets with Solutions These worksheets provide several fill-in-the-blank and open-ended questions for each Learning Objective in each chapter. They allow students to follow along with the reading, consolidating the key concepts of the chapter. Solutions are available for each question provided.

IRM Chapter Outline Each chapter of this Instructor’s Resource Manual also contains:       



Learning Objectives—lists all the chapter’s Learning Objectives Chapter Outline –lists all the topics covered within the chapter Chapter Activities—student activities to help reinforce chapter topics Difficult Topics—lists of most difficult topics from chapter Ten-Minute Quiz—multiple-choice questions to quickly assess students’ understanding of the chapter material Answer Key to Chapter Quiz Questions You Should Be Able to Answer—questions from each Learning Objective that the student should have mastered after reviewing the material. Also includes suggested Short Exercises for further practice.

Assignment Grid—indicates the corresponding Learning Objective for each exercise and problem.

1

Chapter 1: The Financial Statements Learning Objectives 1.

2.

3.

4.

5.

Explain why accounting is critical to business Explain and apply underlying accounting concepts, assumptions, and principles Apply the accounting equation to business organizations Construct financial statements and analyze the relationships among them Evaluate business decisions ethically

Chapter Outline I.

II.

Accounting – Critical to Business A. Decision makers 1.

Individuals 2.

Investors and creditors 3.

Regulatory bodies 4.

Nonprofit organizations B. Financial accounting vs. management accounting C. Organizing a business 1.

Proprietorship 2.

Partnership 3.

Limited-liability company 4.

Corporation Underlying Accounting Concepts, Assumptions, and Principles A. Financial Accounting Standards Board (FASB)/Generally Accepted Accounting Principles (GAAP) B. International Accounting Standards Board (IASB)/International Financial Reporting Standard (IFRS) C. Fundamental qualitative characteristics 1.

Relevance 2.

Faithful representation D. Enhancing (supplementary) qualitative characteristics 1.

Comparability 2.

Verifiability 3.

Timeliness 4.

Understandability E. Cost/benefit F. Entity assumption G. Continuity (going-concern) assumption 1-1 .

III.

IV.

V.

H. Historical cost principle I. Stable-monetary-unit assumption Application of the Accounting Equation (Assets = Liabilities + Equity) A. Assets – economic resources with future benefit B. Liabilities – “outsider claims” C. Owners’ equity – “insider claims” 1.

Paid-in capital 2.

Retained earnings a. Revenues b. Expenses c. Dividends Construct Financial Statements and Analyze the Relationships Among Them A. The Income Statement (Revenues – Expenses = Net Income (Net Loss)) 1.

Revenues and 2.

Gains 3.

Expenses and 4.

Losses B. Statement of Retained Earnings (Beginning Retained Earnings + Net Income – Dividends = Ending Retained Earnings) C. Balance Sheet (Assets = Liabilities + Equity) 1.

Assets a. Current assets b. Long-term (non-current) assets 2.

Liabilities a. Current liabilities b. Long-term liabilities 3.

Stockholders’ equity a. Paid-in capital (common stock and additional paid-in capital) b. Retained earnings c. Sometimes, Treasury stock and/or Other equity D. Statement of Cash Flows (Net cash flow from (Operating Activities + or – Investing Activities + or – Financing Activities) + Beginning Cash balance = Ending Cash balance) Evaluate Business Decisions Ethically A. The role of judgment B. Economic factors C. Legal factors D. Ethical factors E. AICPA Code of Professional Conduct

1-2 .

Chapter Activities 1. Chapter Opener Chapter 1 spotlights The Walt Disney Company and details the services and products the worldwide entertainment corporation provides and sells, its network of theme parks, movies, and stores, and financial information for the year ended October 1, 2016. Additionally, the section introduces the terms “revenues” and “net income.” Discuss with the students the many different ways Disney generates revenues as they produce and provide entertainment; mention the services and goods that the company sells and the prices related to those items. Talk about the flow of revenues from goods and services sold to the financial statements and how those revenues become part of net income. Visit http://www.disney.com and read about the company’s many different sources of revenues. From the company’s website, https://thewaltdisneycompany.com, you can also download the most current annual report. Throughout this chapter, there are many references to information from Disney’s financial statements.

Additionally, ask the students what information they would need from the financial statements if they had $10,000 to invest. How would they decide if The Walt Disney Company was a good investment?

2. Accounts Activity On slips of paper, list accounts and distribute one slip of paper to each student. You can use the following chart of accounts as an example: Cash Accounts Receivable Inventory Prepaid Rent Office Supplies Land Automobiles Buildings Patents Copyrights Trademark Accounts Payable Income Taxes Payable Interest Payable Notes Payable Salaries and Wages Payable Bonds Payable Common Stock 1-3 .

Retained Earnings Sales Revenue Interest Revenue Rent Revenue Advertising Expense Commissions Expense Cost of Goods Sold Depreciation Expense Income Tax Expense Insurance Expense Interest Expense Salary and Wage Expense Supplies Expense Dividends Dividends Payable Divide the room up into five areas: assets, liabilities, stockholders’ equity, revenues, and expenses. Ask the students to move to their particular area of the room depending on what account types they have been assigned. Quiz each student to confirm that he or she is in the correct section of the room. Move the students accordingly if they are in the wrong section.

Repeat the exercise by dividing the room into a balance sheet section and an income statement section. Again, quiz the students to confirm that they are in the correct area for that particular financial statement and move them, if necessary.

Difficult Topics 

Statement of Cash Flows

1-4 .

Chapter 1: Assignment Grid (Will have an X if available) Assignment

S1-1

S1-2 S1-3

S1-4 S1-5 S1-6

S1-7 S1-8 S1-9 S1-10 S1-11 S1-12 S1-13 S1-14 S1-15

Topic(s)

L.O.

Level of Difficulty

1

Estimated Time (minutes) 10

Explain and differentiate between business organizations Identify relevant accounting assumptions Identify underlying accounting concepts, assumptions, and principles Apply the accounting equation Apply the accounting equation Identify assets, liabilities, and stockholders’ equity accounts Accounting equation Identify income statement components Identify appropriate financial statement Explain aspects of financial statements Identify appropriate financial statement use Construct an income statement Construct a statement of retained earnings Construct a balance sheet Solve for retained earnings and construct a balance sheet

2

5

Easy

2

5-10

Easy

3

10

Easy

3

5

Easy

3

5-10

Easy

3 4

5-10 5

Easy Easy

4

10

Easy

4

15-20

Medium

4

5

Easy

4

5

Easy

4

5

Easy

4

10-15

Easy

4

10-15

Medium

1-5 .

Excel Projects

Easy

X

General Ledger Templates

Assignment

S1-16 S1-17

S1-18 S1-19 E1-20A

E1-21A

E1-22A

E1-23A

E1-24A E1-25A

E1-26A

E1-27A

E1-28A E1-29A E1-30A

Topic(s)

L.O.

Level of Difficulty

4

Estimated Time (minutes) 10-15

Construct a statement of cash flows Construct an income statement, statement of retained earnings, and balance sheet Evaluate business decisions ethically Match vocabulary terms with definitions Apply the accounting equation; evaluate business operations Apply the accounting equation; evaluate business operations Apply the accounting equation; evaluate business operations Identify financial statement by type of information Construct a balance sheet Apply the accounting equation; construct a balance sheet Construct an income statement and a statement of retained earnings Construct an income statement and a statement of retained earnings Construct a balance sheet Construct a statement of cash flows Evaluate business operations through the financial statements

4

10-15

Medium

Medium

X 5

5

Easy

1,2,3, 4,5 3,4

10-15

Medium

10-15

Medium

3,4

10-15

Medium

3,4

10-20

Medium

4

10-15

Medium

4

10-20

Medium

3,4

10-20

Medium

4

15-25

Medium

4

15-20

Medium

4

15-20

Medium

4

15-20

Medium

4

10-15

Difficult

1-6 .

Excel Projects

General Ledger Templates

Assignment

E1-31A

E1-32B

E1-33B

E1-34B

E1-35B

E1-36B E1-37B

E1-38B

E1-39B

E1-40B E1-41B E1-42B

E1-43B

Q1-44 – Q1-61

Topic(s)

L.O.

Level of Difficulty

4

Estimated Time (minutes) 20-25

Construct an income statement, statement of retained earnings, and balance sheet Apply the accounting equation; evaluate business operations Apply the accounting equation; evaluate business operations Apply the accounting equation; evaluate business operations Identify financial statement by type of information Construct a balance sheet Apply the accounting equation; construct a balance sheet Construct an income statement and a statement of retained earnings Construct an income statement and a statement of retained earnings Construct a balance sheet Construct a statement of cash flows Evaluate business operations through the financial statements Construct an income statement, statement of retained earnings, and balance sheet Quiz questions

3,4

10-15

Medium

3,4

10-15

Medium

3,4

10-20

Medium

4

10-15

Medium

4

10-20

Medium

3,4

10-20

Medium

4

15-25

Medium

4

15-20

Medium

4

15-20

Medium

4

15-20

Medium

4

10-20

Difficult

4

20-25

Medium

All

20-30

Medium

1-7 .

Medium

Excel Projects

General Ledger Templates

Assignment

P1-62A

P1-63A

P1-64A

P1-65A

P1-66A

P1-67A P1-68B

P1-69B

P1-70B

Topic(s)

L.O.

Level of Difficulty

3,4

Estimated Time (minutes) 30

Apply the accounting equation; evaluate business operations Explain accounting language; apply the accounting equation; evaluate business operations; construct a balance sheet Apply underlying accounting concepts; evaluate business operations; construct a balance sheet Evaluate business operations; construct and analyze an income statement, a statement of retained earnings, and a balance sheet Evaluate business operations; construct a statement of cash flows Construct financial statements Apply the accounting equation; evaluate business operations Explain accounting language; apply the accounting equation; evaluate business operations; construct a balance sheet Apply underlying accounting concepts; evaluate business operations; construct a balance sheet

3,4

20-25

Medium

2,3,4

20-25

Difficult

3,4

30-45

Medium

3,4

20

Medium

4

40-50

Medium

3,4

30

Medium

3,4

20-25

Medium

2,3,4

20-25

Difficult

1-8 .

Medium

Excel Projects

General Ledger Templates

Assignment

P1-71B

P1-72B

P1-73B C1-74 The Cheesecake Factory C1-75 Decision Case 1

C1-76 Decision Case 2

C1-77 Ethical Issue C1-78 Focus on Financials— Apple Inc. C1-79 Focus on Analysis— Under Armour, Inc. Group Project 1 Group Project 2

Topic(s)

L.O.

Level of Difficulty

3,4

Estimated Time (minutes) 30-45

Evaluate business operations; construct and analyze an income statement, a statement of retained earnings, and a balance sheet Evaluate business operations; construct a statement of cash flows Construct financial statements Analyze basic financial statement information

3,4

20

Medium

4

40-50

Medium

3,4

15-20

Medium

Explain accounting language; evaluate business operations through financial statements Evaluate business operations through financial statements; correct errors; construct financial statements Evaluate ethical decisions Apply the accounting equation; evaluate business operations

1,4

30-40

Medium

3,4

20-30

Medium

5

40-50

Medium

3,4

20-30

Medium

Apply the accounting equation; evaluate business operations

3,4

30

Medium

Bank Loan

All

45-60

Difficult

Going Public

All

45-60

Difficult

1-9 .

Medium

Excel Projects

General Ledger Templates

Answer Key to Chapter 1 Quiz (Quiz on following pages.)

1. A 2. B 3. C 4. D 5. A 6. D 7. A 8. C 9. A 10. D

1-10 .

Name____________________________________ Date_________________ Section_______________ CHAPTER 1 10-MINUTE QUIZ Circle the letter of the best response.

1.

Which of these is a liability?

A. Long-Term Debt B. Accounts Receivable C. Cash D. Inventory

2.

Assumption that any organization or person that stands apart as a separate economic unit: A. Continuity (going-concern) assumption.

B. Entity assumption.

C. Stable-monetary-unit assumption.

D. Historical cost principle.

3.

Which financial statement is sometimes known as the statement of financial position?

A. Income Statement B. Statement of Retained Earnings C. Balance Sheet D. Statement of Cash Flows

4.

If total liabilities decreased by $100,000 and total assets decreased by $180,000 during the same accounting time period, what happened to total owners’ equity during this period?

A. $180,000 increase B. $180,000 decrease C. $80,000 increase D. $80,000 decrease

5.

The equation for the Income Statement is: A. Net Income = Total Revenues and Gains – Total Expenses and Losses B. Net Income = Total Revenues and Gains + Total Expenses and Losses C. Net Income = Total Revenues and Losses – Total Expenses and Gains D. Net Income = Total Revenues and Losses +Total Expenses and Gains

1-11 .

6.

Jennie Browne the owner of a small business. She has decided to save money during her initial years of operation by not hiring a professional accountant. She does not add noncash types of compensation included in some of the costs of her assets. Which accounting principle, concept, or assumption does this violate?

A. Entity assumption B. Continuity (going-concern) assumption C. Stable-monetary-unit assumption D. Historical cost principle

7.

The _______________ states that accountants should assume that the dollar’s purchasing power is stable over time.

A. Stable-monetary-unit assumption B. Continuity (going-concern) assumption C. Historical cost principle D. Entity assumption

8.

Which section of the balance sheet contains retained earnings and paid-in capital?

A. Assets B. Liabilities C. Stockholders’ Equity D. Long Term Assets

9.

Listed below are the account balances of the Soloman Corporation: Accounts Payable Building Cash Common Stock Dividends Land Miscellaneous Expense Service Revenue Equipment Note Payable due in 60 days Long-Term Debt Salary Expense Total Assets are: A. $473,000.

B. $438,000.

C. $248,000.

D. $385,000.

1-12 .

$ 63,000 190,000 88,000 150,000 5,000 160,000 3,000 250,000 35,000 125,000 13,000 120,000

10.

Listed below are the account balances of the Grahamm Corporation: Accounts Payable Cash Common Stock Dividends Land Miscellaneous Expense Service Revenue Equipment Note Payable due in 90 days Long-Term Debt Salary Expense Net Income (Net Loss) is: A. $60,000 B. $40,000 C. ($18,000) D. $50,000

1-13 .

$ 75,000 100,000 200,000 10,000 170,000 10,000 147,000 130,000 60,000 15,000 87,000

Chapter 2: Transaction Analysis Learning Objectives 1. Recognize a business transaction and the various types of accounts in which it can be recorded 2. Analyze the impact of business transactions on the accounting equation 3. Analyze the impact of business transactions on accounts 4. Journalize transactions and post journal entries to the ledger 5. Construct a trial balance

Chapter Outline I.

II.

III.

IV.

A Business Transaction A. Any event that has a financial impact on the business and can be measured reliably B. Something is given C. Something is received in return Account A. Record of all the changes in a particular asset, liability, or stockholders’ equity during a period B. Categories 1.

Assets (Examples: Cash, Accounts Receivable, Notes Receivable, Inventory, Prepaid Expenses, Film and Television Costs, Investments, Parks, Resorts, and Other Property) 2.

Liabilities (Examples: Accounts Payable, Notes Payable, Accrued Liabilities) 3.

Stockholders’ (Owners’) Equity (Examples: Common Stock, Retained Earnings, Dividends, Revenues, Expenses) Transaction Examples A. Impact on the accounting equation (the equation always stays in balance) B. Impact on the financial statements Impact of Business Transactions on Accounts A. Double-entry accounting system B. T-account: ACCOUNT TITLE Debit Credit

2-1 .

V.

1.

Debit – “left or left-hand side” 2.

Credit – “right or right-hand side” C. Rules of debit and credit 1.

Debit – Increases in assets, expenses, and dividends; decreases in liabilities, stockholders’ equity, and revenues 2.

Credit – Increases in liabilities, stockholders’ equity, and revenues; decreases in assets, expenses, and dividends D. Balance = amount remaining in an account E. Revenues (Examples: Sales Revenue, Legal Fees Earned, Service Revenue) F. Expenses (Examples: Cost of Goods Sold, Salaries Expense, Utilities Expense) Journalize Transactions and Post Journal Entries to the Ledger A. Journal – A chronological record of transactions B. Journalizing example: Account and Explanation Cash Common Stock Issued common stock C. D. E.

Credit 50,000

Ledger – Grouping of all the T-accounts, with their balances Posting – Data must be copied from the journal to the ledger Posting example:

Account and Explanation Cash Common Stock Issued common stock

Debit 50,000

F. Flow of accounting data Construct and Use a Trial Balance A. Analyzing accounts B. Correcting accounting errors C. Chart of accounts D. Normal account balances:

2-2 .

Credit 50,000

Cash 50,000

VI.

Debit 50,000

Common Stock 50,000

Account Type Asset Liability Stockholders’ Equity Revenue Expense Common Stock Retained Earnings Dividends

Normal Balance Debit Credit

Increase Debit Credit

Decrease Credit Debit

Credit Credit Debit Credit Credit Debit

Credit Credit Debit Credit Credit Debit

Debit Debit Credit Debit Debit Credit

E. Account formats F. How to analyze transactions from T-accounts

Chapter Activities 1. Chapter Opener Chapter 2 spotlight continues with the Walt Disney Company discussion from Chapter 1 and discusses the sources of some of the millions of transactions that Disney records each year, resulting in billions of dollars of revenues. Throughout the chapter, references are made to the accounts and transactions that Disney reports in their financial statements. Again, have the students review the Walt Disney website at https://thewaltdisneycompany.com, and study the financial statements, focusing on the consolidated statements of income (found in the annual report), and discuss what items might make up the company’s revenues. Additionally, discuss the items that could be included in the expense figures for Disney. This could lead to a discussion about how a company determines its net income or net loss. Lead students in a discussion of how revenues and expenses differ from assets and liabilities.

2. Transactions Activity Use the game Monopoly as an example of a business that would engage in transactions for a particular period. Examples of transactions that a player of the game might encounter include: 1) Receive $1,500 in cash to be used as capital investment 2) Bank pays you a dividend of $50 3) Purchase Park Place for $35 4) Pay poor tax of $15 5) Purchase house for property on Park Place for $200 6) Pay rent on Baltic Avenue of $4 2-3 .

7) Receive for services $25 8) From sale of common stock, you get $45 9) Pay school tax of $150 10) Collect rent on Park Place of $175 11) Pay rent on Pennsylvania Railroad of $25 12) Pay Water Works $60 13) Mortgage Park Place for $175 Place the students into groups and use the chart of accounts below. Have the students put each of the transactions in journal entry form.

Cash Dividend Revenue Common Stock House Investment Revenue Land Mortgage Payable Rent Expense Rent Revenue Tax Expense Service Revenue Utilities Expense Difficult Topics 

Rules of debit and credit

2-4 .

Chapter 2: Assignment Grid

Assignment

S2-1 S2-2

S2-3

S2-4

S2-5

S2-6

S2-7

S2-8

S2-9 S2-10 S2-11 S2-12 S2-13 S2-14 S2-15 S2-16 E2-17A

Topic(s)

L.O.

Level of Difficulty

1 1

Estimated Time (minutes) 5 5

Identify transactions Differentiate between different types of accounts Differentiate between different types of accounts Show the impact of transactions on the accounting equation Show the impact of transactions on the accounting equation Analyze the impact of business transactions on accounts Analyze the impact of business transactions on accounts Analyze the impact of business transactions on accounts Journalize transactions Journalize and post transactions Journalize and post transactions Journalize transactions Construct a trial balance Use a trial balance Use a trial balance Define accounting terms Identify transactions, analyze impact on accounting equation, journalize transactions

1

5

Easy

2

5-10

Easy

2

5

Medium

3

5

Easy

3

5-10

Easy

3

5-10

Easy

4 4

10 10-15

Medium Easy

4

10-15

Easy

4 5

15-20 10

Medium Medium

5 5 1,2,3, 4,5 1,2,4

10 10 10

Easy Medium Easy

15-20

Medium

2-5 .

(Will have an X if available) Excel General Projects Ledger Templates

Easy Easy

X

Assignment

E2-18A

E2-19A

E2-20A

E2-21A E2-22A E2-23A

E2-24A E2-25A E2-26A E2-27B

E2-28B

E2-29B

E2-30B

E2-31B

Topic(s)

L.O.

Level of Difficulty

3

Estimated Time (minutes) 10-15

Analyze the impact of business transactions on accounts Analyze the impact of business transactions on accounts Show the impact of business transactions on the accounting equation Journalize transactions in the books Post journal entries and prepare a trial balance Journalize entries and calculate ending balances Construct and use a trial balance Correct errors and prepare a trial balance Solve for cash and construct a trial balance Identify transactions, analyze impact on accounting equation, journalize transactions Analyze the impact of business transactions on accounts Analyze the impact of business transactions on accounts Show the impact of business transactions on the accounting equation Journalize transactions in the books

3

10-15

Medium

2

15-20

Medium

General Ledger Templates

Easy

X 4

10-15

Medium

4,5

20-30

Medium

4

10-15

Medium

5

10-20

Medium

5

15-25

Medium

5

15-20

Medium

1,2,4

15-20

Medium

3

10-15

Easy

3

10-15

Medium

2

15-20

Medium

4

10-15

Medium

2-6 .

Excel Projects

X X

Assignment

E2-32B E2-33B

E2-34B E2-35B E2-36B E2-37

Q2-38 to Q2-57 P2-58A P2-59A

P2-60A

P2-61A

P2-62A

P2-63B P2-64B

Topic(s)

L.O.

Estimated Time (minutes)

Level of Difficulty

Post journal entries and prepare a trial balance Journalize entries and calculate ending balances Construct and use a trial balance Correct errors and prepare a trial balance Solve for cash and construct a trial balance Journalize and post transactions; construct and use a trial balance Quiz questions

4,5

20-30

Medium

4

10-15

Medium

5

10-20

Medium

5

15-25

Medium

5

15-20

Medium

4,5

20-30

Medium

Construct and use a trial balance Analyze the impact of business transactions on the accounting equation and accounts Journalize transactions and calculate account balances Journalize and post transactions; prepare a trial balance Analyze the impact of business transactions on accounts; construct a trial balance Construct and use a trial balance Analyze the impact of business transactions on the accounting equation and accounts

X All

30-50

Medium

5

15-30

Medium

2,3

45-60

Medium

4

30-40

Medium

4,5

50-60

Medium X

3,5

40-50

Medium

5

15-30

Medium

2,3

45-60

Medium

2-7 .

Excel Projects

General Ledger Templates

Assignment

P2-65B

P2-66B

P2-67B

E2-68 E2-69

E2-70

P2-71

C2-72 The Cheesecake Factory C2-73 Decision Case 1

Topic(s)

L.O.

