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Q: Finicial Accounting ( Answered 4 out of 5 stars,   1 Comment )
Subject: Finicial Accounting
Category: Business and Money
Asked by: browngirl888-ga
List Price: $25.00
Posted: 19 Aug 2005 08:22 PDT
Expires: 18 Sep 2005 08:22 PDT
Question ID: 557687
Selected amounts at December 31, 2003 from the Hay and Barnabas
Company?s information system appear as follows:

 Cash paid employees for salaries and wages $   300,000
 Cash collected from sales customers          1,850,000
 Bonds payable                                  500,000
 Cash                                           150,000
 Common stock                                    60,000
 Equipment                                      840,000
 Prepaid insurance                               30,000
 Inventory                                      250,000
 Prepaid rent                                   140,000
 Retained earnings                              130,000
 Salaries and wages expense                     328,000
 Sales                                        2,000,000

Part A

There are five adjustments that need to be made before the financial
statements can be prepared at year end. Show the effect of each of the
following (a ? e) on the accounting equation.

The equipment (purchased on January 1, 2003) has a useful life of 12
years with no salvage value (Straight-line method is used).
Interest accrued on the bonds payable is $20,000 as of December 31, 2003. 
Unexpired insurance at December 31, 2003 is $7,000. 
The rent payment of $140,000 covered the four months from December 1,
2003 through March 31, 2004.
Salaries and wages of $28,000 were earned but unpaid at December 31, 2003. 
Part B

Indicate the proper balance sheet classification of each of the
preceding 12 financial statement items on the December 31, 2003
balance sheet. If the account title would not appear on the balance
sheet, indicate the financial statement on which it would be found.

Current assets 
Property, plant and equipment 
Current liabilities 
Long-term liabilities 
Stockholders? equity 

Subject: Re: Financial Accounting
Answered By: omnivorous-ga on 19 Aug 2005 13:11 PDT
Rated:4 out of 5 stars
Browngirl888 ?

Merrill Lynch?s venerable publication, which I?d recommend printing
out and keeping in a binder, is an excellent resource for financial
analysis and accounting:

Merrill Lynch
?How to Read a Financial Report? (undated)

A second good reference (for cash flow items) is this SBA document on
cash flow statements:

Small Business Administration Women?s Enterprise Center
?Preparing Your Cash Flow Statement? (Aug. 10, 2001)


The reductions in income are bracketed (negative) and the increases in
income (non-bracketed) are positive.

a.  Depreciation and Amortization: ($70,000) 

This takes the equipment over 12 years, straight-line.

b.  Interest expense: ($20,000)

c,  Prepaid expenses: $7,000

d.  Prepaid expenses: $105,000 

January, February, March or 75% of $140,000

e.  Salaries payable: ($28,000)


Cash paid employees ? actually used on the Consolidated Income
Statement either as Cost of Goods Sold or SG&A
Cash collected ? again on the Consolidated Income Statement, though
here you have to net out Accounts Payable/Accounts Receivable changes
Bonds payable ? Long-term liabilities
Cash ? Assets (the most important of your Current Assets)
Common stock ? Stockholders? Equity
Equipment ? Fixed Assets
Prepaid insurance ? Prepaid Expenses (under Current Assets)
Inventory ? Inventories (under Current Assets)
Prepaid rent ? Prepaid Expenses (under Current Assets)
Retained earnings ? gets added to ?Accumulated Retained Earnings? in
Stockholders? Equity.  This will also appear in an ?Accumulated
Retained Earnings Statement? that shows the changes for the 2003
Fiscal Year.
Salaries and wages ? as with ?Cash paid employees? this is on the
Consolidated Income Statement either as Cost of Goods Sold or SG&A
Sales ? the first item on your Consolidated Income Statement

Google search strategy:
?How to Read a Financial Report? Merrill Lynch

Hopefully this is clear in its explanation of Balance Sheet and Income
Statement items but if any part of it is unclear, don?t hesitate to
use the Clarification Request.

Best regards,

browngirl888-ga rated this answer:4 out of 5 stars
good response and thanks for the  additional web site address. I hope
that you will answer the other question that I have posted.

Subject: Re: Finicial Accounting
From: myoarin-ga on 20 Aug 2005 14:14 PDT
A spelling error in each bit typed by the questioner ... ?!

I'm not sure she can judge if the answer was good  - but I think so.

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