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CWRU ACCT 101 - Accounting 101

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Accounting 101common senseIncome StatementSalesSales RevenueLess: Sales returns and allowancesSales discountsNet SalesCost of Goods SoldGross ProfitOperating ExpensesSalaries and wages expenseUtilities expenseAdvertising expenseDepreciation expenseFreight-outInsurance expenseTotal operating expensesIncome from operationsOther revenues and gainsInterest RevenueGain on disposal of AssetsOther expenses and lossesInterest expenseCasualty loss from vandalismIncome before income taxesIncome tax expenseNet income$12,000 8,00064,00017,00016,0008,0007,000 2,0003,000 6001,800 200$480,000 20,000460,000316,000144,000114,00030,0003,6002,00031,60010,100$21,500Income StatementSalesCost of Goods SoldGross ProfitOperating ExpensesOther Revenue and GainsOther Expenses and LossesNet ProfitCost of Goods SoldBeginning Inventory + Cost of Goods Purchased Cost of Goods Available for Sale - Ending Inventory Cost of Goods SoldBalance SheetNAME OF COMPANYBalance SheetAs of the End of the PeriodAssetsCurrent Assets(Ex: cash, short-term investments, accounts)Long-term investments(Ex: investments in bonds, investments in stocks)Property, plant, and equipmentLandBuildings and equipmentLess: Accumulated depreciationIntangible AssetsTotal assetsBalance SheetLiabilities and Stockholder’s EquityLiabilitiesCurrent Liabilities(Ex: notes payable, accounts payable, accruals, unearned revenues, current portion of notes payable)Long- Term Liabilities(Ex: investments in bonds, investments in stocks)Total LiabilitiesStockholders’ EquityCommon StockRetained earningsTotal liabilities and stockholders’ equityRetained Earnings StatementRetained earnings, beginning of periodAdd: Net Income (or deduct net less)Deduct: DividendsRetained earnings, end of period$xxxxxxxxxxxx$xxxAdjusting EntriesExpense xxxAsset xxxUnearned Revenue xxxRevenue xxxAsset xxxRevenue xxxExpenses xxxLiabilities xxxPrepaid Expenses- paid in cash and recorded as assets before they are used or consumedUnearned Revenue- cash has been received before the goods or services are providedAccrued Revenue- revenue earned but not yet recorded as of the financial dateAccrued Expenses- expenses incurred but not yet paid or recorded as of the financial statement dateClosing the BooksTemporaryAll revenue accountsAll expense accountsDividendsPermanentAll asset accountsAll liability accountsStockholders’ equity accountsClosing the books- GEN JOURNALCLOSING ENTRIESRevenueIncome SummaryIncome SummaryExpensesIncome SummaryRetained EarningsRetained EarningsDividends10,6007,7402,86050010,6007,7402,860500Perpetual Inventory System- BuyerPurchase of merchandise on credit.Freight costs on purchases.Purchase returns and allowances.Payment on account with a discountInventory Accounts PayableInventoryCashAccounts Payable InventoryAccounts PayableCashInventory3,8001503003,5003,8001503003,43070Perpetual Inventory System- SellerSale of merchandise on credit.Freight costs on merchandise.Return of merchandise sold.Cash received on account with a discountAccounts Receivable Sales RevenueCost of Goods SoldInventoryFreight-OutCashSales Returns and AllowancesAccounts ReceivableInventoryCost of Goods SoldCashSales DiscountAccounts Receivable3,8002,4001503001403,430703,8002,4001503001403,500FIFOEnding Inventory- for 550 units soldDateJan. 1Apr. 15Aug. 24Nov. 27ExplanationBeginning InventoryPurchasePurchasePurchaseTotalUnits1002003004001,000Unit Cost$10111213Total Cost$1,0002,2003,6005,200$12,000DateNov. 27Aug. 24Units40050450Unit Cost$1312Total Cost$5,200600$5,800Cost of goods available for saleLess: Ending InventoryCost of goods sold$12,0005,800$6,200Cost of Goods SoldLIFOEnding Inventory- for 550 units soldDateJan. 1Apr. 15Aug. 24Nov. 27ExplanationBeginning InventoryPurchasePurchasePurchaseTotalUnits1002003004001,000Unit Cost$10111213Total Cost$1,0002,2003,6005,200$12,000DateJan. 1Apr. 15Aug. 24Units100200150450Unit Cost$101112Total Cost$1,0002,2001,800$5,000Cost of goods available for saleLess: Ending InventoryCost of goods sold$12,0005,000$7,000Cost of Goods SoldDirect Write-Off Method for Uncollectible Accounts [unaccepted method]Bad Debt Expense xxxAccounts Receivable xxxAllowance Method for Uncollectible AccountsBad Debt Expense xxxAllowance for Doubtful Accounts xxx-write off when collection appears unlikely, to never be collected again-Allowance for Doubtful Accounts xxxAccounts Receivable xxxRecovery for An Uncollectible AccountAccounts Receivable xxxAllowance for Doubtful Accounts xxx(To reverse the write-off of the account)Cash xxxAccounts Receivable xxx(To record collection)Computing InterestFace Value x Annual Interest x Time in Terms = Interestof Note Rate of YearNotes ReceivableRecognizing Notes ReceivableNotes Receivable 10,000Accounts Receivable 10,000Honor of Notes ReceivableCash 10,375Notes Receivable 10,000Interest Revenue 375Accrual of Interest ReceivableTo reflect interest earned, but not yet receivedInterest Receivable (10,000 x 9% x 4/12) 300Interest Revenue 300When it is receivedCash [$10,000+ (10,000 x 9% x 4/12)] 10,375Notes Receivable 10,000Interest Receivable 300Interest Revenue (10,000 x 9% x 1/12) 75Depreciation- Straight Line MethodCost - Salvage Value = Depreciable Cost Depreciable Cost . = DepreciableUseful Life (in years) ExpenseSale of Plant Assets- GAIN ON SALEDepreciation Expense 8,000Accumulated Depreciation 8,000Cash 16,000Accumulated Depreciation 49,000Equipment 60,000Gain on Disposal of Plant Assets 5,000Cost of equipmentLess: Accumulated depreciation Book value at date of disposalProceeds from saleGain on disposal of plant asset60,00049,00011,00016,0005,000Sale of Plant Assets- LOSS ON SALEDepreciation Expense 8,000Accumulated Depreciation 8,000Cash 9,000Accumulated Depreciation 49,000Loss on Disposal of Plant Assets 2,000Equipment 60,000Cost of equipmentLess: Accumulated depreciation Book value at date of disposalProceeds from saleLoss on disposal of plant asset60,00049,00011,0009,0002,000Retirement of Plant AssetsAccumulated Depreciation xxxPlant Asset xxxThe loss is equal to asset’s book valueIssuing Bonds at Face ValueA corporation issues 100, five-year, 10%, $1,000 bonds dated Jan 1, 2014 at 100 (100% of face value)Jan 1 | Cash 100,000Bonds Payable 100,000(To record sale of bonds at face value)If interest is payable annually on Jan 1, the company accrues interest of $10,000 (100,000x10%x12/12) on Dec 31Dec 31 | Interest Expense 10,000Interest Payable 10,000(To


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