Journalize transactions and calculate account balances Journalize and post transactions; prepare a trial balance Analyze the impact of business transactions on accounts and construct a trial balance Analyzing accounts Analyze the impact of business transactions on accounts; construct and use a trial balance Analyze the impact of business transactions on account Analyze the impact of business transactions; analyze the impact of errors and compute correct amounts; journalize and post transactions in the books Journalize transactions; analyze their impact on the accounting equation Analyze the impact of transactions on business accounts; construct a trial balance; measure net income or loss; decide whether to continue a business

Level of Difficulty

4

Estimated Time (minutes) 30-40

4,5

50-60

Medium

3,5

40-50

Medium

5 3,5

20-40 20-30

Difficult Medium

3

10-15

Medium

2,3,4

20-30

Difficult

2,4

20-30

Medium

3,5

40-50

Medium

2-8 .

Medium

Excel Projects

General Ledger Templates

Assignment

C2-74 Decision Case 2

C2-75 Ethical Issue 1 C2-76 Ethical Issue 2 Focus on Financials– Apple Inc. Focus on Analysis– Under Armour, Inc. Group Project 1 Group Project 2

Topic(s)

L.O.

Level of Difficulty

3

Estimated Time (minutes) 20-30

Analyze the impact of transactions on accounts; correct erroneous financial statements; decide whether to expand a business Shabby’s Bar & Grill

All

20-30

Medium

Academic honesty

All

20

Medium

Record transactions; compute net income

4,5

20-30

Medium

Analyze financial statements

5

20-30

Medium

Concert

All

45-60

Difficult

Local business

All

45-60

Difficult

2-9 .

Medium

Excel Projects

General Ledger Templates

Answer Key to Chapter 2 Quiz (Quiz on following pages) 1. A 2. C 3. C 4. B 5. D 6. D 7. A 8. B 9. A 10. C

2-10 .

Name____________________________________ Date_________________ Section_______________

CHAPTER 2 10-MINUTE QUIZ Circle the letter of the best response.

1.

Which of the following accounts is increased with a debit?

A. Accounts Receivable B. Accounts Payable C. Rent Revenue D. Common Stock

2.

The journal is: A. A listing of all open accounts and their balances.

B. A listing of all accounts used to record the business transactions.

C. A chronological record of transactions.

D. Not necessary to record transactions.

3.

The ledger is: A. Always expected to have a debit balance.

B. An event that has an economic impact on the business.

C. A grouping of all T-accounts, with their balances.

D. A chronological record of the business’s transactions.

4.

Which of the following accounts is decreased with a credit?

A. Accounts Payable B. Equipment C. Notes Payable D. Service Revenue

5.

The Richardson Company did work for a customer on account for $3,600. The entry to record this transaction is: A. Revenue 3,600 Accounts Receivable 3,600 B. Cash Accounts Payable

3,600

C. Revenue Cash

3,600

D. Accounts Receivable Revenue

3,600

3,600

3,600

3,600 2-11

.

6.

In analyzing a transaction using the accounting equation, which account is included in the Asset section?

A. Accounts Payable B. Revenue C. Paid-in Capital D. Cash

7.

Cash at the beginning of March was $9,670. During the month, cash receipts totaled $80,990. Ending cash at March 31 was $3,340. Cash disbursements during March must have been: A. $87,320 B. $74,660 C. $67,980 D. Cannot be determined from the information given.

8.

A trial balance: A. Requires that every transaction affect at least two accounts.

B. Lists all accounts with their balances.

C. Mandates that the dollar sum of the debits equal that of the credits for each transaction.

D. None of the above

9.

When a company buys merchandise, but does not pay for it immediately, it should: A. Credit Accounts Payable.

B. Make no entry.

C. Credit Accounts Receivable.

D. Debit Accounts Receivable.

10.

A revenue: A. Has the same normal balance as cash.

B. Is the decrease in liabilities as a result of providing goods or services.

C. Is the increase in stockholders’ equity as a result of providing goods or services.

D. Is the decrease in stockholders’ equity as a result of providing goods or services.

2-12 .

Chapter 3: Accrual Accounting & Income Learning Objectives 1.

2.

3.

4.

5.

6.

Explain how accrual accounting differs from cash-basis accounting Apply the revenue and expense recognition principles Adjust the accounts Construct the financial statements Close the books Analyze and evaluate a company’s debt-paying ability

Chapter Outline I.

II.

III.

IV.

Bases of Accounting A. Accrual basis B. Cash basis C. GAAP require accrual accounting D. Incomplete balance sheet E. Incomplete income statement Accrual Accounting and Cash Flows A. Cash transactions B. Noncash transactions C. Time-period concept Revenue and Expense Recognition Principles A. The revenue principle 1.

When to record (recognize) revenue 2.

The amount of revenue to record B. The expense recognition principle 1.

Identify all expenses incurred during the accounting period 2.

Measure the expenses and recognize them in the same period in which any related revenues are earned Adjusting the Accounts A. Definition and purpose of adjustments B. Categories of adjusting entries 1.

Deferrals a. Prepaid expenses and supplies (asset accounts) b. Unearned revenue (liability account) 3-1 .

2.

V.

VI.

VII.

Depreciation a. Accumulated depreciation – contra-asset account b. Book value 3.

Accruals a. Accrued expenses (liability account) b. Accrued revenues (asset account) C. Summary of the adjusting process – measuring income and updating the balance sheet D. Adjusted trial balance Construction of the Financial Statements A. Income Statement B. Statement of Retained Earnings C. Balance Sheet Closing the Books A. Definition and purpose of the closing process B. Temporary accounts (revenues, expenses, dividends) C. Permanent accounts (assets, liabilities, stockholders’ equity) D. Types of closing entries 1.

Debit Revenues, Credit Retained Earnings 2.

Credit Expenses, Debit Retained Earnings 3.

Credit Dividends, Debit Retained Earnings E. Classify assets and liabilities based on liquidity 1.

Current 2.

Long-term F. Formats for the financial statements 1.

Balance-sheet formats a. Report format b. Account format 2.

Income statement formats a. Single-step format b. Multistep format Using Debt-Paying Ability Ratios A. Net working capital (Total current assets – Total current liabilities) B. Current ratio (Total current assets/Total current liabilities) C. Debt ratio (Total liabilities/Total assets) D. How various transactions affect the ratios

3-2 .

Chapter Activities 1. Chapter Opener Chapter 3 again highlights The Walt Disney Company and how the end of the year requires extra entries and adjustments. Students can understand the concept of accrual accounting by reviewing the various “Try It” exercise throughout the chapter. Ask the students to contemplate a transaction where the customer enters Disneyland and purchases a two-day pass at the ticket booth. Revenue is recognized immediately at the time of the purchase. Then have the students consider a customer who purchases a two-day pass in March, for a trip he will take in April. When is the revenue recognized from that transaction? Why is April the correct answer?

Additionally, have them analyze a transaction where Disney pays $4,500 on July 1 for store rent for the next three months. Is the full $4,500 expensed (used up) on July 1? If not, when would that amount be expensed? Have the student explain his/her reasoning.

2. Chapter Activity Ask the students to apply the concepts of cash basis vs. accrual basis of accounting to their personal finances. Give them scenarios and ask them how they would treat that situation under the two bases of accounting. For instance, if they paid their rent for the next six months now, how would they account for that? You might expand this discussion by comparing the way the student’s landlord would account for the student’s rent received in advance. Additionally, how would they account for their tuition that is paid upfront at the start of the semester? Go through several scenarios until they can grasp the concepts.

Difficult Topics     

Adjusting entries and how each one affects net income Contra-accounts Unearned revenue Trial balance Closing the books: temporary vs. permanent accounts

3-3 .

Chapter 3: Assignment Grid

Assignment

S3-1

S3-2

S3-3

S3-4

S3-5 S3-6

S3-7 S3-8 S3-9 S3-10 S3-11 S3-12 S3-13

S3-14 S3-15

Topic(s)

L.O.

Level of Difficulty

1

Estimated Time (minutes) 10

Explain how accrual accounting differs from cash-basis accounting Explain how accrual accounting differs from cash-basis accounting Apply the revenue and expense recognition principles Apply the revenue and expense recognition principles Apply the expense recognition principle Apply the revenue and expense recognition principles Adjust the accounts Adjust the accounts for depreciation Adjust the accounts for interest expense Adjust the accounts for interest revenue Adjust the accounts for unearned revenue Adjust the accounts for prepaid rent Adjust the accounts for accrued and unearned revenue Construct the financial statements Close the books

1

10

Easy

2

10

Easy

2

10

Easy

2

10

Medium

2

10

Medium

3 3

10 10

Medium Medium

3

10

Medium

3

10

Medium

3

5-10

Medium

3

5-10

Medium

3

10

Easy

4

15-30

Medium

5

5-10

Easy

3-4 .

(Will have an X if available) Excel General Projects Ledger Templates

Easy

X

Assignment

S3-16

S3-17 E3-18A

E3-19A

E3-20A

E3-21A E3-22A

E3-23A E3-24A

E3-25A E3-26A E3-27A

E3-28A

Topic(s)

L.O.

Analyze and evaluate liquidity and debt-paying ability Make closing entries and calculate net income Explain how accrual accounting differs from cash-basis accounting; apply the revenue and expense recognition principles Explain how accrual accounting differs from cash-basis accounting; adjust the accounts Apply the revenue and expense recognition principles; adjust the accounts Adjust the accounts Adjust the accounts for prepaid expenses; construct the financial statements Construct the financial statements Adjust the accounts; construct the financial statements Close the books Adjust the accounts; close the books Construct the financial statements; analyze and evaluate liquidity and debt-paying ability Analyze and evaluate liquidity and debt-paying ability

6

Level of Difficulty

Excel Projects

Medium X

5

10

Medium

1,2

5-10

Medium

1,3

15-20

Medium

2,3

10-15

Medium

3 3,4

10-20 10-15

Medium Medium

4

20-30

Medium

3,4

10-20

Difficult

5 3,5

10-20 15-25

Medium Medium

4,6

20-30

Medium

6

30

Medium

3-5 .

Estimated Time (minutes) 5-10

General Ledger Templates

Assignment

E3-29B

E3-30B

E3-31B

E3-32B E3-33B

E3-34B E3-35B

E3-36B E3-37B E3-38B

E3-39B

E3-40

Topic(s)

L.O.

Level of Difficulty

1,2

Estimated Time (minutes) 5-10

Explain how accrual accounting differs from cash-basis accounting; apply the revenue and expense recognition principles Explain how accrual accounting differs from cash-basis accounting; adjust the accounts Apply the revenue and expense recognition principle; adjust the accounts Adjust the accounts Adjust the accounts for prepaid expenses; construct the financial statements Construct the financial statements Adjust the accounts; construct the financial statements Close the books Adjust the accounts; close the books Construct the financial statements; analyze and evaluate liquidity and debt-paying ability Analyze and evaluate liquidity and debt-paying ability Adjust the accounts; construct the financial statements; close the books; analyze and evaluate liquidity and debt-paying ability

1,3

15-20

Medium

2,3

10-15

Medium

3 3,4

10-20 10-15

Medium Medium

4

20-30

Medium

3,4

10-20

Difficult

5 3,5

10-20 15-25

Medium Medium

4,6

20-30

Medium

6

30

Medium

3,4, 5,6

3 hrs

Difficult

3-6 .

Medium

Excel Projects

General Ledger Templates

Assignment

Q3-41 to Q3-57 P3-58A

P3-59A P3-60A

P3-61A P3-62A

P3-63A P3-64A

P3-65A

P3-66B

P3-67B P3-68B

P3-69B P3-70B

P3-71B

Topic(s)

L.O.

Quiz questions

All

Estimated Time (minutes) 30-50

Explain how accrual accounting differs from cash-basis accounts Adjust the accounts Adjust the accounts; construct the financial statements Adjust the accounts Construct the financial statements; analyze and evaluate debt-paying ability Close the books, and evaluate retained earnings Construct the financial statements; analyze and evaluate liquidity and debt-paying ability Analyze and evaluate liquidity and debt-paying ability Explain how accrual accounting differs from cash-basis accounting Adjust the accounts Adjust the accounts; construct the financial statements Adjust the accounts Construct the financial statements; analyze and evaluate debt-paying ability Close the books; evaluate retained earnings

1

20-30

Medium

3 3,4

10-20 45-60

Medium Medium

3 4,6

10-20 20-30

Medium Medium

Excel Projects

General Ledger Templates

Medium

X

X 5

20

Medium

4,6

25-40

Difficult

6

45-60

Difficult

1

20-30

Medium

3 3,4

10-20 45-60

Medium Medium

3 4,6

10-20 20-30

Medium Medium

5

20

Medium

3-7 .

Level of Difficulty

Assignment

P3-72B

P3-73B

E3-74

E3-75

E3-76 C3-77 The Cheesecake Factory C3-78 Decision Case 1 C3-79 Decision Case 2 C3-80 Decision Case 3

C3-81 Ethical Issue 1 C3-82 Ethical Issue 2

Topic(s)

L.O.

Construct the financial statements; analyze and evaluate liquidity and debt-paying ability Analyze and evaluate liquidity and debt-paying ability Analyze and evaluate liquidity and debt-paying ability Adjust the accounts; calculate financial statement amounts Construct a balance sheet from given financial data Analyze basic financial statement information

Adjust the accounts; analyze and evaluate liquidity Construct the financial statements; analyze and evaluate liquidity and debt-paying ability Adjust the accounts; construct the financial statements; evaluate a business based on financial statements Blue Vistas Energy Company Summit Photography Company

Level of Difficulty

4,6

Estimated Time (minutes) 30-40

6

45-60

Difficult

6

20-25

Medium

3,4

60

Difficult

4

20

Difficult

3,4

25

Medium

3,6

25

Medium

4,6

20-30

Difficult

3,4

30-40

Difficult

All

20-30

Medium

All

20-30

Medium

3-8 .

Difficult

Excel Projects

General Ledger Templates

Assignment

Topic(s)

L.O.

Focus on Financials– Apple Inc.

Adjust the accounts; construct financial statements; evaluate debtpaying ability Explain accruals and deferrals

Jason Whitmer

Focus on Financials– Under Armour, Inc. Group Project

Level of Difficulty

3,4,6

Estimated Time (minutes) 15-20

1

15-20

Difficult

All

45

Difficult

3-9 .

Medium

Excel Projects

General Ledger Templates

Answer Key to Chapter 3 Quiz (Quiz on following pages.)

1. D 2. C 3. B 4. C 5. A 6. C 7. B 8. D 9. A 10. B

3-10 .

Name____________________________________ Date_________________ Section_______________

CHAPTER 3 10-MINUTE QUIZ Circle the letter of the best response.

1.

Which of the following is a long-term asset?

A. Allowance for Uncollectible Accounts B. Service Revenue C. Interest Receivable D. Land

2.

Which account needs an adjustment at the end of the period?

A. Note Payable B. Equipment C. Unearned Revenue D. Cash

3.

What is the account classification and normal balance of Equipment?

A. Asset, credit B. Asset, debit C. Expense, debit D. Expense, credit

4.

A deferral is: A. an adjustment for receipt of cash in advance.

B. an adjustment for payment of an item in advance.

C. both A and B. D. none of the above

5.

According to the expense recognition principle: A. expenses are recorded in the period they are actually used.

B. expenses are recognized when cash is paid.

C. current revenues are subtracted from the current expenses to determine net income.

D. both A and C are true.

6.

Which of the following is a contra-asset account?

A. Common Stock B. Salary Expense C. Accumulated Depreciation D. Retained Earnings 3-11 .

7.

8.

9.

The prepaid insurance account has a $8,000 beginning balance. Additional insurance premiums in the amount of $12,000 were paid during the year. At year-end, there is $3,000 of insurance coverage remaining. The entry needed to adjust the account is: A. Prepaid Insurance 12,000 Cash 12,000 B. Insurance Expense Prepaid Insurance

17,000

C. Insurance Expense Prepaid Insurance

3,000

D. Prepaid Insurance Insurance Expense

17,000

17,000 3,000 17,000

Speedy Accounting Services agreed to perform services for a client at a rate of $4,000 per month. A six-month prepayment was made in advance on October 1, 2019 and services began on that date. December 31, 2019 is the end of Speedy’s accounting year. What is the October 1, 2019 entry to record the prepayment?

A. Cash 4,000 Unearned Revenue 4,000 B. Unearned Revenue Service Revenue

12,000

C. Unearned Revenue Cash

24,000

D. Cash Unearned Revenue

24,000

12,000 24,000 24,000

Refer to Question 8. What is the entry to make the necessary adjustment on December 31, 2019? (Speedy Accounting adjusts their books only at the end of the year.)

A. Unearned Revenue 12,000 Service Revenue 12,000 B. Unearned Revenue Cash

12,000

C. Unearned Revenue Service Revenue

4,000

D. Service Revenue Unearned Revenue

12,000

12,000 4,000 12,000

3-12 .

10.

Which asset does not depreciate?

A. Equipment B. Land C. Buildings D. Office Furniture

3-13 .

Chapter 4: Internal Control & Cash Learning Objectives 1.

2.

3.

4.

5.

Describe fraud and its impact Explain the objectives and components of internal control Evaluate internal controls over cash receipts and cash payments Prepare a bank reconciliation Report cash on the balance sheet

Chapter Outline I.

II.

Fraud and Its Impact A. Definition of fraud B. Types of fraud 1.

Misappropriation of assets 2.

Fraudulent financial reporting C. Fraud and business ethics Objectives and Components of Internal Control A. Objectives of internal control 1.

Safeguard assets 2.

Encourage employees to follow company policies 3.

Promote operational efficiency 4.

Ensure accurate, reliable accounting records 5.

Comply with legal requirements B. Sarbanes-Oxley Act (SOX) C. Components of internal control 1.

Control environment 2.

Risk assessment 3.

Information system 4.

Control procedures 5.

Monitoring of controls D. Internal control procedures 1.

Smart hiring practices and separation of duties 2.

Comparisons and compliance monitoring 3.

Adequate records 4.

Limited access 5.

Proper approvals E. Information technology 4-1 .

F. G.

III.

IV.

V.

Safeguard controls Internal controls for E-commerce 1.

Stolen credit card numbers and stolen identity 2.

Malware 3.

Phishing expeditions H. Security measures 1.

Encryption 2.

Firewalls Evaluate Internal Controls over Cash Receipts and Cash Payments A. Cash receipts over the counter B. Cash receipts by mail C. Controls over payment by check 1.

Controls over purchase and payment 2.

Petty cash I. The limitations of internal control – Costs and benefits Design and Use a Bank Reconciliation A. Documents used to control bank account 1.

Signature card 2.

Deposit ticket 3.

Check 4.

Bank statement 5.

Bank reconciliation B. Prepare the bank reconciliation 1.

Bank side of reconciliation a. Deposits in transit b. Outstanding checks c. Bank errors 2.

Book side of reconciliation (requires journal entries) a. Bank collections b. Electronic funds transfers (EFT) c. Service charges d. Interest revenue e. Nonsufficient funds (NSF) checks f. Cost of printed checks g. Book errors 3.

Online banking Report Cash on the Balance Sheet A. Cash and cash equivalents B. Footnotes related to cash and cash equivalents

4-2 .

Chapter Activities 1. Chapter Opener The text discusses a business that is shocked to learn of a trusted employee’s embezzlement of millions of dollars from the business. Engage the students in a discussion of fraud that they have witnessed in their own lives. Also, research fraud that has occurred locally and relate that to the students and the impact it can have on the individuals or businesses involved, or on the community. You as the professor might even have experienced fraudulent behavior with businesses you are familiar with.

2. Chapter Activity Ask the students if they reconcile their personal bank account. If they don’t perform the reconciliation monthly, ask them why they don’t reconcile their own account. What risks are they taking by not reconciling their account? What risks would a business take by not reconciling its bank accounts?

Additionally, refer to the Group Project in the back of the chapter. Taking the scenario of the promotion of the concert, how would students safeguard the assets of the business? Have the students answer all four questions referenced in the scenario.

Difficult Topics 

Preparing the Bank Reconciliation

4-3 .

Chapter 4: Assignment Grid

Assignment

S4-1 S4-2 S4-3

S4-4

S4-5

S4-6 S4-7

S4-8

S4-9

S4-10 S4-11 S4-12 S4-13 S4-14

Topic(s)

L.O.

Level of Difficulty

1

Estimated Time (minutes) 5

Define fraud and its components Describe fraud and its impact Describe objectives and components of internal control Explain the objectives and components of internal control Explain the objectives and components of internal control Evaluate internal controls over cash Evaluate internal controls over cash payments Evaluate internal control over cash receipts and cash payments Evaluate internal control over cash receipts and cash payments Prepare a bank reconciliation Prepare a bank reconciliation Prepare a bank reconciliation Report cash on the balance sheet Match definitions with vocabulary terms

1

5

Easy

2

5-10

Medium

2

5-10

Medium

2

5-10

Medium

3

20-30

Medium

3

20-30

Medium

3

5

Medium

3

10

Medium

4

5

Medium

4

5

Medium

4

5

Medium

5

5

Easy

1,2,3, 4,5

10-15

Easy

4-4 .

Easy

(Will have an X if available) Excel General Projects Ledger Templates

Assignment

E4-15A

E4-16A

E4-17A E4-18A

E4-19A E4-20A E4-21A E4-22B

E4-23B

E4-24B

Topic(s)

L.O.

Level of Difficulty

1,2,3

Estimated Time (minutes) 10-15

Describe fraud and its impact; explain the objectives and components of internal control; evaluate internal controls over cash payments and receipts Evaluate internal controls over cash receipts and cash payments Evaluate internal control over cash payments Describe fraud and its impact; explain the objectives and components of internal control; evaluate internal controls over cash receipts and cash payments Prepare a bank reconciliation Use a bank reconciliation Use a bank reconciliation Describe fraud and its impact; explain the objectives and components of internal control; evaluate internal controls over cash payments and receipts Evaluate internal controls over cash receipts and cash payments Evaluate internal control over cash payments

3

10

Medium

3

10-15

Medium

1,2,3

10

Medium

4

10-20

Medium

4

10-20

Medium

4

10-15

Medium

1,2,3

10-15

Medium

3

10

Medium

3

10-15

Medium

4-5 .

Excel Projects

General Ledger Templates

Medium

X

X

Assignment

E4-25B

E4-26B E4-27B E4-28B Q4-29 to 4-40 P4-41A

P4-42A

P4-43A P4-44A P4-45B

P4-46B

Topic(s)

Describe fraud and its impact; explain the objectives and components of internal control; evaluate internal controls over cash receipts and cash payments Prepare a bank reconciliation Use a bank reconciliation Use a bank reconciliation Quiz questions Describe fraud and its impact; evaluate internal controls over cash receipts and cash payments Explain the objectives and components of internal control; evaluate internal controls Evaluate internal controls Prepare a bank reconciliation Describe fraud and its impact; evaluate internal controls over cash receipts and cash payments Explain the objectives and components of internal control; evaluate internal controls

L.O. Estimated Time (minutes) 1,2,3 10

Excel Projects

General Ledger Templates

Medium

4

10-20

Medium

4

10-20

Medium

4

10-15

Medium

All

20-30

Medium

1,3

15-20

Medium

2,3

10-20

Difficult

3

25-30

Medium

4

20-30

Medium

1,3

15-20

Medium

2,3

10-20

Difficult

4-6 .

