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ACC310 - Lecture notes 1-4

1-4 lecture notes reviewing what was taught in class.

Course

Intermediate Accounting I (ACC 310 )

3 Documents

Students shared 3 documents in this course

University

California Baptist University

Academic year: 2018/2019

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Ebony Chew

California Baptist University

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ACC 310 Intermediate Accounting I

Balance Sheet  Statement of financial position that has an organized list of assets, liabilities, and equity

Usefulness  Provides a list of assets and liabilities

Liquidity  Period of time before an asset is converted to cash or until a liability is paid

Long-term solvency  Riskiness of a company with regard to the amount of liabilities in its capital structure  Solvency provides information about financial flexibility

Book Value  ASSETS - LIABILITIES

Operating cycle  What determines current and long-term liabilities  To convert cash to raw materials  Raw materials to finished product  Finished product to receivables  Then receivables back to cash

Examples on intangible assets  Copyright  Trademark

 Patent  Deferred- taxes that have been paid that we will get back  Prepaid expenses- things we pay  Assets = Liabilities + Shareholders’ Equity  Assets; current assets, long-term,  Liabilities; current liabilities, long-term  Shareholders’ equity; paid in capital, retained earnings

ROA  Net income / Total assets  Net income is overstated if have FIFO

Inventory  Sales / Inventory

Fixed Asset Turnover  Sales / Fixed assets

Debt to Total Assets  TD / TA

Acid Test  Quick assets / Current liabilities

Debt to equity  Total liabilities / Equity

Times interest  Net income + Interest expense + Income taxes / Interest expense

Non-GAAP Earnings

 Inflows and outflows of cash related to the operations  Statement of cash flow most important  Customers from the sale of goods or services  Interest and dividends from investments

Recognition of revenue over time either:  The customer consumes the benefit of the seller’s work as it’s performed as when a company provides cleaning services to a customer for a period of time  The customer controls the asset as it’s created as when a contractor builds an extension onto a customer’s existing building  The seller is creating an asset that has no alternative use to the seller and the seller has the legal right to receive payment for progress to date as when a company manufactures customized fighter jets for the U.

Cash  Includes currency and coins  Balances in checking accounts

Cash equivalents  Include money market funds  T-bills  Credit and debit card receivables often are included in cash equivalents

Separation of duties  Critical in business

Sales returns  Sales returns are variable consideration  Sales revenue  Less; sales returns  Net sales revenue

Allowance  Can use percentage of sales receivables method  Every time you book a sale you have an allowance  Age receivables  Total receivables

A secured borrowing  Transferor (borrower) acts like it borrowed money from the transferee (lender)

A sale of receivables  Seller derecognizes (removes) the receivables from its balance sheet

Manufacturing inventories  Raw materials  Work in process inventory  Finished goods

Perpetual inventory system  Capture returns, discounts, allowances in separate accounts  Account inventory is continually adjusted for each change in inventory

Installment notes  Periodic payments are enough to pay off the note  Includes principal and interest

Effective rate  Yield on the investment  Market rate use to price the bond  Called required rate of return  Face = 10%

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