Category: Business and Money
Asked by: browngirl888-ga
List Price: $25.00
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 I NEED THIS NO LATER THAN AUGUSRT 23, 2005. THANKS
Re: Financial Accounting
Answered By: omnivorous-ga on 19 Aug 2005 13:11 PDT
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) http://philanthropy.ml.com/ipo/resources/pdf/howtoreadfinreport.pdf 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) http://www.onlinewbc.gov/docs/finance/cashflowex.html PART A ======= 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) PART B ======== 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, Omnivorous-GA
rated this answer:
good response and thanks for the additional web site address. I hope that you will answer the other question that I have posted.
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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