Level of Difficulty

X

Assignment

P4-47B P4-48B E4-49

P4-50 C4-51 The Cheesecake Factory C4-52 Decision Case 1

C4-53 Decision Case 2

C4-54 Ethical Issues Focus on Financials– Apple Inc. Focus on Analysis– Under Armour, Inc. Group Project

Topic(s)

Evaluate internal controls Prepare a bank reconciliation Describe fraud and its impact; evaluate internal controls over cash receipts and cash payments Prepare a bank reconciliation Analyze internal controls in a restaurant

L.O. Estimated Time (minutes) 3 25-30

Level of Difficulty Medium

3

20-30

Medium

1,3

15-25

Medium

3

20-30

Difficult

3

25

Medium

1,3,4

20-30

Medium

1,3

15-30

Difficult

All

30-45

Difficult

Report cash on the balance sheet

5

20-30

Medium

Analyze internal controls and cash flows

2,4

20-30

Medium

Concert

All

45

Difficult

Describe fraud and its impact; evaluate internal controls over cash receipts and cash payments; prepare a bank reconciliation Describe fraud and its impact; evaluate internal controls over cash receipts and cash payments Daylight Bank, Cari Morris, University Bank

4-7 .

Excel Projects

General Ledger Templates

Answer Key to Chapter 4 (Quiz on following pages.)

1. A 2. D 3. C 4. B 5. A 6. D 7. C 8. A 9. B 10. D

4-8 .

Name____________________________________ Date_________________ Section_______________

CHAPTER 4 10-MINUTE QUIZ Circle the letter of the best response.

1.

The type of fraud that occurs when employees steal money from their companies and cover it up by falsifying records: A. Misappropriation of assets B. Failure to file tax return C. Fraudulent controls reporting D. Fraudulent financial reporting

2.

Which of the following is NOT an element of the fraud triangle?

A. Opportunity B. Rationalization C. Motive D. Morals

3.

Which of the following is NOT a component of internal control?

A. Monitoring of controls B. Risk assessment C. Abiding by the law D. Information system

4.

Which of the following is not a party to a check?

A. Bank B. Holder C. Maker D. Payee

5.

Check #165, written by IGM Corporation to Office Supplies Store for $822, was recorded in the journal as $282. To correct this error: A. An adjusting entry is needed that includes a credit to cash for $540.

B. The bank reconciliation will show an addition of $540 to the bank balance.

C. An adjusting entry is needed that includes a debit to cash for $540.

D. An adjusting entry is needed that includes a credit to cash for $282.

4-9 .

Table 4-1 Use the following code letters to indicate where the items described in questions 6 – 9 would appear on the March bank reconciliation for the Labb Company.

A. Add to the bank statement balance B. Deduct from the bank statement balance C. Add to the book balance D. Deduct from the book balance E. Does not appear on the bank reconciliation 6. ____ Refer to Table 4-1. An NSF check from a customer for $500 appears on the March bank statement.

7. ____ Refer to Table 4-1. The March bank statement reports $25 of interest earned.

8. ____ Refer to Table 4-1. Deposits in transit total $5,640.

9. ____ Refer to Table 4-1. Outstanding checks amount to $3,075 as of the end of March.

10.

Strong controls over cash payments would require all of the following documents to be present before a bill is paid except: A. Purchase order B. Invoice C. Receiving report D. Bank statement

4-10 .

Chapter 5: Receivables and Revenue Learning Objectives 1.

2.

3.

4.

5.

6.

7.

Apply GAAP for proper revenue recognition Account for Sales Returns and Allowances Account for Sales Discounts Account for accounts receivable Evaluate collectability using the allowance for uncollectible accounts Account for notes receivable and interest revenue Evaluate liquidity using three new ratios

Chapter Outline I.

II. III.

IV.

Apply GAAP for Proper Revenue Recognition A. Revenue recognition 1.

Identify the contract with customer 2.

Identify the performance obligations 3.

Determine the transaction price 4.

Allocate the transaction price to the performance obligation 5.

Recognize revenue when the entity satisfies its performance obligation(s) B. Shipping terms C. Speeding up cash flow from sales D. Sales refunds, returns, and allowances Account for Sales Discounts Account for Accounts Receivable A. Types of receivables 1.

Accounts receivable 2.

Notes receivable 3.

Other receivables B. Manage the risk of not collecting Evaluate Collectability Using the Allowance for Uncollectible Accounts A. Contra account to accounts receivable B. Allowance method 1.

Percent-of-sales method 2.

Aging-of-receivables method C. Writing-off an uncollectible account D. Combining the percent-of-sales method and the aging method 5-1 .

V.

VI.

E. Direct write-off method F. Computing cash collections from customers Account for Notes Receivable and Interest Revenue A. Key terms 1.

Creditor 2.

Debtor 3.

Interest 4.

Maturity date 5.

Maturity value 6.

Principal 7.

Term B. Accounting for notes receivable, including issuing the note, collecting the note, calculating interest, and accruing interest Evaluating Liquidity using Three New Ratios A. Quick (Acid-test) ratio B. Accounts receivable turnover C. Days’ sales outstanding (DSO) or days’ sales in receivables

Chapter Activities 1. Chapter Opener Review Apple’s balance sheet shown in the chapter with the students. Note the change in the balances of short-term investments and accounts receivable between 2015 and 2016. Engage the students in a discussion as to the potential cause of the changes. Identify the company’s allowance for uncollectible accounts for the latest year. What are some ways that Apple might have determined that amount will be uncollectible? Encourage a discussion related to why those uncollectible amounts (the allowance balances) are important information to the readers of the financial statements.

2. Calculation Bingo To reinforce the calculations for determining the adjusting entries for the allowance for uncollectible accounts, have several calculations for the students to compute based on both the percent-of-sales method and the aging-of-receivables method. Additionally, prepare bingo cards for the students. Some of the cards will have the correct answers mixed in with incorrect answers. Go through several calculations randomly until someone achieves “bingo” and a winner is declared. The prize can be anything that will make the activity fun – candy, extra credit, “dollar store” prizes, etc. This activity will assist the students in mastering the differences in the 5-2 .

calculations for both methods. You may choose to divide the students into groups rather than individually for this activity.

Difficult Topics  

Writing off an account receivable under the allowance method does NOT affect bad debt expense Writing off an account receivable under the allowance method does NOT affect the net amount of accounts receivable

5-3 .

Chapter 5: Assignment Grid

Assignment

S5-1 S5-2 S5-3

S5-4

S5-5 S5-6 S5-7

S5-8

S5-9 S5-10 S5-11 S5-12

E5-13A

E5-14A

Topic(s)

L.O.

Level of Difficulty

1

Estimated Time (minutes) 5

Apply GAAP for proper revenue recognition Record a credit card sale Apply GAAP for proper revenue recognition; account for sales returns Apply GAAP for proper revenue recognition; account for sales discounts Account for sales discounts Account for accounts receivable Evaluate collectibility using the allowance for uncollectible accounts Evaluate collectibility using the allowance for uncollectible accounts Account for notes receivable Account for notes receivable Account for notes receivable Evaluate liquidity using the quick (acid-test) ratio and days’ sales in receivables Apply GAAP for proper revenue recognition; account for sales allowances Apply GAAP for proper revenue recognition; account for sales discounts

1 1,2

5 5-10

Easy Easy

1,3

10

Easy

3

5

Easy

4

10

Easy

5

5-10

Medium

5

10

Medium

Easy

X 6

5-10

Easy

6

10

Medium

6

10

Medium

7

10-15

Medium

X

X 1,2

10-15

Medium X

1,3

10-15

5-4 .

(Will have an X if available) Excel General Projects Ledger Templates

Medium

Assignment

E5-15A

E5-16A

E5-17A

E5-18A E5-19A

E5-20A E5-21A E5-22A E5-23A

E5-24A

E5-25B

E5-26B

E5-27B

Topic(s)

L.O.

Level of Difficulty

1,2,3

Estimated Time (minutes) 10-15

Apply GAAP for proper revenue recognition; account for sales allowances; account for sales discounts Apply GAAP for sales, sales returns, and sales discounts Account for accounts receivable and uncollectible accounts Apply GAAP for uncollectible receivables Account for accounts receivable and uncollectible receivables Apply GAAP to uncollectible receivables Apply GAAP to uncollectible accounts Apply GAAP for notes receivable Show how to speed up cash flow from receivables; evaluate liquidity through ratios Show how to speed up cash flow from receivables; evaluate liquidity through ratios Apply GAAP for proper revenue recognition; account for sales allowances Apply GAAP for proper revenue recognition; account for sales discounts Apply GAAP for proper revenue recognition; account for sales allowances; account for sales discounts

1,2,3

15-20

Medium

4,5

10-15

Medium

5

10-15

Medium

4,5

10-15

Medium

5

15-30

Medium

5

10-15

Medium

6

10-15

Medium

1,7

10-15

Medium

1,7

10-15

Medium

1,2

10-15

Medium

1,3

10-15

Medium

1,2,3

10-15

Medium

5-5 .

Medium

Excel Projects

General Ledger Templates

Assignment

E5-28B

E5-29B

E5-30B E5-31B

E5-32B E5-33B E5-34B E5-35B

E5-36B

Q5-37 to Q5-54 P5-55A

P5-56A

P5-57A

Topic(s)

L.O.

Level of Difficulty

1,2,3

Estimated Time (minutes) 15-20

Apply GAAP for sales, sales returns, and sales discounts Account for accounts receivables and uncollectible accounts Apply GAAP for uncollectible receivables Account for accounts receivable and uncollectible receivables Apply GAAP to uncollectible receivables Apply GAAP to uncollectible accounts Apply GAAP for notes receivable Show how to speed up cash flow from receivables; evaluate liquidity through ratios Show how to speed up cash flow from receivables; evaluate liquidity through ratios Quiz questions

4,5

10-15

Medium

5

10-15

Medium

4,5

15

Medium

5

15-30

Medium

5

10-15

Medium

6

10-15

Medium

1,7

10-15

Medium

1,7

10-15

Medium

All

20-30

Medium

Apply GAAP for proper revenue recognition; account for sales returns and allowances Apply GAAP for proper revenue recognition; account for sales discounts Apply GAAP for revenue, receivables, collections, and uncollectibles using the percent-of-sales method; account for notes receivable

1,2

20-30

Medium

General Ledger Templates

Medium

X 1,3

20-30

Medium

1,4,5, 6

15-20

Medium

5-6 .

Excel Projects

Assignment

P5-58A

P5-59A

P5-60A P5-61A

P5-62A

P5-63B

P5-64B

P5-65B

P5-66B

Topic(s)

L.O.

Level of Difficulty

5

Estimated Time (minutes) 25-35

Apply GAAP for uncollectible receivables Apply GAAP for uncollectible receivables; evaluate liquidity through ratios Apply GAAP for notes receivable Show how to speed up cash flow from receivables; evaluate liquidity using ratios Apply GAAP for proper revenue recognition; account for sales allowances; account for sales discounts; account for accounts receivable; write off account; estimate uncollectible account expense Apply GAAP for proper revenue recognition; account for sales returns and allowances Apply GAAP for proper revenue recognition; account for sales discounts Apply GAAP for revenue, receivables, collections, and uncollectibles using the percent-of-sales method; account for notes receivable Apply GAAP for uncollectible receivables

5,7

20-25

Difficult

6

20-30

Medium

1,7

15-25

Difficult

1,2, 3,4,5

40-50

Medium

1,2

20-30

Medium

1,3

20-30

Medium

1,4, 5,6

15-20

Medium

5

25-35

Medium

5-7 .

Excel Projects

General Ledger Templates

Medium

X

Assignment

P5-67B

P5-68B P5-69B

P5-70B

E5-71 E5-72

P5-73

C5-74 The Cheesecake Factory

Topic(s)

L.O.

Level of Difficulty

5,7

Estimated Time (minutes) 20-25

Apply GAAP for uncollectible receivables; evaluate liquidity using ratios Apply GAAP for notes receivable Show how to speed up cash flow from receivables; evaluate liquidity using ratios Apply GAAP for proper revenue recognition; account for sales allowances; account for sales discounts; account for accounts receivable; write off account; estimate uncollectible account expense Show how to speed up cash from receivables Apply GAAP for receivables and uncollectible receivables Account for and evaluate accounts receivable including returns, sales discounts, and uncollectible accounts Analyze accounts receivable for a company in the restaurant industry

6

20-30

Medium

1,7

30-40

Difficult

1,2, 3,4,5

40-50

Medium

1

15-20

Difficult

4,5

15-20

Difficult

1,2, 3,4,5

15-20

Difficult

4

15

Medium

5-8 .

Difficult

Excel Projects

General Ledger Templates

Assignment

Topic(s)

L.O.

C5-75 Decision Case 1

Apply GAAP for revenue, accounts receivable, and uncollectible receivables Apply GAAP for uncollectible receivables; evaluate liquidity through ratios Strasburg Loan Company Apply GAAP for proper revenue recognition; calculate ratios Apply GAAP for revenue recognition; account for and control accounts receivable; calculate ratios Navarro Copy Center

C5-76 Decision Case 2 C5-77 Ethical Issue Focus on Financials– Apple Inc. Focus on Analysis– Under Armour, Inc. Group Project

Level of Difficulty

1,4,5

Estimated Time (minutes) 20-25

5,7

15-20

Medium

All

20-30

Medium

1,7

30-40

Difficult

1,4,7

20

Medium

All

30-45

Difficult

5-9 .

Medium

Excel Projects

General Ledger Templates

Answer Key to Chapter 5 Quiz (Quiz on following pages.)

1. C 2. A 3. B 4. D 5. D 6. C 7. D 8. A 9. C 10. B

5-10 .

Name____________________________________ Date_________________ Section_______________

CHAPTER 5 TEN-MINUTE QUIZ Circle the letter of the best response.

1.

At the end of the year, before adjustments are made, Benz Corporation reports Accounts Receivable of $20,000 and a credit balance in Allowance for Uncollectible Accounts of $1,450. Sales for the year were $300,000. Historically, 1% of sales have been uncollectible. Using the percent-of-sales method, the amount of uncollectible expense for the year would be: A. $1,550.

B. $4,450.

C. $3,000.

D. $200.

2.

Refer to Question #1. After all year-end entries have been made, the net amount of accounts receivable for Benz Corporation would be: A. $15,550.

B. $20,000.

C. $17,000.

D. $18,550.

3.

Which method of writing off an uncollectible account does not violate the expense recognition principle?

A. Direct write-off method B. Allowance method C. Net receivables method D. Expense recognition does not apply to uncollectible account expense.

4.

When an accounts receivable account has been determined to be uncollectible the entry to record the write off using the allowance method would include a: A. debit to Accounts Receivable.

B. debit to Uncollectible Account Expense.

C. credit to Notes Receivable.

D. debit to Allowance for Uncollectible Accounts.

5.

The numerator in the quick ratio includes: A. Equipment B. Net current receivables C. Cash plus short-term investments D. Both B and C 5-11 .

6.

On May 4, Rudd Sales Co. sold a $6,100 machine to a customer. The customer signed a 60-day, 4% note. What entry does Rudd make on May 4?

A. Accounts Receivable 6,140 Sales Revenue 6,100 Interest Revenue 40 B. Sales Revenue 6,100 Accounts Receivable 6,100 C. Notes Receivable 6,100 Sales Revenue 6,100 D. Cash 6,344 Notes Receivable 6,100 Interest Revenue 244

7.

Refer to Question 6. What is the maturity date and the maturity value of the note?

(Round to the closest dollar) Maturity date Maturity value A. July 3 $6,100 B. July 4 $6,344 C. July 2 $6,060 D. July 3 $6,140

8.

Bradley Company reports the following accounts receivable information at year end: A/R, current $100,000 A/R, 1-30 days past due 9,000 A/R, over 30-days past due 12,000 The company estimates that 1% of current accounts, 10% of accounts 1-30 days past due, and 15% of accounts over 30 days past due will be uncollectible. Bradley reports a credit balance of $500 in Allowance for Uncollectible Accounts before the year-end adjustment.

Using the aging-of-accounts method, what is the amount of Uncollectible Account Expense for the year?

A. $3,200 B. $3,700 C. $500 D. $1,900

9.

The formula to calculate days’ sales outstanding (DSO) is: A. Net credit sales / Average net accounts receivable B. Average net accounts receivable / 365 C. 365 / Accounts receivable turnover D. Accounts receivable turnover / Net credit sales

10.

Traylor Corporation reports net income for the year of $565,000. An uncollectible account of $125 is written off. Which of these is/are true?

A. Net income will decrease by $125.

B. Net income will not change.

C. Net accounts receivable will decrease.

D. Both A and C are true.

5-12 .

Chapter 6: Inventory & Cost of Goods Sold Learning Objectives 1.

2.

3.

4.

Show how to account for inventory Apply and compare various inventory cost methods Explain and apply underlying U.S. GAAP for inventory Compute and evaluate gross profit (margin) percentage, inventory turnover, and days’ inventory outstanding (DIO) 5. Use the cost-of-goods-sold (COGS) model to make management decisions 6. Analyze effects of inventory errors

Chapter Outline I.

II.

Accounting for Inventory A. Compare and contrast a service entity and a merchandising entity B. Sale price vs. cost of inventory 1.

Sales revenue 2.

Cost of goods sold 3.

Inventory 4.

Gross profit (gross margin) 5.

Number of units of inventory 6.

Cost per unit of inventory C. Accounting for inventory in the perpetual system 1.

Difference between periodic and perpetual systems 2.

How the perpetual system works 3.

Recording transactions in the perpetual system 4.

Calculation of net purchases a. Purchase price b. Freight-in c. Purchase returns d. Purchase allowances e. Purchase discounts Inventory Methods A. Determine inventory cost B. Various inventory costing methods 1.

Specific-identification 2.

Average-cost 3.

First-in, first-out (FIFO) 4.

Last-in, first-out (LIFO) 6-1 .

C.

III.

IV.

V.

VI.

Comparison of effects of FIFO, LIFO, and average cost on cost of goods sold, gross profit, and ending inventory D. Tax advantage of LIFO 1.

LIFO and managing reported income 2.

LIFO liquidation Explain and Apply Underlying GAAP for Inventory A. Accounting principles 1.

Consistency 2.

Disclosure 3.

Representational faithfulness B. Lower-of-cost-or-market rule Compute and Use Gross Profit (Gross Margin) Percentage, Inventory Turnover, and Days’ Inventory Outstanding (DIO) A. Gross profit percentage = Gross profit / Net sales revenue B. Inventory turnover = COGS / Average inventory C. Days’ inventory outstanding (DIO) = 365 / Inventory turnover Use the Cost of Goods Sold (COGS) Model to Make Management Decisions A. Compute budgeted purchases B. Estimate inventory by gross profit method Analyze the Effects of Inventory Errors

Chapter Activities 1.

Chapter Opener

Review Under Armour, Inc.’s consolidated balance sheets and income statements shown at the beginning of the chapter. Ask the students to compare the inventory amounts for 2016 and 2015.

Why did inventory increase during 2016? What is the relationship between net sales (net revenues), cost of goods sold, and inventory? Discuss the percentage changes, as reported in the chapter opener, for net sales (net revenues), cost of goods sold, and gross profit (gross margin).

Ask the students what these changes indicate about Under Armour. Would an increase in inventory always be a good/bad thing for a company?

2.

Inventory Activity

This activity will require you to give the students four items (pieces of paper, pieces of candy, etc.). Make sure that you also have them write the dollar amounts of $1 on one item, $2 on another item, $3 on the third item, and $4 on the last item. Go through various scenarios of purchases and sales with each item. For instance, the company buys all four items at the values 6-2 .

on each one. The total inventory is $10. If the company sells the $1 item for $4 and the $2 item for $4, determine sales revenue, cost of goods sold, and ending inventory under each method discussed in Chapter 6. Continue with the activity until the students have mastered the inventory methods.

Difficult Topics   

Average-cost method application FIFO application LIFO application

6-3 .

Chapter 6: Assignment Grid

Assignment

S6-1

S6-2

S6-3

S6-4

S6-5

S6-6 S6-7 S6-8 S6-9

S6-10

S6-11 S6-12

S6-13

Topic(s)

L.O.

Level of Difficulty

1

Estimated Time (minutes) 10-15

Show how to account for inventory transactions Show how to account for inventory transactions Show how to account for inventory transactions Apply the averagecost, FIFO, and LIFO methods Compare income tax effects of the inventory costing methods Apply the averagecost method Apply the FIFO method Apply the LIFO method Compare income, tax, and other effects of the inventory methods Apply the lower-ofcost-or-market rule to inventory Compute ratio data to evaluate operations Estimate ending inventory by the gross profit method Analyze the effect of an inventory error on two years

1

5

Easy

1

5

Easy

2

10-15

Easy

Easy

X 2

10-15

Medium

2

5-10

Easy

2

5

Easy

2

5

Easy

2

10-15

Medium

3

5-10

Medium

4

5-10

Medium

5

5-10

Easy

6

5

Medium

6-4 .

(Will have an X if available) Excel General Projects Ledger Templates

Assignment

S6-14

E6-15A

E6-16A

E6-17A

E6-18A

E6-19A

E6-20A

E6-21A

E6-22A

E6-23A E6-24A E6-25A

E6-26A

Topic(s)

L.O.

Level of Difficulty

6

Estimated Time (minutes) 10-15

Analyze the effect of an inventory error on multiple years Show how to account for inventory transactions; apply the FIFO cost method Show how to account for inventory transactions; apply the FIFO cost method Compare ending inventory and cost of goods sold using four methods Compare the tax advantage of LIFO over FIFO Apply the average, FIFO, and LIFO methods Compare ending inventory and cost of goods sold – FIFO vs.

LIFO Compare gross profit – FIFO vs. LIFO – falling prices Apply the lower-ofcost-or-market rule to inventories Compute cost of goods sold and gross profit Evaluate profitability and inventory turnover Compute and evaluate gross profit percentage and inventory turnover Use the COGS model to make management decisions

1,2

15-20

Medium

1,2

15-25

Medium

2

10-15

Medium

2

5-10

Medium

2

10-15

Medium

2

15

Medium

2

15

Medium

3

5-10

Medium

5

15-20

Medium

4

20-30

Difficult

4

15

Medium

5

10-15

Medium

6-5 .

Medium

Excel Projects

General Ledger Templates

Assignment

E6-27A

E6-28A E6-29B

E6-30B

E6-31B

E6-32B

E6-33B

E6-34B

E6-35B

E6-36B

E6-37B E6-38B E6-39B

Topic(s)

L.O.

Level of Difficulty

5

Estimated Time (minutes) 10-15

Use the COGS model to make management decisions Analyze the effect of an inventory error Show how to account for inventory transactions; apply the FIFO cost method Show how to account for inventory transactions; apply the FIFO cost method Compare ending inventory and cost of goods sold using four methods Compare the tax advantage of LIFO over FIFO Apply the average, FIFO, and LIFO methods Compare ending inventory and cost of goods sold – FIFO vs.

LIFO Compare gross profit – FIFO vs. LIFO – falling prices Apply the lower-ofcost-or-market rule to inventories Compute cost of goods sold and gross profit Evaluate profitability and inventory turnover Compute and evaluate gross profit percentage and inventory turnover

6

10-15

Medium

1,2

15-20

Medium

1,2

15-25

Medium

2

10-15

Medium

2

10

Medium

2

10-15

Medium

2

15

Medium

2

15

Medium

3

5-10

Medium

4

15-20

Medium

4

20-30

Difficult

4

15

Medium

6-6 .

Medium

Excel Projects

General Ledger Templates

Assignment

E6-40B

E6-41B

E6-42B Q6-43 to Q6-59 P6-60A

P6-61A

P6-62A P6-63A

P6-64A

P6-65A

P6-66A

P6-67A

P6-68A

Topic(s)

L.O.

Use the COGS model to make management decisions Use the COGS model to make management decisions Analyze the effect of an inventory error Quiz questions Show how to account for inventory in a perpetual system using the averagecosting method Apply various inventory costing methods Compare inventory by three methods Compare various inventory costing methods Explain GAAP and apply the lower-ofcost-or-market rule to inventories Compute and evaluate gross margin and inventory turnover Compute gross profit; estimate inventory using the gross profit method Use the COGS model to make management decisions, and estimate amount of inventory to purchase Analyze the effects of inventory errors

Level of Difficulty

5

Estimated Time (minutes) 10-15

5

10-15

Medium

6

10-15

Medium

All

30-40

Medium

1,2

20-30

Medium

General Ledger Templates

Medium

X

2

20-30

Medium

2

20-30

Medium

2

30-40

Medium

3

15-30

Medium

4

20-25

Medium

4,5

25-30

Medium

5

20-25

Difficult

6

15-20

Difficult

6-7 .

Excel Projects

Assignment

P6-69B

P6-70B

P6-71B P6-72B

P6-73B

P6-74B

P6-75B

P6-76B

P6-77B E6-78

E6-79 E6-80 P6-81

Topic(s)

L.O.

Level of Difficulty

1,2

Estimated Time (minutes) 20-30

Show how to account for inventory in a perpetual system using the averagecosting method Apply various inventory costing methods Compare inventory by three methods Compare various inventory costing methods Explain GAAP and apply the lower-ofcost-or-market rule to inventories Compute and evaluate gross margin and inventory turnover Compute gross profit; estimate inventory using the gross profit method Use the COGS model to make management decisions, and estimate amount of inventory to purchase Analyze the effects of inventory errors Apply various inventory methods to make decisions Measure the effect of a LIFO liquidation Evaluate profitability Account for inventory; analyze two companies that use different inventory methods

2

20-30

Medium

2

20-30

Medium

2

30-40

Medium

3

15-20

Medium

4

20-30

Medium

4,5

25-30

Medium

5

20-25

Difficult

6

15-20

Difficult

2

5-10

Difficult

2

20-30

Difficult

4 1,2,4

20-30 20-30

Difficult Difficult

6-8 .

Medium

Excel Projects

General Ledger Templates

Assignment

Topic(s)

L.O.

C6-82 The Cheesecake Factory C6-83 Decision Case 1

Analyze inventory and gross profit of a company in the restaurant industry Apply and compare various inventory methods, and assess the impact of a yearend purchase of inventory Apply and compare various inventory cost methods; apply underlying GAAP for inventory Coalmont

C6-84 Decision Case 2

C6-85 Ethical Issue Focus on Financials– Apple Inc.

Focus on Analysis– Under Armour, Inc. Group Project Appendix 6A S6A-1

S6A-2

Show how to account for inventories; compute and evaluate gross profit and inventory turnover Show how to account for inventory; explain GAAP for inventory; compute and evaluate gross profit and inventory turnover Evaluate inventory turnover ratios Periodic system Record inventory transactions in the periodic system Compute cost of goods sold and prepare the income statement – periodic system

Level of Difficulty

1,4

Estimated Time (minutes) 15-25

2

50-60

Difficult

2,3

15-25

Medium

All

20-30

Medium

1,4

30

Difficult

1,2,4

30-40

Difficult

4

30-40

Difficult

App

10-15

Easy

App

10-15

Easy

6-9 .

Medium

Excel Projects

General Ledger Templates

Assignment

E6A-3

E6A-4

P6A-5

P6A-6

Appendix 6B

Topic(s)

L.O.

Estimated Time (minutes)

Level of Difficulty

Compute amounts for the GAAP inventory methods – periodic system Journal inventory transactions in the periodic system; compute cost of goods sold Compute cost of goods sold and gross profit on sales – periodic system Record transactions in the periodic system; report inventory items in the financial statements LIFO reserve

App

10-15

Medium

App

10-15

Medium

App

20-25

Medium

App

20-30

Medium

General Ledger Templates

X

6-10 .

Excel Projects

Answer Key to Chapter 6 Quiz (Quiz on following pages) 1. C 2. A 3. D 4. A 5. B 6. C 7. D 8. A 9. C 10. B

6-11 .

Name____________________________________ Date_________________ Section_______________

CHAPTER 6 10-MINUTE QUIZ Circle the letter of the best response.

1.

The inventory records for Bracken Sales appear below:

Beg. Bal. (20 units @ $40) Purchases No. 1: (100 units @ $60) No. 2: (80 units @ $80)

Inventory 800 Cost of Goods Sold (150 units @ ?)

6,000 6,400

Using the average-cost method, what is the weighted-average unit cost?

A. $54.67 B. $60.00 C. $66.00 D. $68.89 2.

Refer to Question 1. Using the average-cost method, what is the cost of goods sold?

A. $9,900 B. $2,870 C. $7,000 D. $9,000

3.

Refer to Question 1. What value is assigned to the ending inventory, if using FIFO? A. $9,200 B. $10,600 C. $2,600 D. $4,000

4.

Gross profit plus cost of goods sold equals: A. sales revenue.

B. purchases.

C. beginning inventory.

D. ending inventory.

5.

The perpetual inventory system: A. is used by few businesses.

B. requires an annual count of inventory on hand.

C. keeps a periodic record for each inventory item.

D. all of the above 6-12 .

6.

Cost of goods sold: A. will always be lower when using LIFO rather than FIFO, during a period of rising prices.

B. will be the same amount when using LIFO or FIFO, during a period of rising prices.

C. is the number of units of inventory sold multiplied by cost per unit of inventory.

D. is the number of units of inventory purchased multiplied by cost per unit of inventory.

7.

Merchandise inventory: A. is an asset on the balance sheet.

B. is the cost of inventory that has not been sold.

C. is neither A or B. D. is both A and B.

8.

Inventory turnover: A. indicates how rapidly inventory is sold.

B. is the ratio of purchases to average inventory.

C. both A and B. D. none of the above

9.

The Merriweather Merchandising Company had the following records: Net sales $88,500 Beginning inventory 10,500 Purchases 28,000 Freight-in 2,000 Sales salaries expense 9,700 Ending inventory 12,000 What is the cost of goods sold for this company?

A. $26,500 B. $29,500 C. $28,500 D. $31,500

10.

Refer to Question 9. What is the gross profit for this company?

A. $62,000 B. $60,000 C. $50,300 D. $52,300

6-13 .

Chapter 7: Plant Assets, Natural Resources, & Intangibles Learning Objectives 1.

2.

3.

4.

5.

6.

7.

8.

Explain how to account for the cost of plant assets Distinguish a capital expenditure from an immediate expense Explain how to account for depreciation on plant assets Analyze the effect of a plant asset disposal Apply GAAP for natural resources and intangible assets Explain the effect of an asset impairment on the financial statements Analyze rate of return on assets Analyze the cash flow impact of long-lived asset transactions

Chapter Outline I.

II.

III.

Explain How to Account for the Cost of Plant Assets A. Types of long-lived assets 1.

Plant assets 2.

Natural resources 3.

Intangible assets B. Types of plant assets 1.

Land – does not depreciate 2.

Buildings, machinery, and equipment 3.

Land improvements and leasehold improvements C. Lump-sum (basket) purchases of assets Distinguish a Capital Expenditure from an Immediate Expense A. Capital expenditure: increase the asset’s capacity or extend useful life B. Expense: maintain asset or restore it to working order Explain How to Account for Depreciation on Plant Assets A. Book value of a plant asset = cost – accumulated depreciation B. Depreciation: allocation of a plant asset’s cost to expense over its life C. Measuring depreciation 1.

Cost 2.

Estimated useful life: length of service expected from using the asset 3.

Estimated residual value: expected cash value of an asset at end of useful life D. Depreciation methods 1.

Straight-line method 2.

Units-of-production method 3.

Double-declining-balance method (an accelerated method) 7-1 .

IV.

V.

VI.

VII.

VIII.

E. Comparing depreciation methods F. Other issues in accounting for plant assets G. Depreciation for tax purposes H. Depreciation for partial years I. Changing the useful life of a depreciable asset J. Fully depreciated assets Analyze the Effect of a Plant Asset Disposal A. Disposing of a fully depreciated asset for no proceeds B. Selling a plant asset C. Exchanging a plant asset D. Use T-accounts for analyzing plant asset transactions Apply GAAP for Natural Resources and Intangible Assets A. Accounting for natural resources – depletion B. Accounting for intangible assets – amortization C. Accounting for specific intangibles 1.

Patents 2.

Copyrights 3.

Trademarks and trade names 4.

Franchises and licenses 5.

Goodwill D. Accounting for research and development costs Explain the Effect of an Asset Impairment on the Financial Statements A. Step 1: test the asset for impairment (NBV > Estimated FCF) B. Step 2: compute impairment loss (NBV – FV) Analyze the Rate of Return on Assets A. ROA = Net Income Avg. Total Assets B. ROA measures how much the entity earned for each dollar of assets invested C. DuPont analysis gives a more detailed view of ROA Analyze the Cash Flow Impact of Long-Lived Asset Transactions A. Acquisitions (investing activity) B. Sales (investing activity) C. Depreciation

7-2 .

Chapter Activities 1.

Chapter Opener

This chapter’s spotlight is on the FedEx Corporation. Discuss the types of assets that FedEx might use in their business. Ask the students to think about the different intangible assets that FedEx might own. Students may mention the value of employees; they might enjoy a brief (but interesting) discussion of why this “intangible” asset is not recorded on the books. Challenge the students to think about how the cost of various fixed assets might be allocated on FedEx’s books by using the process of depreciation and amortization.

2.

Depreciation Activity

Have the students list on the board the assets that they own personally (cars, computers, homes, etc.), along with the approximate costs of each. Then assign estimated lives to each of the assets and an estimated residual value. Then ask the students to calculate depreciation for each of these items using the three methods of depreciation. Once the students have this information, they can determine accumulated depreciation per year and book value.

Difficult Topics  

Depreciation method equations Selling an asset, especially debiting accumulated depreciation and debit/credit losses/gains

7-3 .

Chapter 7: Assignment Grid

Assignment

S7-1

S7-2

S7-3

S7-4

S7-5

S7-6

S7-7

S7-8

S7-9

S7-10

Topic(s)

Measure the cost and book value of a company’s plant assets Measure and record the cost of individual assets in a lump-sum purchase of assets Distinguish a capital expenditure from an immediate expense Distinguish a capital expenditure from an immediate expense Compute depreciation and book value by three methods – first year only Select the best depreciation method for income tax purposes Compute depreciation using straight-line method with a residual value of zero Compute depreciation using units-ofproduction method with a residual value of zero Compute depreciation using doubledeclining-balance method with a residual value of zero Compute depreciation using straight-line method with residual value

L.O. Estimated Time (minutes) 1 5

1

5-10

Easy

Easy X

2

10

Medium

2

5

Easy

3

10-15

Easy

3

5-10

Easy

3

5-10

Easy

3

5-10

Easy

3

5-10

Easy

3

5-10

Easy X

7-4 .

Level of Difficulty

(Will have an X if available) Excel General Projects Ledger Templates

Assignment

S7-11

S7-12

S7-13

S7-14

S7-15

S7-16

S7-17 S7-18

S7-19 S7-20 S7-21

Topic(s)

Compute depreciation using units-ofproduction method with residual value Compute depreciation using doubledeclining-balance method with residual value Compute partial year depreciation, and select the best depreciation method Compute and record depreciation after a change in useful life of the asset Compute depreciation; record a gain or loss on disposal Account for the depletion of a company’s natural resources Measure and record goodwill Explain the effect of asset impairment on financial statements Calculate return on assets Calculate return on assets Analyze the cash flow impact of investing activities on the statement of cash flows

L.O. Estimated Time (minutes) 3 5-10

Excel Projects

Easy X

3

5-10

Easy X

3

10

Medium

3

5-10

Medium

3,4

5-10

Medium

5

5-10

Medium

5

5-10

Medium

6

5-10

Medium

7

5

Medium

7

5

Medium

8

5

Easy

7-5 .

Level of Difficulty

General Ledger Templates

Assignment

E7-22A E7-23A

E7-24A

E7-25A E7-26A

E7-27A

E7-28A E7-29A

E7-30A

E7-31A

E7-32A

E7-33A

E7-34A

Topic(s)

L.O. Estimated Time (minutes) 1 5-10

Measure the cost of plant assets Allocate costs to 1,4 assets acquired in a lump-sum purchase; dispose of a plant asset Distinguish capital 2 expenditures from expenses Measure, depreciate, 1,8 and report plant assets Determine 3 depreciation amounts by three methods Report plant assets, 1,3,8 depreciation, and investing cash flows Change a plant asset’s 3 useful life Compute 3,4 depreciation; record a gain or loss on disposal Measure DDB 3,4 depreciation; analyze the effect of a sale of a plant asset Measure a plant 1,3,4 asset’s cost; calculate UOP depreciation; analyze the effect of a used asset trade-in Record natural 5 resource assets and depletion Record intangibles, 5,6 amortization, and impairment Compute and account 5,6 for goodwill and impairment

Excel Projects

General Ledger Templates

Medium

10-15

Medium

5-10

Medium

15

Medium

15-20

Medium

15

Medium

10-15

Medium

10

Medium

15-20

Difficult

10-15

Medium

10-15

Medium X

7-6 .

Level of Difficulty

10-15

Medium

5-10

Medium

Assignment

E7-35A E7-36A E7-37B E7-38B

E7-39B

E7-40B E7-41B

E7-42B

E7-43B E7-44B

E7-45B

E7-46B

E7-47B

Topic(s)

L.O. Estimated Time (minutes) 7 5-10

Calculate return on assets Report cash flows for 8 plant assets Measure the cost of 1 plant assets Allocate costs to 1,4 assets acquired in a lump-sum purchase; dispose of a plant asset Distinguish capital 2 expenditures from expenses Measure, depreciate, 1,8 and report plant assets Determine 3 depreciation amounts by three methods Report plant assets, 1,3,8 depreciation, and investing cash flows Change a plant asset’s 3 useful life Compute 3,4 depreciation; record a gain or loss on disposal Measure DDB 3,4 depreciation; analyze the effect of a sale of a plant asset Measure a plant 1,3,4 asset’s cost; calculate UOP depreciation; analyze the effect of a used asset trade-in Record natural 5 resource assets and depletion

7-7 .

Level of Difficulty Medium

10

Medium

5-10

Medium

10-15

Medium

5-10

Medium

15

Medium

15-20

Medium

15

Medium

10-15

Medium

10

Medium

15-20

Difficult

10-15

Medium

10-15

Medium

Excel Projects

General Ledger Templates

Assignment

E7-48B

E7-49B

E7-50B E7-51B Q7-52 to Q7-66 P7-67A

P7-68A

P7-69A

Topic(s)

L.O.

Record intangibles, amortization, and impairment Compute and account for goodwill and impairment Calculate return on 10ssets Report cash flows for plant assets Quiz questions Measure and account for plant assets; distinguish a capital expenditure from an expense; measure and record depreciation Measure and account for the cost of plant assets; measure and record depreciation under DDB Measure and account for the cost of plant assets and depreciation; analyze and record a plant asset disposal

Level of Difficulty

5,6

Estimated Time (minutes) 10-15

5,6

5-10

Medium

7

5-10

Medium

8

10

Medium

All

30-40

Medium

1,2,3

20-30

Medium

1,3

15

Medium

1,3,4

25-35

Difficult

General Ledger Templates

Medium

X

7-8 .

Excel Projects

Assignment

P7-70A

P7-71A

P7-72A P7-73A

P7-74A P7-75A

P7-76B

P7-77B

Topic(s)

L.O.

Measure and account for the cost of a plant asset; measure depreciation by three methods; identify the cash flow advantage of accelerated depreciation for tax purposes Analyze plant asset transactions from a company’s financial statements Account for natural resources Analyze the effect of a plant asset addition and disposal; report plant asset transactions on the financial statements Calculate return on assets Analyze the effect of a plant asset disposal and the cash flow impact of long-lived asset transactions

1,3,8

Measure and account for plant assets; distinguish a capital expenditure from an expense; measure and record depreciation Measure and account for the cost of plant assets; measure and record depreciation under DDB

Estimated Time (minutes) 30-40

Level of Difficulty

1,3, 4,6,8

20-25

Medium

5

20-30

Difficult

1,4,8

30-40

Medium

7

20-30

Difficult

4,8

20-30

Difficult

1,2,3

20-30

Medium

1,3

15

Medium

7-9 .

Excel Projects

General Ledger Templates

Difficult

X

Assignment

P7-78B

P7-79B

P7-80B

P7-81B P7-82B

P7-83B E7-84B

E7-85

Topic(s)

L.O.

Level of Difficulty

1,3,4

Estimated Time (minutes) 25-35

Measure and account for the cost of plant assets and depreciation; analyze and record a plant asset disposal Measure and account for the cost of a plant asset; measure depreciation by three methods; identify the cash flow advantage of accelerated depreciation for tax purposes Analyze plant asset transactions from a company’s financial statements Account for natural resources Analyze the effect of a plant asset addition and disposal; report plant asset transactions on the financial statements Calculate return on assets Analyze the effect of a plant asset disposal and the cash flow impact of long-lived asset transactions Determine the effect on net income of a change in the depreciation method

1,3,8

30-40

Difficult

1,3, 4,6,8

20-25

Medium

5

20-30

Difficult

1,4,8

30-40

Difficult

7

20-30

Difficult

4,8

20-30

Difficult

3

15-20

Difficult

7-10 .

Difficult

Excel Projects

General Ledger Templates

Assignment

P7-86

P7-87

C7-88 The Cheesecake Factory C7-89 Decision Case 1 C7-90 Decision Case 2

C7-91 Ethical Issue Focus on Financials– Apple Inc. Focus on Analysis– Under Armour, Inc

Topic(s)

L.O.

Level of Difficulty

2

Estimated Time (minutes) 15-25

Distinguish a capital expenditure from an expense, and measure the financial statement effects of an expensing error Determine plant and equipment transactions for an actual company Calculate depreciation for a new location of a company in the restaurant industry Measure profitability based on different inventory and depreciation methods Distinguish between capital expenditures and expense; account for plant assets and intangible assets Toledo National Bank

4

20-30

Difficult

3

15-25

Difficult

3

30-45

Difficult

2,5

30-40

Difficult

All

30-40

Difficult

Analyze activity in plant assets

1,2, 3,5

30-40

Difficult

Measure the cost of plant assets; explain plant asset activity; apply GAAP for intangible assets, explain an asset impairment, analyze rate of return on assets; analyze the cash flow impact of long-lived asset transactions

1,3, 5,7,8

20-30

Difficult

7-11 .

Difficult

Excel Projects

General Ledger Templates

Assignment

Group Project

Topic(s)

L.O.

Estimated Time (minutes)

Local business plan

7-12 .

Level of Difficulty

Excel Projects

General Ledger Templates

Answer Key to Chapter 7 Quiz (Quiz on following pages.)

1. C 2. A 3. B 4. B 5. A 6. D 7. B 8. C 9. D 10. D

7-13 .

Name____________________________________ Date_________________ Section_______________

CHAPTER 7 10-MINUTE QUIZ Circle the letter of the best response.

Case 7-1: Use the information below to answer Questions 1 – 4.

A business purchased a machine that had a total cost of $550,000 and a residual value of $35,000.

The asset is expected to service the business for a period of 10 years or produce a total of 1,980,000 units. The machine was purchased January 1st of the current year and has been in service one complete year.

1.

Refer to Case 7-1. What is the depreciable cost of the asset?

A. $ 35,000 B. $550,000 C. $515,000 D. $ 55,000

2.

Refer to Case 7-1. Using the straight-line method, what is the amount of depreciation expense in year two of the asset’s life?

A. $ 51,500 B. $103,000 C. $ 55,000 D. $110,000

3.

Refer to Case 7-1. Now assume the business uses the units-of-production method. If the asset produces 500,000 units in year one and 400,000 units in year two, what is book value at the end of year two?

(Round your calculation of depreciation per unit to the closest cent.)

A. $234,000 B. $316,000 C. $298,000 D. $252,000

4.

Refer to Case 7-1. What is the depreciation expense in year one, if the double-decliningbalance method is used?

A. $ 55,000 B. $110,000 C. $103,000 D. $ 51,500

7-14 .

5.

The entry to record annual depreciation includes a: A. debit to Depreciation Expense.

B. debit to Accumulated Depreciation.

C. credit to Depreciation Expense.

D. credit to the asset account.

6.

In calculating the total cost of land, all costs are included except: A. survey fees.

B. real estate agent’s commission.

C. purchase price.

D. parking lots.

7.

If a plant asset is sold and a loss is incurred, the entry to record the sale would include a: A. credit to Cash.

B. debit to Loss on Sale of Asset.

C. debit to Plant Asset.

D. credit to Accumulated Depreciation.

8.

Which of the following statements is TRUE? A. Allocating the cost of a plant asset over its useful life is called depletion.

B. Allocating the cost of a natural resource to an expense is called depreciation.

C. Intangible assets are amortized.

D. Both A and B are true.

9.

Return on assets: A. measures the amount of sales dollars generated by each dollar of assets invested in the business.

B. is calculated as average total assets/net income.

C. is calculated as net income/net sales.

D. is calculated as net income/average total assets.

10.

Bradley Company reported the following during the current year:  Depreciation expense, $12,800  Gain on the sale of land, $32,700  Purchase of new equipment, $35,800  Cash received from sale of land, $105,000 Bradley Company’s net cash flow from investing activities as reported on the cash flow statement would be: A. $ 82,000 B. $ 89,100 C. $101,900 D. $ 69,200

7-15 .

Chapter 8: Current and Contingent Liabilities Learning Objectives 1.

2.

3.

4.

5.

Distinguish between current and long-term liabilities Account for accounts payable and analyze accounts payable turnover Account for notes payable and accrued interest Account for accrued liabilities and unearned revenue Account for contingent liabilities

Chapter Outline I.

II.

III.

IV.

V.

Distinguish Between Current and Long-Term Liabilities A. Short-term liabilities defined B. Long-term liabilities defined Accounts for Accounts Payable and Analyze Accounts Payable Turnover A. Accounts payable turnover = Purchases from suppliers / Average Accounts Payable B. Days payable outstanding = 365 / Accounts payable turnover Accounts for Notes Payable and Accrued Interest A. Short-term notes payable are due within 1 year B. Current portion of long-term debt is the amount of the principal that is payable within 1 year Account for Accrued Liabilities and Unearned Revenue A. Examples of accrued liabilities 1.

Sales tax payable 2.

Payroll liabilities (salaries, wages, payroll taxes) 3.

Accrued warranties payable B. Unearned revenue defined Account for Contingent Liabilities A. Contingent liabilities defined B. FASB guidelines to account for contingent liabilities 1.

Accrue for a contingent liability 2.

Disclose a contingency in a footnote if it reasonably possible that a loss will occur 3.

No need to report a contingent loss that is unlikely to occur

8-1 .

Chapter Activities 1.

Chapter Opener

Find the most current financial statement for Amazon.com and have the students identify the effect of the acquisition of Whole Foods, Inc. Some questions you might pose to the students include: How much did the company’s liabilities grow with the acquisition? How much did the company’s assets grow with the acquisition? Discuss the source of each of Amazon’s current liabilities.

Additionally, show the students how to read and interpret Amazon’s footnote on contingent liabilities.

2.

Chapter Activity

Divide the class into groups and have each group select a Fortune 500 company to research. Have them report back to the class, and explain and discuss each current liability reported on that company’s balance sheet. In addition, have the students review and report to the class about their company’s contingent liabilities, as reported in the footnotes.

Difficult Topics  

FASB rules for recording a liability Accounts payable turnover

8-2 .

Chapter 8: Assignment Grid

Assignment

S8-1

S8-2

S8-3 S8-4 S8-5 S8-6

S8-7

S8-8 S8-9 E8-10A

E8-11A E8-12A

E8-13A E8-14A

Topic(s)

L.O.

Level of Difficulty

1

Estimated Time (minutes) 5-10

Identify the current liabilities associated with operating activities Calculate purchases by analyzing inventory account activity Calculate days’ payable outstanding

2

5-10

Easy

2

5-10

Easy

Account for a shortterm note payable Account for a shortterm note payable Account for warranty expense and accrued warranty payable Report warranties in the financial statements Account for accrued payroll Interpret a company’s contingent liabilities Analyze current and long-term liabilities; evaluate accounts payable turnover Analyze accounts payable turnover Purchase inventory, accrue interest, and pay a short-term note Record note payable transactions Account for a shortterm note payable

3

5-10

Easy

3

5-10

Easy

4

10

Easy

4

5-10

Medium

4

10-15

Easy

5

5-10

Easy

1,2

20-30

Medium

2

5-10

Medium

3

15-20

Medium

3

5-10

Easy

3

10-15

Medium

8-3 .

(Will have an X if available) Excel General Projects Ledger Templates

Easy

X

Assignment

E8-15A

E8-16A E8-17A

E8-18A E8-19A E8-20B

E8-21B E8-22B

E8-23B E8-24B E8-25B

E8-26B E8-27B

E8-28B E8-29A Q8-30 thru Q8-43 P8-44A

Topic(s)

L.O.

Account for warranty expense and the related liability Record and report current liabilities Account for payroll expense and liabilities Report current and long-term liabilities Report a contingent liability Analyze current and long-term liabilities; evaluate accounts payable turnover Analyze accounts payable turnover Purchase inventory, accrue interest, and pay a short-term note Record note payable transactions Account for a shortterm note payable Account for warranty expense and the related liability Record and report current liabilities Account for payroll expense and liabilities Report current and long-term liabilities Report a contingent liability Quiz questions Measure and report current liabilities

Level of Difficulty

4

Estimated Time (minutes) 5-15

4

10-15

Medium

4

10

Medium

1,2, 3,4 5

15-20

Medium

5-10

Medium

1,2

10-20

Easy

2

5-10

Medium

3

15-20

Medium

3

5-10

Easy

3

10-15

Medium

4

5-15

Medium

4

10-15

Medium

4

10

Medium

1,2, 3,4 5

15-20

Medium

5-10

Medium

All

20-30

Medium

1,2, 3,4

15-20

Medium

8-4 .

Medium

Excel Projects

General Ledger Templates

Assignment

Topic(s)

P8-45A

Record liabilityrelated transactions P8-46A Measure and report current liabilities P8-47A Account for estimated warranties payable; account for contingent liabilities P8-48B Measure and report current liabilities P8-49B Record liabilityrelated transactions P8-50B Measure and report current liabilities P8-51B Account for estimated warranties payable; account for contingent liabilities E8-52 Report current liabilities; evaluate liquidity C8-53 Analyze contingent The liabilities of a Cheesecake company in the Factory restaurant industry C8-54 Calculate and analyze Decision accounts payable Case 1 turnover for two companies in the toy and game industry C8-55 Analyze a contingent Decision liability at an Case 2 automobile manufacturer C8-56 Microsoft Ethical Corporation Issue

L.O.

1,2, 3,4 1,2, 3,4 4,5

Estimated Time (minutes) 30-40

Level of Difficulty

20-30

Medium

20-30

Medium

General Ledger Templates

X

X

1,2, 3,4 1,2, 3,4 1,2, 3,4 4,5

15-20

Medium

30-40

Medium

20-30

Medium

20-30

Medium

1

10-15

Difficult

5

15-20

Medium

2

30-40

Difficult

5

15-20

Difficult

8-5 .

Medium

Excel Projects

Assignment

Topic(s)

L.O.

Focus on Financials – Apple Inc.

Analyze current liabilities; evaluate accounts payable turnover; evaluate contingent liabilities Analyze current liabilities; evaluate accounts payable turnover; evaluate contingent liabilities Consider different businesses

Focus on Analysis – Under Armour, Inc. Group Project

Level of Difficulty

1,2,5

Estimated Time (minutes) 20

1,2,5

20-30

Difficult

8-6 .

Difficult

Excel Projects

General Ledger Templates

Answer Key to Chapter 8 Quiz (Quiz on the following pages.)

1. D 2. B 3. C 4. A 5. B 6. C 7. D 8. B 9. C 10. D

8-7 .

Name____________________________________ Date_________________ Section______________

CHAPTER 8 10-MINUTE QUIZ Circle the letter of the best response.

1.

Ridgepointe Corporation made sales of $300,000 subject to warranties that are estimated to be at 4% of the sales made. The entry to accrue warranty expense would include which of these?

A. Credit to Inventory, $12,000 B. Debit to Warranty Payable, $12,000 C. Credit to Warranty Expense, $12,000 D. Credit to Accrued Warranties Payable, $12,000

2.

Refer to Question #1. Defects totaled $8,000. Ridgepointe’s entry to replace the defective products will include which of these?

A. Credit to Accrued Warranties Payable.

B. Credit to Inventory.

C. Debit to Warranty Expense.

D. Debit to Inventory.

3.

Which of the following is not a current liability?

A. Accounts Payable B. Notes Payable due in 90 days C. Bonds Payable D. Accrued Payroll Liabilities

4.

Fowler Inc. reports purchases from suppliers of $130,000 and average accounts payable of $50,000. What is the days’ payable outstanding for Fowler Inc.?

A. 140 days B. 3 days C. 7 days D. 50 days

5.

On November 1, Coker Company received $6,000 from a customer for legal services to be performed over the next three months. On December 31, after all adjusting entries are made, the balance sheet should report what amount of unearned revenue?

A. $6,000 B. $2,000 C. $4,000 D. $- 0 -

8-8 .

6.

A contingent liability should be reported on the balance sheet if: A. it is less than possible but more than remote that a loss will occur.

B. it is the result of a lawsuit that is not yet settled.

C. it is probable that the loss will occur and the amount can be reasonably estimated.

D. Contingent liabilities will never be reported on the balance sheet.

7.

Bell Corporation purchases inventory on February 1, 2019 for $80,000 in exchange for a short-term note payable, due in one year, with interest at 8%. The entry on February 1, 2019 includes a: A. debit to Inventory, $80,000.

B. credit to Interest Payable, $6,400.

C. credit to Notes Payable, Short-term, $80,000.

D. Both A and C.

8.

Refer to Question #7. On December 31, 2019, the corporation’s year end, the amount of accrued interest payable will be: A. $6,400 B. $5,867 C. $533 D. There is no interest accrued until the due date.

9.

Refer to Question #7 and #8. On February 1, 2020, the amount of interest expense at maturity will be: A. $6,400 B. $5,867 C. $533 D. There will not be any interest expense recorded at maturity.

10.

From the following list, calculate total current liabilities (amounts in millions): Accumulated depreciation Sales tax payable Accrued warranties payable Bonds payable Current portion of long-term debt Long-term debt Accounts receivable Accounts payable Interest payable Interest expense Unearned revenue Accrued liabilities payable A. $123 B. $238 C. $95 D. $46 8-9 .

$ 28 7 2 35 10 100 15 13 3 14 6 5

Chapter 9: Long-Term Liabilities Learning Objectives 1.

2.

3.

4.

5.

6.

Account for bonds payable and interest expense with straight-line amortization Account for bonds payable and interest expense with effective-interest amortization Account for other features of bonds payable Describe other long-term liabilities Analyze the impact on leverage on the financial statements Report long-term liabilities on the financial statements

Chapter Outline I.

Account for Bonds Payable and Interest Expense with Straight-Line Amortization A. Bonds payable 1.

Types of bonds a. Term bonds and serial bonds b. Secured bonds and unsecured bonds (debentures) 2.

Bond prices 3.

Bond premium and discount 4.

Time value of money 5.

Bond interest rates determine bond prices a. Stated interest rate (coupon rate) b. Market interest rate (effective-interest rate) B. Issuing bonds payable at par (face) value 1.

No premium or discount 2.

Semi-annual interest payments 3.

Accrue interest at year-end 4.

Pay off at maturity C. Issuing bonds payable at a discount 1.

Market interest rate is higher than stated interest rate of the bonds 2.

Straight-line method of amortization of bond discount results in same amount of interest expense each interest period 3.

Semi-annual entries include interest payment and amortization of bond discount 4.

Accrue interest and amortize bond discount at year-end D. Issuing bonds payable at a premium 1.

Stated interest rate of the bonds is higher than market interest rate 2.

Straight-line method of amortization of bond premium results in same amount of interest expense each interest period 9-1 .

3.

II.

III.

IV.

V.

VI.

Semi-annual entries include interest payment and amortization of bond premium 4.

Accrue interest and amortize bond premium at year-end E. Straight-line amortization method permitted when amounts do not differ significantly from amounts determined by the effective-interest method of amortization Account for Bonds Payable and Interest Expense with Effective-Interest Amortization A. Issuing bonds payable at a discount 1.

Using the PV function in Excel, prepare amortization table as per Exhibit 9-2 2.

Journal entries come from amortization table 3.

Interest expense increases over life of the bond, as carrying value of the bond also increases 4.

Year-end accrual B. Issuing bonds payable at a premium 1.

Using the PV function in Excel, prepare amortization table as per Exhibit 9-5 2.

Journal entries come from amortization table 3.

Interest expense decreases over life of the bond, as carrying value of the bond also decreases 4.

Year-end accrual Other Features of Bonds Payable A. Prior-period interest amounts B. Retirement of bonds payable before maturity C. Convertible bonds and notes Other Long-Term Liabilities A. Deferred Income taxes B. Commitments C. Types of leases 1.

Finance lease 2.

Operating lease Analyze the Impact of Leverage on Financial Statements A. Debt ratio B. Leverage ratio (equity multiplier) C. Times-interest-earned ratio Reporting Liabilities on the Financial Statements A. Balance sheet B. Disclosing fair value of long-term debt in footnotes C. Reporting financing activities on statement of cash flows

9-2 .

Chapter Activities 1.

Chapter Opener

Review the balance sheet for Southwest Airlines and discuss with students the various liabilities that appear on the financial statement (differentiating between current and long-term). Discuss with the students how they believe those liabilities are created and introduce the topics of bonds payable, notes payable, and deferred income taxes. Discuss what might appear on the income statement and the statement of cash flows related to the various liabilities you discuss.

Additionally, discuss obligations (such as leases) that Southwest does not report on the balance sheet, and why these are described in footnotes. Why does the reader of the financial statements need this information?

2.

Jeopardy

Chapter 9 introduces several new terms and calculations. Set up a “Jeopardy”-type game and split the class into three groups. Have the students choose a dollar amount from the “board” and have pre-written questions for each dollar amount. The questions can range from new terms introduced in the chapter to calculations that the students need to solve to journal entries the students must draft.

Difficult Topics    

Difference between stated and market interest rates Bond premium/discount and amortization journal entries Year-end accruals Effective-interest method of amortization

9-3 .

Chapter 9: Assignment Grid

Assignment

S9-1 S9-2 S9-3

S9-4

S9-5

S9-6

S9-7

S9-8

S9-9

S9-10

S9-11

Topic(s)

L.O.

Level of Difficulty

1

Estimated Time (minutes) 5-10

Review of bonds issued at a discount Determine bond prices at par, discount, or premium Journalize basic bond payable transactions and bonds issued at par Determine bonds payable amounts with a discount; amortize bonds using the straight-line method Determine bonds payable amounts with a premium; amortize bonds using the straight-line method Issue bonds payable at a discount and amortize bonds using the effectiveinterest method Account for bonds payable issued at a discount using the effective-interest method Issue bonds payable at a premium and amortize bonds using the effectiveinterest method Account for bonds payable issued at a premium using the effective-interest method Account for a bond payable retirement before maturity Deferred income tax, commitments, lease, and ratio vocabulary terms

1

5

Easy

1

5-10

Easy

1

10-15

Medium

Medium

X 1

10-15

Medium

2

15-20

Medium X

2

10

Medium

2

15-20

Medium

2

10

Medium

3

10

Medium

4,5

5-10

Medium

9-4 .

(Will have an X if available) Excel General Projects Ledger Templates

Assignment

S9-12 S9-13

S9-14 E9-15A

E9-16A

E9-17A

E9-18A

E9-19A

E9-20A E9-21A E9-22A

Topic(s)

L.O.

Level of Difficulty

5

Estimated Time (minutes) 5-10

Compute and evaluate three ratios Calculate the leverage ratio, debt ratio, and times-interest-earned ratio, and evaluate debtpaying ability Report liabilities Issue bonds payable (discount), pay and accrue interest, and amortize bond discount using the straight-line method Measure cash amounts for a bond payable (premium); amortize bond premium using the straight-line method Issue bonds payable (discount); record interest payments and the related bond amortization using the effective-interest method Issue bonds payable (premium); record interest payment and the related bond amortization using the effectiveinterest method Account for bonds payable retired prior to maturity Account for deferred taxes payable Evaluate debt-paying ability Analyze current and long-term liabilities; evaluate debt-paying ability

5

10-15

Medium

Medium

X

6 1

10 10-15

Easy Medium

1

10-15

Medium

2

15-20

Medium

2

15-20

Medium

1,3

20-30

Medium

4

15-20

Difficult

5

20-25

Difficult

4,5

10-20

Difficult

9-5 .

Excel Projects

X

General Ledger Templates

Assignment

E9-23A

E9-24B

E9-25B

E9-26B

E9-27B

E9-28B

E9-29B E9-30B E9-31B

E9-32B

Q9-33 to Q9-49

Topic(s)

L.O.

Level of Difficulty

1,6

Estimated Time (minutes) 15-20

Account for bonds payable; report long-term liabilities Issue bonds payable (discount); pay and accrue interest; amortize bond discount using the straight-line method Measure cash amounts for a bond payable (premium); amortize bond premium using the straight-line method Issue bonds payable (discount); record interest payments and the related bond amortization using the effective-interest method Issue bonds payable (premium); record interest payment and the related bond amortization using the effectiveinterest method Account for bonds payable retired prior to maturity Account for deferred taxes payable Evaluate debt-paying ability Analyze current and long-term liabilities; evaluate debt-paying ability Account for bonds payable; report long-term liabilities Quiz Questions

1

10-15

Medium

1

10-15

Medium

2

15-20

Medium

2

15-20

Medium

1,3

20-30

Medium

4

15-20

Difficult

5

20-25

Difficult

4,5

10-20

Difficult

1,6

15-20

Medium

All

30-45

Medium

9-6 .

Medium

Excel Projects

General Ledger Templates

Assignment

P9-50A

P9-51A

P9-52A

P9-53A

P9-54A

P9-55A

P9-56B

P9-57B

Topic(s)

L.O.

Level of Difficulty

1,6

Estimated Time (minutes) 20-25

Record bond transactions at par; report bonds payable on the balance sheet Issue bonds at a discount; amortize using the straight-line method; report bonds payable and accrued interest payable on the balance sheet Account for bonds payable at a discount; amortize using the straight-line method Analyze a company’s long-term debt; report long-term debt on the balance sheet (effectiveinterest method) Issue convertible bonds at a discount, amortize using the effectiveinterest method, and convert bonds; report bonds payable on the balance sheet Report liabilities on the balance sheet; calculate the leverage ratio, debt ratio, and times-interestearned ratio Record bond transactions at par; report bonds payable on the balance sheet Issue bonds at a discount; amortize using the straight-line method; report bonds payable and accrued interest payable on the balance sheet

1,6

30-40

Difficult

1

30-40

Difficult

2,6

30-45

Difficult

2,3,6

40-50

Difficult

4,5,6

20-30

Difficult

1,6

20-25

Medium

1,6

30-40

Difficult

9-7 .

Medium

Excel Projects

General Ledger Templates

Assignment

Topic(s)

Account for bonds payable at a discount; amortize using the straight-line method Analyze a company’s P9-59B long-term debt; report long-term debt on the balance sheet (effectiveinterest method) Issue convertible bonds P9-60B at a discount; amortize using the effectiveinterest method; convert bonds; report bonds payable on the balance sheet Report liabilities on the P9-61B balance sheet; calculate the leverage ratio, debt ratio, and times-interestearned ratio Report current and longE9-62 term liabilities; evaluate leverage Understand how P9-63 structuring debt transactions can affect a company Calculate modified debt C9-64 ratios for a company in The Cheesecake the restaurant industry Factory Explore an actual C9-65 bankruptcy; calculate Decision leverage ratio, ROA, debt Case ratio, and times-interestearned ratio P9-58B

L.O.

Level of Difficulty

1

Estimated Time (minutes) 30-40

2,6

30-45

Difficult

2,3,6

40-50

Difficult

4,5,6

20-30

Difficult

5,6

10-15

Difficult

4,5

20-30

Difficult

5

15-20

Difficult

5

15-20

Difficult

9-8 .

Difficult

Excel Projects

General Ledger Templates

Assignment

Topic(s)

L.O.

Focus on Financials – Apple Inc.

Analyze current and long-term liabilities; evaluate debt-paying ability Analyze current liabilities and long-term debt; calculate ratios

Focus on Analysis – Under Armour, Inc.

Level of Difficulty

4,5,6

Estimated Time (minutes) 20

4,5,6

20

Difficult

9-9 .

Difficult

Excel Projects

General Ledger Templates

Answer Key to Chapter 9 Quiz (Quiz on following pages.)

1. A 2. D 3. B 4. A 5. C 6. A 7. B 8. C 9. C 10. D

9-10 .

Name____________________________________ Date_________________ Section_______________ CHAPTER 9 10-MINUTE QUIZ Circle the letter of the best response.

1.

When calculating deferred income taxes: A. Income tax payable is based on tax reporting rules.

B. Income tax payable is based on GAAP. C. Income tax expense is based on tax reporting rules.

D. Income tax expense can never equal income tax payable.

2.

The Fuller Company issued a $100,000, 5-year, 6% bond at par. It is a semiannual bond with interest paid on June 30th and December 31st. The entry to record the sale of the bond would include a: A. $100,000 credit to Cash.

B. $6,000 debit to Interest Expense.

C. $100,000 debit to Accounts Payable.

D. $100,000 credit to Bonds Payable.

3.

Refer to Question 3. The entry to record the semiannual interest payment is: A. Interest Expense 6,000 Cash 6,000 B. Interest Expense 3,000 Cash 3,000 C. Interest Payable 6,000 Cash 6,000 D. Interest Expense 3,000 Interest Payable 3,000

4.

On January 1, Southeast Airlines issued $300,000 of 9%, 5-year, callable bonds when the market interest was 8%. On a date when the carrying value of the bonds is $300,500, the bonds are called and retired at 99. Southeast will report a: A. $3,500 Gain on Retirement of Bonds Payable.

B. $300,000 credit to Bonds Payable.

C. $300,500 credit to Cash.

D. $3,500 Loss on Retirement of Bonds Payable.

9-11 .

5.

For 2019, Lail Company reports beginning total assets of $100 million and ending total assets of $180 million. Beginning common stockholders’ equity was $60 million and ending stockholders’ equity was $90 million. Net income for 2019 was $45 million. The leverage ratio for 2019 equals: A. 0.53 B. 3.11 C. 1.94 D. 1.67

6.

On February 1st, Starr Company issued $500,000, 5-year, 4% bonds. The market rate at the time of the sale was greater than 4% so the bonds were sold at 94. Interest is payable July 31th and January 31st. The entry to record the sale of the bonds would include a: A. Debit to Discount on Bonds Payable for $30,000.

B. Debit to Cash for $500,000.

C. Credit to Cash for $470,000.

D. Credit to Bonds Payable for $470,000.

7.

Refer to Question 6. Starr Company uses the straight-line method to amortize discount on the bonds, the entry to record the first interest payment would include: A. Credit to Cash for $20,000.

B. Debit to Interest Expense for $13,000.

C. Debit to Interest Expense for $6,000.

D. Debit to Discount on Bonds Payable for $3,000.

8.

On July 1, 2019, a company issued $200,000, 8-year, 4% bonds payable for $186,944, when the market rate of interest was 5%. Interest payment dates are June 30 and December 31. Using the effective interest method of amortization, the December 31, 2019, carrying amount of the bonds (rounded to the closest dollar) will be: A. $186,270 B. $199,326 C. $187,618 D. $200,000

9.

When a company uses the effective-interest method to amortize bond discount, A. Interest expense on each semi-annual interest payment date will be a constant amount.

B. Interest expense is calculated as principal × contract rate × 6/12.

C. Interest expense will increase each period as the carrying amount of the bonds increases.

D. Both B and C are correct.

9-12 .

10.

Which of the following is not a characteristic of a financing lease?

A. The Lease transfers ownership of the asset to the lessor at the end of term.

B. The Lease term is for the major part of the remaining economic life.

C. The Lease grants the option, that the lessee is reasonably certain to exercise, for the lessee to purchase the asset.

D. All of the above are true.

9-13 .

Chapter 10: Stockholders’ Equity Learning Objectives 1.

2.

3.

4.

5.

6.

Explain the features of a corporation Account for the issuance of stock Show how treasury stock affects a company Account for retained earnings, dividends, and stock splits Evaluate a company’s performance using new ratios Report stockholders’ equity transactions in the financial statements

Chapter Outline I.

Corporations A. Corporations defined and features of a corporation 1.

Separate legal entity – owned by shareholders (stockholders) 2.

Continuous life and transferability of ownership 3.

Limited liability of shareholders 4.

Separation of ownership and management 5.

Corporate taxation 6.

Government regulation B. Organizing a corporation 1.

Charter 2.

By-laws 3.

Board of directors and officers C. Stockholders’ rights 1.

Vote 2.

Dividends 3.

Liquidation 4.

Preemption D. Stockholders’ equity 1.

Paid-in capital or contributed capital a. All stock accounts b. All additional paid-in capital accounts 2.

Retained earnings a. All net earnings, b. Minus all dividends E. Classes of stock 1.

Common and preferred 10-1 .

II.

III.

IV.

V.

2.

Comparison of common stock, preferred stock, and long-term debt 3.

Par value and no-par values Account for the Issuance of Stock A. Common stock 1.

Common stock at par 2.

Common stock above par 3.

No-par common stock 4.

No-par common stock with a stated value 5.

Common stock issued for assets other than cash 6.

Common stock issued for services 7.

Ethical challenges related to issuing stock for other than cash B. Preferred stock C. Authorized, issued, and outstanding stock Treasury Stock A. Why companies purchase their own stock B. Treasury Stock is contra-equity; debit balance C. Recording treasury stock (at cost) D. Retirement of treasury stock E. Resale of treasury stock (never includes a “gain” or “loss”) F. Issuing stock for employee compensation Account for Retained Earnings, Dividends, and Stock Splits A. Dividends defined B. Cash dividends 1.

Declaration date 2.

Date of record 3.

Payment date C. Analyzing the stockholders’ equity accounts D. Dividends on preferred stock 1.

Dividend rate may be a % of par or a stated dollar amount per share 2.

Cumulative and noncumulative preferred stock E. Stock dividends result in no change in total stockholders’ equity 1.

Small (<25%) recorded at market value 2.

Large (>25%) recorded at par value F. Stock splits do not require a journal entry but rather a memorandum entry Evaluate a Company’s Performance Using New Ratios A. ROE: Relating profitability to stockholder investment B. Earnings per share C. Effect of equity financing on EPS D. Market capitalization and the price-earnings ratio E. Dividend yield 10-2 .

VI.

Report Stockholders’ Equity Transactions in the Financial Statements A. Statement of cash flows – financing activities 1.

Issuance of stock 2.

Treasury stock 3.

Cash dividends B. Statement of stockholders’ equity C. Stockholders’ equity section of the balance sheet

Chapter Activities 1.

Chapter Opener

Home Depot is profiled at the beginning of Chapter 10. During class, research the current stock price of Home Depot and review the most current stockholders’ equity section of the balance sheet.

Ask the students what information they would research if they were interested in purchasing common stock of the corporation. Review the entire stockholders’ equity section and discuss what transaction created each line item. You might ask students why “Treasury Stock” is a negative number, and then discuss why a company might have treasury stock and what this means to shareholders. Research cash dividend payments in recent years, and whether or not there have been stock dividends or stock splits. Compare dividends per share and earnings per share.

Compare the facts and information you’ve discussed about Home Depot’s stockholders’ equity with other similar businesses such as Lowes.

2.

Stockholders’ Equity Activity

Print a variety of stockholders’ equity account names on cardstock; prepare a blue set and a red set. Prepare blue and red “CEO” and “CFO” cards. Randomly distribute all cards to students in class. Using the CEO and CFO as leaders in each group, have a contest between the two “corporations” to see which one can organize their stockholders’ equity accounts the fastest.

Difficult Topics  Treasury stock  Preferred dividends and common dividends  Stock dividends and stock splits

10-3 .

Chapter 10: Assignment Grid

Assignment

S10-1

S10-2

S10-3

S10-4 S10-5 S10-6 S10-7 S10-8

S10-9 S10-10 S10-11

S10-12 S10-13

S10-14 S10-15

Topic(s)

L.O.

Level of Difficulty

1

Estimated Time (minutes) 5-10

Explain advantages and disadvantages of a corporation Describe characteristics of preferred and common stock Describe the effect of a stock issuance on paidin-capital Issue stock – par value stock and no-par stock Record issuance of stock for cash and for services Issue stock to finance the purchase of assets Account for the purchase and sale of treasury stock Explain purchase of treasury stock to fight off a takeover of the corporation Account for cash dividends Account for cash dividends Divide cash dividends between preferred and common stock Record a small stock dividend Prepare the stockholders’ equity section of a balance sheet Use stockholders’ equity data Calculate book value per share

1

5-10

Easy

2

5-10

Easy

2

5

Easy

2

5-10

Easy

2

5-10

Easy

3

5

Easy

3

15-20

Medium

4

10

Easy

4

10

Easy

4

5-10

Easy

4

5-10

Medium

6

5-10

Medium

Easy

X 5

15-20

Medium

5

10

Medium

10-4 .

(Will have an X if available) Excel General Projects Ledger Templates

Assignment

S10-16

S10-17

S10-18

S10-19 S10-20 S10-21

S10-22

E10-23A

E10-24A

E10-25A E10-26A

E10-27A

E10-28A

Topic(s)

L.O.

Level of Difficulty

5

Estimated Time (minutes) 5-10

Calculate and explain return on assets and return on equity Calculate and explain return on assets and return on equity Calculate earnings-pershare effects of financing with bonds versus stock Define and use various stock values Measure cash flows from financing activities Analyze a basic statement of stockholders’ equity Analyze a statement of stockholders’ equity including stock dividends and other comprehensive income Identify key terms associated with corporations Account for issuance of stock; prepare the stockholders’ equity section of a balance sheet Measure paid-in capital of a corporation Prepare the stockholders’ equity section of a balance sheet Show how treasury stock affects a company; prepare the stockholders’ equity section of a balance sheet Account for the purchase and sale of treasury stock

5

10-15

Medium

5

10-15

Medium

2,5

20-30

Medium

6

5-10

Medium

6

10

Medium

6

10-15

Medium

1

10-15

Medium

2,6

10-15

Medium

2

10

Medium

2,6

10-15

Medium

3,6

10-15

Medium

3

5-10

Medium

10-5 .

Difficult

Excel Projects

General Ledger Templates

Assignment

E10-29A

E10-30A

E10-31A

E10-32A

E10-33A

E10-34A

E10-35A E10-36A E10-37A E10-38A E10-39A

E10-40B

E10-41B

E10-42B

Topic(s)

L.O.

Account for issuance of stock; show how treasury stock affects a company; account for dividends Report stockholders’ equity after a sequence of transactions Infer transactions from a company’s comparative stockholders’ equity Calculate dividends on preferred and common stock Record a stock dividend and report stockholders’ equity Measure the effects of stock issuance, dividends, splits, and treasury-stock transactions Calculate and interpret ratios Analyze alternative plans for raising money Evaluate profitability Report cash flows from financing activities Use a company’s statement of stockholders’ equity Identify key terms associated with corporations Account for issuance of stock; prepare the stockholders’ equity section of a balance sheet Measure paid-in capital of a corporation

2,3,4

Level of Difficulty

Excel Projects

Medium X

6

10

Medium

2,3,4,6

20-30

Difficult

4

15

Medium

4,6

15-20

Medium

2,3,4

15-20

Difficult

5

10-15

Difficult

4,6

15-20

Medium

5 6

10-15 10

Difficult Medium

6

20-25

Medium

1

10-15

Medium

2,6

10-15

Medium

2

10

Medium

10-6 .

Estimated Time (minutes) 10

X

General Ledger Templates

Assignment

Topic(s)

L.O.

E10-43B

Prepare the stockholders’ equity section of a balance sheet Show how treasury stock affects a company; prepare the stockholders’ equity section of a balance sheet Account for the purchase and sale of treasury stock

E10-46B

E10-47B

E10-44B

E10-45B

E10-48B

E10-49B

E10-50B

E10-51B

E10-52B E10-53B E10-54B E10-55B E10-56B

Q10-57 to Q10-75

Level of Difficulty

2,6

Estimated Time (minutes) 10-15

3,6

10-15

Medium

3

5-10

Medium

Account for issuance of stock; show how treasury stock affects a company; account for dividends

2,3,4

10

Medium

Report stockholders’ equity after a sequence of transactions Infer transactions from a company’s comparative stockholders’ equity

6

10

Medium

2,3,4,6

20-30

Difficult

4

15

Medium

4,6

15-20

Medium

2,3,4

15-20

Difficult

5

10-15

Difficult

5

15-20

Medium

5 6

10-15 10

Difficult Medium

6

20-25

Medium

All

45-50

Medium

Calculate dividends on preferred and common stock Record a stock dividend and report stockholders’ equity Measure the effects of stock issuance, dividends, and treasury stock transactions Calculate and interpret ratios Analyze alternative plans for raising money Evaluate profitability Report cash flows from financing activities Use a company’s statement of stockholders’ equity Quiz Questions

10-7 .

Medium

Excel Projects

General Ledger Templates

Assignment

Topic(s)

L.O.

P10-76A

Account for stock issuance; report stockholders’ equity Report stockholders’ equity Analyze stockholders’ equity and dividends of a corporation Account for stock issuance, dividends, and treasury stock Measure the effects of stock-related transactions on a company Prepare a corporation’s balance sheet; measure profitability Differentiate financing with debt vs. equity

P10-77A P10-78A

P10-79A

P10-80A

P10-81A

P10-82A P10-83A P10-84B

P10-85B P10-86B

P10-87B

P10-88B

P10-89B

P10-90B P10-91B

Analyze a statement of stockholders’ equity Account for stock issuance; report stockholders’ equity Report stockholders’ equity Analyze stockholders’ equity and dividends of a corporation Account for stock issuance, dividends, and treasury stock Measure the effects of stock-related transactions on a company Prepare a corporation’s balance sheet; measure profitability Differentiate financing with debt vs. equity Analyze a statement of stockholders’ equity

Level of Difficulty

2,6

Estimated Time (minutes) 30-45

6

10-15

Medium

2,4

25-35

Difficult

2,3,4

15-20

Medium

Medium

X 2,3,4,6

20-30

Medium

4,5,6

40-50

Difficult

5

20-30

Difficult

6

15-20

Difficult

2,6

30-45

Medium

6

10-15

Medium

2,4

25-35

Difficult

2,3,4

15-20

Medium

2,3,4,6

20-30

Medium

4,5,6

40-50

Difficult

5

15-30

Difficult

6

15-20

Difficult

10-8 .

Excel Projects

General Ledger Templates

Assignment

E10-92

E10-93

E10-94

E10-95

E10-96 C10-97 The Cheesecake Factory C10-98 Decision Case 1 C10-99 Decision Case 2 C10-100 Ethical Issue 1 C10-101 Ethical Issue 2 Focus on Financials— Apple Inc.

Topic(s)

L.O.

Estimated Time (minutes)

Level of Difficulty

Reconstruct transactions from the financial statements Report financing activities on the statement of cash flows Account for issuance of stock and treasury stock; explain the changes in stockholders’ equity Account for issuance of stock, treasury stock, and other changes in stockholders’ equity Analyze information from stockholders’ equity Calculate impact of stock transactions on a company in the restaurant industry Evaluate alternative ways of raising capital

2,3,4

20-25

Medium

6

20-25

Medium

2,3,4

15

Difficult

2,3,4

15

Medium

2,3,4,6

20-25

Difficult

2,3,4

15-20

Medium

2,6

30-45

Difficult

Evaluate alternative ways of raising capital

5

30-40

Difficult

George Campbell

All

30-45

Difficult

St. Genevieve Petroleum Company Analyze common stock, retained earnings, return on equity, and return on assets Analyze treasury stock and retained earnings

All

30-45

Difficult

2,3,4,5

20-30

Difficult

2,3,4

20-30

Difficult

All

60+

Difficult

Focus on Analysis— Under Armour, Inc. Group Project Effects of recession and in Ethics ethical considerations

10-9 .

Excel Projects

General Ledger Templates

Answer Key to Chapter 10 Quiz (Quiz on following pages.)

1. D 2. A 3. D 4. B 5. C 6. C 7. A 8. A 9. B 10. C

10-10 .

Name____________________________________ Date_________________ Section_______________

CHAPTER 10 10-MINUTE QUIZ Circle the letter of the best response.

1.

Which of the following is/are part of stockholders’ equity?

A. Retained earnings B. Paid-in capital C. Treasury stock D. All of the above

2.

Which of the following is/are true?

A. Common stock is usually voting stock.

B. Preferred stock is usually voting stock.

C. Common dividends are usually paid first, before preferred dividends.

D. None of the above

3.

D&D Corporation is authorized to sell 50,000 shares of $10 par, 6% cumulative preferred stock and 100,000 shares of $6 par common stock. There are 40,000 shares of preferred stock outstanding and 30,000 shares of common stock outstanding. A $40,000 cash dividend has been declared by the board of directors. No dividends in arrears exist. What is the total amount to be given to the preferred shareholders?

A. $40,000 B. $20,000 C. $18,000 D. $24,000

4.

Refer to Question 3. What is the common stock dividend per share amount (rounded)?

A. $.733 B. $.533 C. $.678 D. $1.333

5.

Which of the following is not an advantage of a corporation?

A. Ease of transferring ownership B. Limited liability of stockholders C. Double taxation of distributed profits D. Can raise more capital than a proprietorship can

10-11 .

6.

Authorized stock is which of the following?

A. The number of shares the company has issued to its stockholders.

B. The number of shares that the stockholders own.

C. The maximum number of shares the company can issue.

D. The number of shares that will be distributed in a stock dividend.

7.

Kahn Corporation issued 100,000 shares of $1 par common stock at a price of $10 per share. On June 1, Kahn purchased 2,000 shares of its own stock at a cost of $14 per share.

On December 1, Kahn resold all the shares for $16 each. The entry on December 1 would include which of these?

A. Credit to Paid-in Capital from Treasury Stock Transactions, $4,000.

B. Credit to Treasury Stock, $32,000.

C. Credit to Gain on the Sale of Treasury Stock, $4,000.

D. Debit to Cash, $28,000.

8.

Queensboro Corp. issued 10,000 shares of $20 par common stock at $18 per share. Later, the company purchased 3,000 of these shares from the shareholders. If Queensboro later declares a 15% stock dividend, they should distribute an additional _____ shares: A. 1,050 B. 1,950 C. 450 D. 1,500

9.

Which of the following statements is true regarding stock transactions?

A. Dividends in arrears can apply to both common and preferred stock.

B. A large stock dividend is recorded at par value.

C. The journal entry for a stock split includes a credit to Common Stock.

D. The purchase of treasury stock is recorded in a contra-equity account with a credit balance.

10.

On the first of the year, Colorado Corporation issued 10,000 shares of $1 par common stock at $10 per share. Later in the year they purchased 1,000 shares of treasury stock from their shareholders for $12 each. The balance in Common Stock at year-end is: A. $100,000 B. $9,000 C. $10,000 D. $88,000

10-12 .

Chapter 11: The Statement of Cash Flows Learning Objectives 1.

2.

3.

4.

Identify the purposes of the statement of cash flows Distinguish among operating, investing, and financing activities Prepare a statement of cash flows using the indirect method Prepare a statement of cash flows using the direct method

Chapter Outline I.

II.

III.

Identify the Purposes of the Statement of Cash Flows A. Predict future cash flows B. Evaluate management decisions C. Determine ability to pay dividends and interest D. Show the relationship of net income to cash flows (both are necessary for the business to succeed) Distinguish Among Operating, Investing, and Financing Activities A. Operating activities B. Investing activities C. Financing activities D. Two formats for operating activities 1.

Indirect method 2.

Direct method Prepare a Statement of Cash Flows Using the Indirect Method A. Cash flows from operating activities 1.

Start with accrual net income 2.

Add back depreciation, depletion, and amortization expenses 3.

Deduct gains and add back losses on the sale of long-term assets 4.

Add and subtract changes in the current asset and current liability accounts (excluding Cash) B. Cash flows from investing activities 1.

Computing purchases and sales of plant assets 2.

Computing purchases and sales of investments, and loans and collections C. Cash flows from financing activities 1.

Computing issuances and payments of long-term debt 2.

Computing issuances of stock and purchases of treasury stock 3.

Computing dividend declarations and payments D. Noncash investing and financing activities 11-1 .

IV.

Prepare a Statement of Cash Flows Using the Direct Method A. Cash flows from operating activities 1.

Cash collections from customers 2.

Cash receipts of interest and dividends 3.

Payments to suppliers 4.

Payments to employees 5.

Payments for interest expense and income tax expense B. Depreciation, depletion, and amortization expense (not listed on the directmethod statement of cash flows) C. Cash flows from investing activities 1.

Purchasing plant assets and investments and making loans to other companies 2.

Proceeds from selling plant assets and investments and from collecting notes receivable D. Cash flows from financing activities 1.

Proceeds from issuance of stock and debt (notes and bonds payable) 2.

Payment of debt and purchasing the company’s own stock 3.

Payment of cash dividends E. Noncash investing and financing activities F. Computing operating cash flows by the direct method 1.

Computing cash collections from customers 2.

Computing payments to suppliers 3.

Computing payments for other operating expenses 4.

Computing payments to employees 5.

Computing payments of interest and income taxes G. Computing investing and financing cash flows (same for both methods) H. Measuring cash adequacy: free cash flow

Chapter Activities 1.

Chapter Opener

Review the cash-flow statement for Alphabet, Inc. (Google) and explain to the students what information can be derived regarding the cash flows for the year. Discuss where some of the investing and financing activities are reported in various accounts in the ledger; for instance, ask how proceeds from the issuance of debt and the repayment of debt affect the note payable account.

Have them mention other possible types of cash flows for a business. Emphasize to students that all cash transactions are reported on the statement of cash flows, and then show how beginning and ending cash are reconciled with the changes in cash for the year (made up of the three types of activities on the statement).

11-2 .

2.

Chapter Activity

On slips of cardstock or paper, list the line items from a statement of cash flows under the indirect method (you can use one of the examples shown in the text).

Divide the room up into three areas: operating activities, investing activities, and financing activities. Ask the students to move to their particular area of the room depending on where their line item would appear on the statement of cash flows. Quiz each student to confirm that he or she is in the correct section of the room and perhaps have some students explain exactly what his or her line item involves. Move the students accordingly if they are in the wrong section. Repeat the exercise by doing the same activity for the direct method. Again, quiz the students to confirm that they are in the correct area for that particular financial statement and move them, if necessary.

Difficult Topics  

Distinguishing between cash flows from operating, investing, and financing activities Understanding the formulas used in calculating cash flows from operating activities when using the direct method

11-3 .

Chapter 11: Assignment Grid

Assignment

S11-1

S11-2 S11-3 S11-4

S11-5

S11-6 S11-7

S11-8 S11-9 S11-10

S11-11

S11-12

S11-13

S11-14

Topic(s)

L.O.

Level of Difficulty

1

Estimated Time (minutes) 10

Explain the purposes of the statement of cash flows Evaluate operating cash flows – indirect method Use cash flow data to evaluate performance Report cash flows from operating activities – indirect method Distinguish among operating, financing, and investing activities – indirect method Prepare operating cash flows – indirect method Prepare a statement of cash flows – indirect method Calculate investing cash flows Calculate financing cash flows Calculate operating cash flows – direct method Calculate operating cash flows – direct method Prepare a statement of cash flows – direct method Computing operating cash flows – direct method Prepare a statement of cash flows – direct method

2

5-10

Easy

2

15-30

Easy

3

5-10

Medium

2

10

Medium

3

10

Easy

3

15

Easy

3

10

Easy

3

15

Easy

4

15

Easy

4

10-15

Easy

4

15

Easy

4

5

Medium

4

15

Easy

11-4 .

Excel Projects

Easy

X

General Ledger Templates

Assignment

Topic(s)

L.O.

E11-15A

Distinguish among operating, investing, and financing activities for the statement of cash flows – indirect method Distinguish among operating, investing, and financing activities for the statement of cash flows – indirect method Calculate cash flows from operating activities – indirect method Calculate cash flows from operating activities – indirect method Prepare a statement of cash flows – indirect method Evaluate a statement of cash flows – indirect method Calculate investing and financing amounts for the statement of cash flows Calculate cash flows from operating activities – direct method Identify items for the statement of cash flows – direct method Prepare the statement of cash flows – direct method Calculate amounts for the statement of cash flows – direct method Distinguish among operating, investing, and financing activities for the statement of cash flows – indirect method

E11-16A

E11-17A

E11-18A

E11-19A

E11-20A

E11-21A

E11-22A

E11-23A

E11-24A

E11-25A

E11-26B

Level of Difficulty

2,3

Estimated Time (minutes) 10-15

2,3

5-10

Easy

3

10-15

Medium

Easy

X 3

15-20

Medium

3

20-30

Medium X

3

5-10

Medium

3,4

10-15

Medium

4

10-15

Difficult

4

5-10

Medium

4

20-30

Medium

4

10-15

Medium

2,3

10-15

Easy

11-5 .

Excel Projects

General Ledger Templates

Assignment

Topic(s)

L.O.

E11-27B

Distinguish among operating, investing, and financing activities for the statement of cash flows – indirect method Calculate cash flows from operating activities – indirect method Calculate cash flows from operating activities – indirect method Prepare the statement of cash flows – indirect method Evaluate a statement of cash flows – indirect method Calculate investing and financing amounts for the statement of cash flows Calculate cash flows from operating activities – direct method Identify items for the statement of cash flows –direct method Prepare the statement of cash flows – direct method Calculate amounts for the statement of cash flows – direct method Quiz questions

E11-28B

E11-29B

E11-30B

E11-31B

E11-32B

E11-33B

E11-34B

E11-35B

E11-36B

Q11-37 to Q11-56 P11-57A

Prepare an income statement, balance sheet, and statement of cash flows – indirect method

Level of Difficulty

2,3

Estimated Time (minutes) 5-10

3

10-15

Medium

3

15-20

Medium

3

20-30

Medium

3

5-10

Medium

3,4

10-15

Medium

4

10-15

Difficult

4

5-10

Medium

4

20-30

Medium

4

10-15

Medium

All

30-45

Medium

2,3

45-60

Difficult

11-6 .

Easy

Excel Projects

General Ledger Templates

Assignment

Topic(s)

L.O.

P11-58A

Prepare an income statement, balance sheet, and statement of cash flows – direct method Prepare the statement of cash flows – indirect method Prepare the statement of cash flows – indirect method Prepare the statement of cash flows – indirect method Prepare the statement of cash flows – direct method Prepare the statement of cash flows – direct method Prepare the statement of cash flows – direct and indirect methods Prepare the statement of cash flows – indirect and direct methods Prepare an income statement, balance sheet, and statement of cash flows – indirect method Prepare an income statement, balance sheet, and statement of cash flows – direct method Prepare the statement of cash flows – indirect method

P11-59A

P11-60A

P11-61A

P11-62A

P11-63A

P11-64A

P11-65A

P11-66B

P11-67B

P11-68B

Level of Difficulty

2,4

Estimated Time (minutes) 45-60

2,3

35-45

Medium

2,3

35-45

Difficult

2,3

30-40

Difficult

2,4

30-40

Difficult

2,4

35-45

Medium

2,3,4

45-60

Difficult

2,3,4

45-60

Difficult

2,3

45-60

Difficult

2,4

45-60

Difficult

2,3

35-45

Medium

11-7 .

Difficult

Excel Projects

General Ledger Templates

Assignment

Topic(s)

P11-69B

Prepare the statement of cash flows – indirect method P11-70B Prepare the statement of cash flows – indirect method P11-71B Prepare the statement of cash flows – direct method P11-72B Prepare the statement of cash flows – direct method P11-73B Prepare the statement of cash flows – direct and indirect methods P11-74B Prepare the statement of cash flows – indirect and direct methods E11-75 Compute cash flow amounts E11-76 Use the balance sheet and the statement of cash flows together P11-77 Prepare a balance sheet from a statement of cash flows C11-78 Analyze the statement The of cash flows for a Cheesecake company in the Factory restaurant industry C11-79 Prepare and use the Decision statement of cash flows Case 1 to evaluate operations C11-80 Use cash flow data to Decision evaluate an investment Case 2 Ethical Georgetown Motors Issue Focus on Use the statement of Financials: cash flows Apple Inc.

L.O.

Level of Difficulty

2,3

Estimated Time (minutes) 35-45

2,3

30-40

Difficult

2,4

30-40

Difficult

2,4

35-45

Medium

2,3,4

45-60

Difficult

2,3,4

45-60

Difficult

3,4

20-30

Difficult

3

20

Medium

2,3

30-45

Difficult

2,3

15-20

Difficult

3

45-60

Difficult

1,2

15-25

Difficult

All

30-45

Difficult

1,2, 3,4

40-50

Difficult

11-8 .

Medium

Excel Projects

General Ledger Templates

Assignment

Focus on Analysis: Under Armour, Inc. Group Projects 1&2

Topic(s)

L.O.

Analyze cash flows

1,2, 3,4

Analyzing annual reports and cash flow

All

Estimated Time (minutes) 20-30

Level of Difficulty

120+

Difficult

11-9 .

Difficult

Excel Projects

General Ledger Templates

Answer Key to Chapter 11 Quiz (Quiz on following pages.)

1. B 2. C 3. C 4. C 5. A 6. D 7. A 8. B 9. A 10. D

11-10 .

Name ________________________________________ Date _____________ Section ______________ CHAPTER 11 10-MINUTE QUIZ Circle the letter of the best response.

1.

Cash payment of dividends is reported in the ______ activities section of the statement of cash flows.

A. Investing B. Financing C. Operating D. Dividends are not reported on the statement of cash flows

2.

Cash purchases of long-term assets are reported in the _______ activities section of the statement of cash flows.

A. Operating B. Financing C. Investing D. Non-cash investing and financing

3.

When using the indirect method, what should be added to net income in determining net cash flow provided by operating activities?

A. Gain on sale of long-term assets B. Decrease in accounts payable C. Depreciation expense D. Increase in inventory

4.

Which of the following does not have an effect on cash?

A. Borrowing on a long-term note payable.

B. Issuance of common stock.

C. Recording depletion expense.

D. Purchase of supplies.

5.

The Long Corporation purchased a large machine 5 years ago at a total cost of $400,000.

The accumulated depreciation on this machine is $280,000. The corporation sold the machine at a $10,000 gain. What amount would be reported as cash proceeds from this sale?

A. $130,000 B. $110,000 C. $120,000 D. $125,000

11-11 .

6.

The Kolinek Company had $300,000 of sales revenue. During the same accounting period the beginning and ending accounts receivable balances were $32,000 and $36,000, respectively. What amount of cash was collected from the customers during this period?

A. $332,000 B. $300,000 C. $304,000 D. $296,000

7.

Grace Manufacturing Company reported the following data: Beginning notes payable of $23,000, borrowings during the year of $190,000 and ending notes payable of $22,000.

How much did they repay on their notes during the year?

A. $191,000 B. $190,000 C. $189,000 D. Cannot be determined based on the information given.

8.

Which of the following items are not included in determining the cash payments (outflows) from investing activities?

A. Acquisition of plant assets B. Repaying a long-term note payable C. Making loans to others D. Purchase of investments that are not cash equivalents

9.

Which of the following would be reported as a cash receipt from financing activities?

A. Issuing bonds payable B. Purchase of treasury stock C. Purchase of plant assets D. Payment of principal amounts of debt

10.

Perry Corporation reports cost of goods sold of $228,000 and a decrease in inventory during the year of $10,000. All accounts payable relate to inventory purchases; accounts payable decreased by $4,800 during the year. How much cash did Ferguson pay for inventory during the year?

A. $223,200 B. $213,200 C. $218,000 D. $222,800

11-12 .

Chapter 12: Financial Statement Analysis Learning Objectives 1.

2.

3.

4.

5.

Perform an industry and company analysis Perform a horizontal analysis Perform a vertical analysis Use ratios to make business decisions Evaluate the quality of earnings

Chapter Outline I. II.

III.

IV.

V.

Perform an Industry and Company Analysis Perform a Horizontal Analysis A. Study of percentage changes from year to year B. Trend percentages are calculated using a base year Perform a Vertical Analysis A. Income statement: Net sales is the base amount B. Balance sheet: Total assets is the base amount Prepare Common-Size Financial Statements A. Benchmarking B. Benchmarking against a key competitor Use Ratios to Make Business Decisions A. First understand the company, it’s industry, it’s history, and where it is headed in the future B. Measuring the ability to pay current liabilities 1.

Working capital: Current assets – Current liabilities 2.

Current ratio: Current assets Current liabilities 3.

Quick (acid-test) ratio: Cash and Cash equivalents + ST investments + Net current receivables Current liabilities C. Measuring turnover and the cash conversion cycle 1.

Inventory turnover: Cost of goods sold Average inventory 12-1 .

Days’ inventory outstanding (DIO): 365 Inventory turnover 3.

Accounts receivable turnover: Net sales Average net accounts receivable 4.

Days’ sales outstanding (DSO) or days’ sales in receivables: 365 Accounts receivable turnover OR: a. Average daily sales: Net credit sales 365 days b. Convert average daily sales to DSO: Average net accounts receivable Average daily sales 5.

Accounts payable turnover: Cost of goods sold Average accounts payable 6.

Days’ payables outstanding (DPO): 365 Accounts payable turnover 7.

Cash conversion cycle: DIO + DSO – DPO Days’ inventory outstanding (DIO) + Days’ sales outstanding (DSO) – Days’ payable outstanding (DPO) Measuring leverage (overall ability to pay debts) 1.

Debt ratio: Total liabilities Total assets 2.

Times-interest-earned ratio: Income from operations Interest expense Measuring profitability 1.

Gross (profit) margin percentage: Gross margin Net sales 2.

Operating income (profit) percentage: Operating income Net sales 2.

D.

E.

12-2 .

3.

VI.

DuPont analysis: ROA × Leverage ratio = ROE (see formulas below) 4.

Rate of return on sales (Net profit margin ratio): Net income – Preferred dividends Net sales 5.

Asset turnover ratio: Net sales Average total assets 6.

Rate of return on total assets (ROA): Rate of return on sales × Asset turnover ratio 7.

Leverage (equity multiplier) ratio: Average total assets Average common stockholders’ equity 8.

Rate of return on common stockholders’ equity (ROE): Net income – Preferred dividends Average common stockholders’ equity 9.

Earnings per share of common stock: Net income – Preferred dividends Average # of shares of common stock outstanding F. Analyzing stock as an investment 1.

Price/Earnings ratio (multiple): Market price per share of common stock Earnings per share 2.

Dividend yield: Dividend per share of common stock Mkt price per share of common stock 3.

Book value per share of common stock: Total stockholders’ equity – Preferred equity # of shares of CS outstanding (Basic) G. The limitations of ratio analysis Evaluate the Quality of Earnings A. Economic value added (EVA) B. Red flags in financial statement analysis C. Efficient capital markets

12-3 .

Chapter Activities 1.

Chapter Opener

Show the students Under Armour, Inc.’s financial information on any of the financial websites (Yahoo! Finance, MSN Money, etc.). Ask the students if they had $1,000 to invest in the company, how would they decide if Under Armour, Inc. is a good investment? What information would they use from the financial statements to make this decision?

Repeat this exercise and discussion using Apple Inc. After that discussion, point out specific ratios that are found under the heading of “key ratios,” “key statistics,” or a similar heading on the web sites mentioned above. Explain to the students that Chapter 12 will help them in understanding how to first calculate and then interpret the information found under these headings and will give them the knowledge to analyze any set of financial statements.

2.

Ratio Flash Cards

Prior to class set up flash cards with each ratio name listed on one side and the formula on the other. Break the class up into teams and have the teams compete as to who can name the formula on the back of the card first and award point values depending on the difficulty of the formula.

You may use bells, buzzers, or some other system that will allow teams to be first in answering.

Additionally, the flash cards can be turned over where the formula is shown and the students must guess the ratio. The team with the most points at the end wins!

Difficult Topics 

Ratio memorization

12-4 .

Chapter 12: Assignment Grid Note: There are no end-of-chapter activities available in General Ledger software for this chapter.

Assignment

S12-1

S12-2 S12-3 S12-4

S12-5 S12-6 S12-7

S12-8 S12-9 S12-10 S12-11

S12-12

S12-13 S12-14 S12-15

Topic(s)

L.O.

Perform horizontal analysis of revenues, expenses, and net income Perform trend analysis of sales and net income Perform vertical analysis to analyze cash Compare common-size income statements of two companies Evaluate the trend in a company’s current ratio Evaluate a company’s quick ratio Calculate and evaluate turnover and the cash conversion cycle Measure ability to pay long-term debt Measure profitability using DuPont Analysis Compute EPS and the price-earnings ratio Use ratio date to reconstruct an income statement Use ratio data to reconstruct a balance sheet Analyze a company based on its ratios Evaluate quality of earnings Evaluate quality of earnings

2

Estimated Time (minutes) 5-10

Easy X

2

5-10

Easy

3

10-15

Easy

3

10

Easy

X

X 4

5-10

Easy

4

5-10

Easy

4

15-20

Medium

X

X 4

5-10

Easy

4

10-15

Medium

4

5-10

Easy

4

10-15

Medium

4

15-20

Medium

4

15-20

Medium

1,5

10

Medium

5

5-10

Medium

12-5 .

Level of Difficulty

(Will have an X if available) Excel General Projects Ledger Templates

Assignment

Topic(s)

L.O.

E12-16A

Perform a horizontal analysis of an income statement Calculate trend percentages Perform a vertical analysis of a balance sheet Prepare a common-size income statement Calculate year-to-year changes in working capital Calculate ratios; evaluate turnover, liquidity, and current debt-paying ability Analyze a company’s ability to pay its liabilities Analyze the profitability of a company Calculate earnings per share Evaluate a stock as an investment Prepare an income statement; calculate earnings per share; evaluate quality of earnings; evaluate a company as an investment Perform a horizontal analysis of an income statement Calculate trend percentages Perform a vertical analysis of a balance sheet Prepare a common-size income statement

E12-17A E12-18A

E12-19A E12-20A

E12-21A

E12-22A

E12-23A E12-24A E12-25A E12-26A

E12-27B

E12-28B E12-29B

E12-30B

Level of Difficulty

2

Estimated Time (minutes) 10-15

2

5-10

Medium

3

10-15

Easy

3

10-15

Easy

4

5-15

Medium

4

15-25

Difficult

Easy

X 4

15-20

Medium

4

15-20

Medium

4

10

Medium

4

10-15

Medium

4,5

20-25

Medium

2

10-15

Easy

2

5-10

Medium

3

10-15

Easy

3

10-15

Easy

12-6 .

Excel Projects

General Ledger Templates

Assignment

E12-31B

E12-32B

E12-33B

E12-34B E12-35B E12-36B E12-37B

Q12-38 to Q12-55 P12-56A

P12-57A

P12-58A

P12-59A P12-60A

Topic(s)

L.O.

Calculate year-to-year changes in working capital Calculate ratios; evaluate turnover, liquidity, and current debt-paying ability Analyze a company’s ability to pay its liabilities Analyze the profitability of a company Calculate earnings per share Evaluate a stock as an investment Prepare an income statement; calculate earnings per share; evaluate quality of earnings; evaluate a company as an investment Quiz questions Calculate trend percentages, return on sales, asset turnover, and ROA, and compare with industry averages Prepare common-size statements; analyze profitability; make comparisons to the industry Calculate the effects of business transactions on selected ratios Use ratios to evaluate a stock investment Use ratios to decide between two stock investments

Level of Difficulty

4

Estimated Time (minutes) 5-15

4

15-25

Difficult

4

15-20

Medium

4

15-20

Medium

4

10

Medium

4

10-15

Medium

4,5

15-20

Medium

All

30-45

Medium

1,2,4

20-30

Difficult

1,3,4

20-30

Medium

4

30-40

Difficult

4

40-50

Difficult

4

45-60

Difficult

12-7 .

Medium

Excel Projects

General Ledger Templates

Assignment

P12-61A

P12-62B

P12-63B

P12-64B

P12-65B P12-66B

P12-67B

E12-68

E12-69

P12-70

C12-71 The Cheesecake Factory

Topic(s)

L.O.

Analyze trends; calculate and interpret ratios; evaluate earnings quality Calculate trend percentages, return on sales, asset turnover, and ROA, and compare with industry averages Prepare common-size statements; analyze profitability; make comparisons to the industry Calculate the effects of business transactions on selected ratios Use ratios to evaluate a stock investment Use ratios to decide between two stock investments Analyze trends; calculate and interpret ratios; evaluate earnings quality Use ratio data to reconstruct a company’s balance sheet Use ratio data to reconstruct a company’s income statement Use trend percentages, common-size percentages, and ratios to reconstruct financial statements Calculate and analyze ratios and earnings quality for a company in the restaurant industry

2,4,5

Estimated Time (minutes) 60-90

Excel Projects

Difficult X

1,2,4

20-30

Difficult

1,3,4

20-30

Medium

4

30-40

Difficult

4

40-50

Difficult

4

45-60

Difficult

2,4,5

60-90

Difficult

4

20-30

Difficult

4

20-30

Difficult

2,3,4

30-40

Difficult

4,5

30-40

Difficult

12-8 .

Level of Difficulty

General Ledger Templates

Assignment

C12-72 Decision Case 1 C12-73 Decision Case 2 C12-74 Ethical Issue Focus on Financials: Apple Inc.

Focus on Analysis: Under Armour, Inc. Group Project 1 Comprehensive Financial Statement Analysis Project

Topic(s)

Level of Difficulty

4,5

Estimated Time (minutes) 30

3,4

20-30

Difficult

All

20-30

Difficult

Calculate standard financial ratios; measure liquidity and profitability; analyze earnings quality; vertical and horizontal analysis Analyze trend data; calculate the standard financial ratios and use them to make decisions Analyze ratio data with benchmark company

1,2,3, 4,5

60+

Difficult

1,2,4

60+

Difficult

All

120+

Difficult

Kohl’s Corporation

All

120+

Difficult

Assess the effects of transactions on a company Identify action to cut losses and establish profitability Greensboro Golf

L.O.

12-9 .

Difficult

Excel Projects

General Ledger Templates

Answer Key to Chapter 12 Quiz (Quiz on following pages.)

1. B 2. A 3. B 4. D 5. C 6. A 7. C 8. B 9. C 10. D

12-10 .

Name____________________________________ Date_________________ Section_______________ CHAPTER 12 10-MINUTE QUIZ Circle the letter of the best response.

1.

The formula for the debt ratio is: A. Total Liabilities – Total Assets B. Total Liabilities / Total Assets C. Total Assets/ Total Liabilities D. Total Assets – Total Liabilities

3.

Which ratio is used to analyze stock as an investment?

A. Dividend yield B. Current ratio C. Times interest earned D. Inventory turnover

3.

The formula for the cash conversion cycle is: A. Days’ inventory outstanding (DIO) + Days’ sales outstanding (DSO) + Days’ payable outstanding (DPO) B. Days’ inventory outstanding (DIO) + Days’ sales outstanding (DSO) – Days’ payable outstanding (DPO) C. Days’ inventory outstanding (DIO) – Days’ sales outstanding (DSO) + Days’ payable outstanding (DPO) D. Days’ inventory outstanding (DIO) – Days’ sales outstanding (DSO) – Days’ payable outstanding (DPO)

4.

Trend percentages are: A. a form of horizontal analysis.

B. used to show a trend in a financial statement item.

C. computed by selecting a base year whose amounts are set equal to 100%.

D. All of the above

12-11 .

Shown below are the financial statements for the Beta Corporation Beta Corporation Income Statement for the year ended December 31, 20X9 and 20X8 (amounts in thousands)

20X9 20X8 $130,000 $117,000 64,000 56,000 66,000 61,000 35,000 38,800 31,000 22,200 8,000 7,200 23,000 15,000 9,050 6,240 $ 13,950 $ 8,760

Net Sales Cost of Goods Sold Gross Profit Operating Expenses Operating Income Interest Expense Income Before Income Tax Income Tax Net Income

Beta Corporation Balance Sheet December 31, 20X9 and 20X8 Assets Cash Accounts Receivable Inventory Plant Assets Less: Accumulated Depreciation Total Assets Liabilities & Stockholders' Equity Accounts Payable Notes Payable – short term Bonds Payable Common Stock Retained Earnings Total Liabilities & Stockholders' Equity

12-12 .

20X9 $18,500 10,100 15,600 39,000 (6,000) $77,200

20X8 $17,000 12,400 10,000 32,000 (5,000) $66,400

$21,900 4,400 18,000 11,600 21,300

$16,000 4,000 17,000 11,300 18,100

$77,200

$66,400

5.

Refer to Beta Corporation. What is the working capital for 20X9 and 20X8, respectively?

A. $22,300 and $23,400 B. $6,700 and $13,400 C. $17,900 and $19,400 D. $2,300 and $9,400

6.

Refer to Beta Corporation. What is the inventory turnover for 20X9?

A. 5.00 B. 4.10 C. 5.69 D. 6.00

7.

Refer to Beta Corporation. The percentage change in Notes Payable is: A. 9.09% B. 9.52% C. 10.0% D. 4.0%

8.

Refer to Beta Corporation. The debt ratio in 20X9 is: A. 51.2% B. 57.4% C. 97.4% D. 34.1%

9.

Refer to Beta Corporation. What is the days payable outstanding for 20X9?

A. 96 days B. 125 days C. 108 days D. 116 days

10.

Refer to Beta Corporation. What is the ROA for 20X9?

A. 16.8% B. 13.2% C. 18.1% D. 19.4%

12-13 .

Flipping the Classroom Guide Below you will find a suggested plan for flipping your classroom using the resources provided for Financial Accounting by Thomas, Tietz, & Harrison 12th edition.

Pre-Class Activities 1) Use the Directed Reading Worksheets (available in MyLab Accounting as assignable media) for each chapter to help guide students through reading the chapters on their own. Idea: Have students hand in the directed reading handout at the beginning of the class when the related chapter is covered.

2) Assign the Try It in Excel Exercises, Demo Docs, Real World Accounting videos and other short videos in MyLab Accounting as homework items to view (and do) before class. These short videos can be viewed by the student before class. Combined with the Directed Reading Worksheets, the student will have an overview of the chapter concepts before coming to class.

In-Class Activities 3) Use stories and discussion questions from the blog, Accounting in the Headlines, in class to discuss the material that the students read on their own. See http://accountingintheheadlines.com/ .Idea: Use Learning Catalytics questions to poll students about the blog story and/or test their understanding.

4) Use the Focus on Financials or Focus on Analysis problems from the end of chapter material in class to apply financial accounting concepts to real-life annual reports to further reinforce the material that students are studying on their own.

5) Use the Caesars Palace mini-cases in class to further apply concepts to real-life situations.

6) Work basic homework problems in class, giving students the opportunity to participate.

Post-Class Activities 7) Assign algorithmic homework exercises in MyLab Accounting to reinforce and repeat the tools you demonstrated in class.

8) Assign multiple-choice questions related to the Accounting in the Headlines stories you used in class. These multiple-choice questions can be found in the chapter “Accounting in the Headlines” in the drop-down menu when selecting questions for a quiz in MyLab Accounting.

STUDENT HANDOUT Tips on how to use the resources and online tools to get an A in this class using MyLab Accounting: 

READ the chapter. Yes, I know it’s hard, but it’s an important 30 minutes to an hour spent in learning this material.



PRACTICE homework online. Sure it makes sense when your professor goes over the assignment—they’ve been doing this for a long time. There is no substitute for doing problems/exercises. That’s how you learn accounting. And the online homework assignments are algorithmic, so they are already setup for you to practice problems until you “get it”.



WORK through the Help Me Solve This. This is step-by-step, interactive tutoring for when you get stuck on a homework problem. If you don’t understand it on the homework you won’t understand it on the exam.



STUDY in groups. Creating study groups is a great way to expand your learning. These groups will not only increase your number of resources to go to for help, but they also create a sort of accountability that will help keep you on track for success.



Learn WHY as well as HOW. Sure the “how” to do it is a big part of accounting, but if you can learn why you are doing a particular accounting task, it will be much easier to perform the task.



RELATE topics to your personal life or job. The best way to insure you understand a topic is to apply it to your life or job.



ASK questions. When online, use the “Ask my instructor” button to ask specific homework questions at the point you have them. Also, ask questions while in class. Don’t assume you are the only one who doesn’t understand. Your questions help you and other students learn.

Get Started with Pearson’s MyLab Accounting First, make sure you have these 3 things…

Email: You'll get some important emails from your instructor at this address.

Course ID: A Course ID looks something like this: professor12345 Access code or credit card: The required access code comes either with your book or by itself at your bookstore. Alternatively, you can buy instant access with a credit card or PayPal account during registration.

Next, get registered!

1. Go to www.pearsonmylabandmastering.com.

2. Under the large Register section on the right side of the page, and click the Student button.

3. Read the onscreen instructions and click OK! Register now.

4. Next, enter the Course ID for your course (listed above).

5. After this, either Create a new Pearson username and password, or, if you’ve already registered for another Pearson product (i.e. MyMathLab), Sign In with that username and password.

6. On the next page, click the Access Code button if you purchased a package with an access code from the bookstore, OR purchase instant access now by clicking on the purchase options under the Use a Credit Card or PayPal section.

7. You are now registered! Now, it’s time to sign. Go to www.pearsonmylabandmastering.com and click the Sign In button in the top right. Enter your username and password.

Need help?

Visit https://www.pearsonmylabandmastering.com/myaccountinglab/students/getregistered/ for:    

Helpful videos Frequently Asked Questions System Requirements Other helpful “getting started” info!

Or visit our 24/7 Technical Support site at https://support.pearson.com/getsupport/.

Sample Syllabus Financial Accounting, 12th Edition Thomas, Tietz, Harrison, & Horngren 2019, Pearson Education, Inc. Purpose The purpose of this sample syllabus is to provide instructors with a class-ready document in which they can enter their own course-specific information to begin a new term. The sample syllabus for the introductory financial accounting course (Appendix A) includes suggested course schedules and related assignments for a 16-week term and a 10-week term. This syllabus can be used for an online, hybrid, or in-class courses.

MyAccountingLab The course design incorporates use of Pearson’s MyAccountingLab (MAL), a course management system designed for use in introductory accounting courses with a range of features that have been created to enhance engagement and relevance. For more information about how to use MAL in your course, see MyAccountingLab Course Implementation Guide.

Course Design and Activities This sample syllabus is designed to cover all 12 chapters of the Financial Accounting, 12th edition textbook in a 10-week or 16-week schedule, but it can be modified for other time frames.

The sample syllabus on the following pages is organized to include various commonly used course activities: exams, comprehensive final exam, pre-tests, post-tests, homework assignments (exercises and/or problems), discussions, MAL study plans, and other special assignments (including the Accounting Cycle Tutorial). Course activities and their relative weights shown on the sample syllabus should be considered placeholders and can be revised and adapted to suit instructors’ individual preferences. The following descriptive overviews of each type of course activity are intended to stimulate ideas and present issues for instructor consideration. These overviews are not intended to be prescriptive for all instructors and all courses.

Exams and Compressive Final Exam (55–120 minutes) The sample syllabus includes three exams and a comprehensive final exam. There are many options for testing. Exams can be created and administered in MAL. Some instructors may prefer to create exams in MAL but administer pencil-and-paper exams in the classroom, although one advantage of administering the exam in MAL is that MAL includes item analysis that can provide detailed assessment feedback of results for individual students and for the class as a whole.

For exams, some instructors prefer to place a heavier emphasis on problems using either a comprehensive exercise or a combination of testable problems plus a few additional test bank (multiple-choice) questions. To enhance integrity of online exams that may be taken either in testing centers or in an unproctored setting, it is recommended that algorithmic “similar-to” versions of quantitative problems be assigned. For conceptual non-numerical questions, question Copyright © 2019 Pearson Education, Inc.

pooling can be enabled so that similar questions can be randomly presented to different students.

Consider presenting problems and questions to students in randomized sequence. Recommended exam characteristics are to allow partial credit on questions with multiple parts and to allow students one timed attempt of appropriate duration.

Some instructors include only multiple-choice (test bank) questions on the comprehensive final exam. It is recommended that questions be randomly sequenced and question pooling enabled so that similar questions can be randomly presented to different students. Some instructors use the comprehensive final exam as the “make-up” exam for any (but for only one) missed exam and may also allow students who did not miss any exams to drop their lowest exam score and replace it with their percentage score on the comprehensive final exam. This approach has a number of advantages, including the following: emphasizes long-term learning and retention, avoids the need to validate reasons for missing an exam, and provides equitable treatment for students who do not miss any exams.

Reading Students are expected to (1) preview and scan chapters before attempting pre-tests, (2) read chapters more closely before attempting homework assignments and post-tests, and (3) consider examples within the chapter and end-of-chapter materials, including Summary Problems, Quick Checks, and Accounting Vocabulary. This helps student’s focus attention on emphasized concepts and problem-solving examples. In addition, PowerPoint chapter summaries are provided in MAL for review. Animated lectures and professor-narrated PowerPoint summaries are pre-class learning aides available for every learning objective and will help students prepare for class. These can be used in an online or flipped classroom experience or simply to get students ready for lecture. Some instructors provide supplemental readings/notes for other special assignments.

MAL Study Plan The MAL study plan helps students practice course material and lets them test their mastery. The study plan is a flexible tool that can be used in different ways, depending on how instructors structure the course. Instructors can assign study plan work as a stand-alone assignment; they can assign a companion study plan as a prerequisite to a test or quiz to ensure student preparation; or they can make the study plan available to allow students the option to study on their own. Student results are reported in the MAL gradebook and can be monitored by the instructor. Instructors may include some type of weighted measure of study plan scores in the course grade points, and they may award bonus points for study plan completion. For example, an instructor may weight study plan as 5% of total course grade points, based on completion of perhaps nine chapters and then award 1% bonus credit for completion of three additional chapters.

Pre-tests To promote familiarity and preparation, it is recommended that the deadline for completing pretests be before the first class meeting of chapter discussion or early in the week of online chapter activity. A ready-made pre-test is provided in MAL for each chapter, although some instructors will prefer to construct their own tests. Given that the purpose of the pre-test is to promote familiarity and preparation, instructors who elect to include pre-test scores as part of the course grade will include only definitional/factual questions or very basic exercises; they may allow students to complete the pre-test a few times and record the highest score in the course grade Copyright © 2019 Pearson Education, Inc.

points. Some instructors do not include pre-test results as part of the course grade points, and some award perhaps one course grade point for pre-test completion, regardless of the score.

Post-tests A ready-made post-test is provided in MAL for each chapter, although some instructors will prefer to construct their own tests. Most instructors include post-test scores as part of their course grade points. Post-tests measure student comprehension of more complex chapter material. Some instructors allow students to repeat a post-test a few times (perhaps three times) and record the highest score as part of the course grade points. Other instructors allow students to complete the post-test an indefinite number of times and record their average score in the course grade points to encourage students to review the chapter more critically before attempting the post-test the first time.

Discussions The challenge of an online/hybrid course is to keep students engaged and connected throughout the semester. There are several strategies for accomplishing this. One strategy is to set up an online discussion board in the school’s course management system (e.g., CANVAS or Blackboard) or on a website wiki and require students to post comments to the discussion board on a weekly basis.

Instructors may post one or more questions at the beginning of each chapter’s discussion board to get the conversation started, but it is recommended that students be encouraged to post questions that they think are important to discuss.

Some instructors recommend setting a requirement that students post a specific number of times (perhaps 5–10) on a minimum number of different days (perhaps 2–4). Discussion posts can be graded based on the number of quality posts; they may discard posts that are just short acknowledgements, such as “yes” or “I agree.” Some instructors score discussions on the last one or two days of the week as a “half-discussion” because other students have little or no opportunity to respond. Other instructors offer extra credit points for additional quality posts over the required number.

For an in-class discussion, instructors can ask discussion question to the entire class or break the class up into groups. The Discussion Cases at the end of each chapter are a good starting point for discussions.

Homework Assignments Homework assignments should include only algorithmic “similar to” problems. It is recommended that students may complete these assignments an unlimited number of times. Some instructors choose to average the attempts for grading. Other instructors elect to record the highest grade because doing so may encourage students to practice the activities until they master them.

Another means of keeping students engaged and connected is to require them to use the Ask My Instructor function in MAL at least once on each chapter’s homework. This requires students to communicate directly with the instructor about homework and gets the students used to utilizing this function to assist in problem solving.

Copyright © 2019 Pearson Education, Inc.

In addition, some instructors make available to students a set of optional practice problems consisting of static (book) versions of many or all the end-of-chapter exercises and problems.

Scores for these practice problems are not recorded as part of the course grade but provide students additional study resources to promote mastery of concepts and procedures.

Special Assignments While the preceding course activities promote a consistent approach to each chapter with a repeated cycle of pre-test, homework, discussion, and post-test, the special assignments are included to foster integration of concepts across chapters and to promote development of other skills. Special assignments might include: 



Accounting Cycle Tutorial: A key element of an introductory financial accounting course is the integration of the components of the accounting cycle into a single coherent process.

The Accounting Cycle Tutorial available in MAL provides students with brief explanations of each concept of the accounting cycle through engaging videos and/or animations.

Students are immediately assessed on their understanding, and their performance is recorded in the MyAccountingLab gradebook. The Accounting Cycle Tutorial maybe used as a remediation self-study tool or as a course special assignment. Instructors typically weight this integrating project as a significant portion of the course grade, sometimes 10%– 20%. Some instructors allow two or three attempts for completion and report the average score of these attempts as course grade points.

Textbook Resources: A variety of textbook resources (at the end of each chapter) are available to enable instructors to incorporate special assignments in different ways: o Serial Case – Cheesecake Factory: At the end of each chapter, students get to apply the knowledge they have learned in the chapter for Cheesecake factory throughout the course. o Ethical Issues: These are at the end of each chapter where the students can analyze different ethical scenarios either individually or in groups. o Focus on Financials – Apple, Inc.: At the end of each chapter, the students look at the financials for Apple, Inc. to calculate and/or interpret financial information based on material studied in the chapter. o Focus on Analysis – Under Armour, Inc.: At the end of each chapter, the students look at the financials for Under Armour, Inc. to calculate and/or analyze financial information based on material studied in the chapter. o Group Projects: At the end of each chapter is case study based on material covered that is designed for students to work on in groups. o Comprehensive Financial Statement Analysis Project: At the end of chapter 12 only, is a comprehensive financial statement analysis that students can work as an individual special assignment or in a group.

Copyright © 2019 Pearson Education, Inc.

Appendix A FINANCIAL ACCOUNTING COURSE SAMPLE SYLLABUS

FINANCIAL ACCOUNTING I ACC 101, Fall 2019 Section 01 (Day[s], Time), Room # Instructor Name

Office Hours Day Times.

Day Times. and by appointment

Insert Photo Here.

Email: username@school.edu Phone: ###-###-#### Website: http://sitename.url

Prerequisites: Course ##(s) Course Description: This course is an introduction to the basic concepts and standards underlying financial accounting.

Topics to be covered include revenue recognition, receivables, inventory, long-lived assets, liabilities, and stockholders’ equity. The impact of transactions on the accounting equation and financial statements (balance sheet, income statement, and cash flows) is emphasized.

Required Resources: Financial Accounting, C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr., Charles T. Horngren, 12th Edition (Pearson 2018), ISBN ###-#-###-#####-#.

MyAccountingLab access subscription, (Note: The access subscription for MyAccountingLab (MAL) is bundled with new textbook from the bookstore). To register online, use this Course ID instructor#####, as explained in specific MAL instructions provided separately.

Grading Policy: The course grade will be determined based on the following: Course Activity Exams Comprehensive final exam Pre-tests Homework problems Post-tests Chapter discussion boards (or in-class discussions) MAL study plan Special assignments

Weight Course Grade Scale 30% 100–90%: A 20% 89–80%: B 5% 79–70%: C 10% 69–80%: D 10% below 60%: F 5% 5% 15% 100%

Studying and Reading: Learning research shows that long-term learning is most effective when learning activities are done in small segments over a period of time. The recommended study cycle Copyright © 2019 Pearson Education, Inc.

Appendix A

for each chapter is reading, pre-test, MAL study plan, homework, discussion board, related special assignments, and post-test. Students are expected to (1) preview and scan chapters before attempting pre-tests; (2) read chapters more closely while completing the MAL study plan, homework assignments, and post-tests; and (3) consider examples within each chapter and endof-chapter materials to focus attention on emphasized concepts, relationships, and problem-solving examples.

MyAccountingLab (MAL): One of the most important skills college students can develop is time management. The most common cause of failure to successfully complete this course is getting behind from lack of self-discipline or from succumbing to other competing time demands. Your primary tool for online work is MAL. There will be five listings for each chapter—pre-tests, study plan, homework, practice problems, and post-tests—and special assignment listings for some chapters. The learning pace and timing of MAL activities will help you successfully complete the course and retain the knowledge you acquire.

Pre-tests: Pre-tests will be given online through MAL. To encourage student preparation and participation in class, pre-tests must be completed BEFORE class discussion for the date shown on the course schedule. Pre-tests may be attempted two times, and the best score will be recorded.

Study Plan: This personalized study plan will be open and available for you to complete throughout the semester in MAL until the final exam, but it is recommended that you try to complete each chapter before you move on to the next chapter. The mastery points you earn will contribute to your overall grade, based on percentage of completion of your study plan.

Homework: MAL makes available assignments similar to chapter problems and allows unlimited attempts and no time limits. To promote your steady progress through the course, homework must be completed before the deadline shown on the course schedule. There are hints available to you as you work the problems, and there are also “Help me solve this” example problems. Feel free to use the discussion section for each chapter to ask questions and discuss the concepts.

Post-tests: Post-tests are available in MAL. To promote your steady progress through the course, these quizzes must be completed before midnight of the date shown on the course schedule. Each post-test may be attempted three times, and the best score will be recorded. Each attempt will contain questions that are different from previous attempts. Practice quizzes are also available in MAL; although these do not earn course points, they provide additional opportunities to develop test-taking skills and to review chapter content.

Special Assignments: Special assignments include the Accounting Cycle Tutorial (in MAL) and other activities, as assigned from the end of each chapter. This may include Ethical Issues, Focus on Financials (Apple, Inc.), Focus on Analysis (Under Armour, Inc.), Group Projects, and Comprehensive Financial Statement Analysis Project. Special assignments must be completed by the deadline shown on the course schedule. Special assignments may be submitted up to one week Copyright © 2019 Pearson Education, Inc.

Appendix A

after their due date to earn up to 50% of their point value. No special assignment will be accepted later than one week after the due date.

Exams and Comprehensive Final Exam: There will be three exams and a comprehensive final exam. No late exams will be accepted, and no make-up exams will be offered. The exams will consist of multiple-choice and problem-solving exercises/problems covering the designated chapters. The comprehensive final exam will consist of only multiple-choice questions synthesizing concepts covered throughout the course. The lowest exam score will be dropped and replaced with the percentage score for the comprehensive final exam (unless that score is lower).

The comprehensive final exam is NOT optional; it will count once for itself, and its percentage score will replace one lowest exam score.

Chapter Discussions: Post comments, questions, and responses to other student’s postings to chapter discussion boards on a weekly basis. The instructor will post one or more questions at the beginning of each chapter’s discussion board to get the conversation started, but students are encouraged to post questions that they think are important to discuss. To earn maximum discussion points, students must post at least five quality discussion comments/questions on at least two different days prior to the expiration of the discussion board.

Supplemental Resources: These include an ebook, online lectures, demonstration problems for each concept (which can be downloaded to other devices), and flash cards and games to play using these concepts. Each chapter has sample practice pre-test and sample practice post-test quizzes (MAL practice quizzes that earn NO points), which you can use to make sure you understand all the concepts from the chapter.

In summary: Assignment Pre-test Homework Post-test Study plan Special assignments Practice quizzes

Points Yes Yes Yes Yes Yes No

# of tries 2 Unlimited 3 Unlimited 1–3 Unlimited

Deadline?

Yes Yes Yes Until final exam Yes No

Copyright © 2019 Pearson Education, Inc.

Appendix A

Instructor Course Policies: **insert policy statements here** College/University Policies: **insert policy statements here**

Copyright © 2019 Pearson Education, Inc.

Appendix A FINANCIAL ACCOUNTING COURSE SCHEDULE: 16-WEEK TERM PreWeek Read Disc Homework test 1 Ch1 1 1 1-20, 61, 64, 65, 66, 67

Posttest 1

2

Ch2

2

2

2-17, 18, 58, 59, 60, 61

2

3

Ch3

3

3

3-18, 22, 58, 59, 60, 61, 62, 63, 65

3

4

Ch4

4

4

4-15, 19, 41, 42, 44

4

5

Special Assignments* (see note below)

Exam

Accounting Cycle Tutorial Accounting Cycle Tutorial Accounting Cycle Tutorial Ex1

6

Ch5

5

5

7

Ch6

6

6

8

Ch7

7

7

9

Ch8

8

8

5-15, 17, 22, 23, 55, 56, 57, 58, 59, 62 6-15, 22, 23, 24, 28, 62, 63, 64, 65, 66, 68 7-23, 24, 25, 27, 67, 69, 70, 71, 72, 73, 74, 75 8-10, 12, 15, 19, 44, 45, 46, 47

5 6 7 8

10

Ex2

11

Ch9

9

9

12

Ch10

10

10

13

Ch11

11

11

14

Ch12

12

12

9-15, 17, 19, 20, 21, 23, 51, 53, 54, 55 10-23, 24, 27, 29, 31, 76, 78, 79, 80, 82 11-15, 21, 57, 58, 61, 62, 64 12-16, 18, 20, 26, 56, 60, 61

9 10 11 12

15 16

Ex3 Final

*Serial Case (Cheesecake Factory), Ethical Issues, Focus on Financials (Apple, Inc.), Focus on Analysis (Under Armour, Inc.), Group Projects, and Comprehensive Financial Statement Analysis Project may be assigned from the end of each chapter as individual or team special assignment throughout the semester.

Copyright © 2019 Pearson Education, Inc.

Appendix A FINANCIAL ACCOUNTING COURSE SCHEDULE: 10-WEEK TERM PreWeek Read Disc Homework test 1 Ch1 1 1 1-20, 61, 64, 65, 66, 67 2-17, 18, 58, 59, 60, 61 2

Ch2, 3

2, 3

2, 3

3

Ch4, 5

4, 5

4, 5

3-18, 22, 58, 59, 60, 61, 62, 63, 65 4-15, 19, 41, 42, 44 5-15, 17, 22, 23, 55, 56, 57, 58, 59, 62

Posttest 1

Special Assignments* (see note below)

2, 3

Accounting Cycle Tutorial

4, 5

Accounting Cycle Tutorial

4

Exam

Ex1 6-15, 22, 23, 24, 28, 62, 63, 64, 65, 66, 68

5

Ch6, 7

6, 7

6, 7

6

Ch8, 9

8, 9

8, 9

7-23, 24, 25, 27, 67, 69, 70, 71, 72, 73, 74, 75 8-10, 12, 15, 19, 44, 45, 46, 47

6, 7

8, 9 9-15, 17, 19, 20, 21, 23, 51, 53, 54, 55

7

Ex2 10-23, 24, 27, 29, 31, 76, 78, 79, 80, 82

8

9

Ch10, 11

Ch12

10, 11

12

10, 11

12

10, 11 11-15, 21, 57, 58, 61, 62, 64, 12-16, 18, 20, 26, 56, 60, 61

12 Ex3, Final

10

*Serial Case (Cheesecake Factory), Ethical Issues, Focus on Financials (Apple, Inc.), Focus on Analysis (Under Armour, Inc.), Group Projects, and Comprehensive Financial Statement Analysis Project may be assigned from the end of each chapter as individual or team special assignment throughout the semester.

Copyright © 2019 Pearson Education, Inc.

Appendix A FINANCIAL ACCOUNTING COURSE SCHEDULE GRIDS

16-WEEK COURSE Week Chapter Exam Pre-test Read Homework Post-test Accounting Cycle Tutorial Chapter discussion boards MAL study plan Other special assignments*

1 1

2 2

3 3

4 4

x x x x

x x x x x x x

x x x x x x x

x x x x x x x

5

6 5

7 6

8 7

9 8

11 9

12 10

13 11

14 12

x x x x

x x x x

x x x x

x x x x

x x x x

x x x x

x x x x

x x x x

x x

x x

x x

x x

x x

x x

x x

x x

1

x x

10 2

15

16

3

Final

10-WEEK COURSE Week 1 2 3 4 5 6 7 8 9 10 Chapter 1 2, 3 4, 5 6, 7 8, 9 10, 11 12 Exam 1 2 3, F Pre-test x x x x x x x Read x x x x x x x Homework x x x x x x x Post-test x x x x x x x Accounting Cycle Tutorial x x Chapter discussion boards x x x x x x x MAL study plan x x x x x x x Other special assignments* *Serial Case (Cheesecake Factory), Ethical Issues, Focus on Financials (Apple, Inc.), Focus on Analysis (Under Armour, Inc.), Group Projects, and Comprehensive Financial Statement Analysis Project may be assigned from the end of each chapter as individual or team special assignments throughout the semester.

Copyright © 2019 Pearson Education, Inc.

Appendix B END-OF-CHAPTER RESOURCES FOR SPECIAL ASSIGNMENTS Financial Accounting

Serial Case – Cheesecake Factory Ethical Issues Focus on Financials – Apple, Inc. Focus on Analysis – Under Armour, Inc. Group Projects Comprehensive Financial Statement Analysis Project

1 2

3

4

5

6

Chapter 7 8 9

x

x

x

x

x

x

x

x

x

x

x

x

x x

x x

x x

x x

x x

x x

x x

x x

x x

x x

x x

x x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

10 11

12

x

Copyright © 2019 Pearson Education, Inc.

Appendix C MyAccountingLab Best Practices* Topic

Sample Ideas

Course management



Bookmark instructor and student help files for FAQ purposes.



Create a course for instructor use only. You can use this to make changes as you teach during the term or try out new resources or ideas you’ve gained from attending a seminar.



Consider using coordinator courses if you teach multiple sections of the same course.



Remind students of important course dates or communicate changes in course information.



Students can download the mobile app “My Dashboard” to log in and review material from their MyAccountingLab course.



You can copy/paste messages from another source such as a Word document or website.



Use media assignments to require students to use learning resources prior to beginning homework assignments.



Create personalized homework linked with practice tests to have homework assignments with fewer objectives.



Consider pooling to increase the number of variations for a quiz.



Use prerequisite settings to ensure mastery of concepts.



Use item analysis to check student understanding of questions and/or objectives.



Email students by criteria such as assignment performance using the search/email by criteria option in the gradebook tools.



Change a student’s status to inactive if he/she withdraws from the course, so that your roster remains current.



At the end of a semester, export your course data and save it for record-keeping purposes.



Add content pages that contain your syllabus, projects, or other instructor-made materials.



Modify your course menu to move frequently used tools to the top. Remove unused items to streamline your course menu.



Add discussion threads by chapter or topic to focus on strategic points.



Use Class Live to run online office hours or provide tutoring for students.

Announcements

Assignments

Gradebook and roster

MAL design

* From MyAccountingLab Implementation Guide Copyright © 2019 Pearson Education, Inc.