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Importance of Accounting, Principles and Concepts

University:

  • Unit No: N/A
  • Level: High school
  • Pages: 12 / Words 3122
  • Paper Type: Assignment
  • Course Code: N/A
  • Downloads: 752
Brief :

Topic- Accounting Skills

 project consists of

  1. Executive summary
  2. Table of content
  3. Body of project
  4. Conclusion / Recommendation
  5. References

Part A

1. Assumethatfinancial statements for PepsiCo for the years ending December 31, 2014 and 2013 has been received. Answer the following questions:
  • If you were a banker, why would you need data from the financial statement of PepsiCo’s?
  • If you were a potential capitalist in PepsiCo stock, what data you want from their financial statements?
  • If you were a labour negotiator for a union that represents a group of PepsiCo’s employees, which financial statement would provide the useful information?

2. Discuss accounting assumption principle that has been violated in each situation below:

  • Melissa is the proprietor of Missy’s Tea Shop, a sole proprietorship. She acquires a new computer for her personal usage. Melissa records computer as an asset.
  • The Candle Store is facing problems related to finance. It has no plans to liquidate but decided to utilize market value to report their assets since they plan on moving to a smaller store.
  • Henry is a new accountant for Acme Foods. He is busy and has decided that he can prepare the financial records every two years.
  • Houston Electronics acquire an office building several years ago for $500,000. The office building could be sold today for $850,000. The accountant will now show the building as an asset on the books for $850,000.
  1. measureloan requests at Eastwood National Bank. One loan request is from Surfer Dude Supplies, a small company. Richard Tracy, the CEO, is seeking $105,000 and brings you a financial statement for his first year of operations ended December 31.
  2. Dividends, are a distribution of income, not an expense. What is the difference? Why can’t the firm list them as an expenditure.
  3. Read the following case and response the questions:

Geopetro is independent oil and natural gas Company which is headquarters in San Francisco,

California. It recently received an audit opinion. The following is an extract from Geopark’s 2012 report:

The consolidated financial statements are prepared assuming that the Organization will proceed as a going concern. As determined in Note 2 to the consolidated financial statements, the Organization has obtained recurring net losses resulted in an accumulated deficit of $49.7 million as of December 31, 2012.  The Company has restricted cash and working capital to fund its coming operations. These components increase doubt about the ability of the organization to continue as a going concern. The plans regarding those matters are also represented in Note 2. The consolidated financial statements do not include any adjustments.

Required:

  • What is the aim of an auditors’ report?
  • What is a going concern? Define.
  • What are the auditors saying about these specific companies?
  • Are losses, restructuring, and the disposal of segments necessarily precursors to the demise of the company?
  1. Merck & Co. Inc., a global health care organization that produces prescription medicines, has been a defendant in a number of product liability lawsuits. In the notes to Merck’s 2012 financial statements, the firm states: “There are several different unfinished judicial proceedings regarding the Company, mainly product liability and intellectual property lawsuits. It is not practicable to anticipate the conclusion of such proceeding, either the probability of loss is remote or any possible loss related with the resolution of such proceedings is not anticipated to the Company’s financial position, effect of operations or cash flows either individually or in the multiple.”

Required:

State what Merck means by this statement.  Include what is mean by “material” and “remote.” Who is in the best place to ascertain the outcome of a lawsuit?

  • Presentedbeloware condensed information from the financial statements of Unique Factory for 2015 and  The figures are expressed in thousands. Use this data answer the questions.

Statement A

2015 

2014  

     

Total current assets

$ 82,309

$ 80,080 

Property, plant & equipment

   

(net of accumulated depreciation)

63,451

62,724 

Investments

303

1,061 

Other assets

      3,438

      2,606 

 Total assets

$149,501

$146,471 

     

Total current liabilities

$ 33,928

$ 28,668 

Long-term debt

20,491

25,676 

Deferred income taxes and contingencies

      4,174

     5,208 

 Total liabilities

$ 58,593

$ 59,552 

Total stockholders' equity

    90,908

    86,919 

 Total liabilities & stockholders' equity

$149,501

$146,471 

     

Statement B

2015

2014 

     

Net sales

$209,203

$174,206 

Cost of sales

 136,225

 114,284 

Gross profit

72,978

59,922 

Selling, general and administrative expenses

63,895

53,520 

Other income (expense)

         693

      (118)

Income (loss) before income taxes

9,776

6,284 

Income tax expense

3534

     2,388 

Net income (loss)

did

$    6,242

$   3,896 

Required: Based on the information provided, is Unique Factory considered a business or non-business entity? How do you know by analysing the financial statements?

Part B

Answer any five out of EIGHT questions.

Exercise 1

Brock Corporation’s end of year balance sheet consisted of the following amounts:

Cash

$ 25,000

Accounts receivable

$ 46,000

Property, plant & equipment

69,000

Long-term debt

41,000

Capital stock

100,000

Accounts payable

24,000

Retained earnings

?

Inventory

33,000

Required: What is Brock’s total liabilities balance at the end of the current year?

Exercise 2

Wei Company reported the following items on its financial statements for the year ending December 31, 2015: 

Sales

$ 560,000

Cost of goods sold

$400,000

Salary expense

40,000

Interest expense

30,000

Dividends

20,000

Income tax expense

25,0000

Required: What is the net income for the company? 

Exercise 3

Presented below are selected data from the accounting records for Micro’s Gift Store for 2014.

 

Net sales

$ 190,000

 

Income taxes

30,000

 

Cost of sales

80,000

 

Operating expenses

45,000

 

Dividends

12,000

Required:

  1. Calculatethenet income or loss for 
  2. Statehowthe amount from part “A” will impact the financial position of Micro’s Gift 
  3. Isthecompany profitable? Explain.

Exercise 4

Categorize the favourable items according to the financial statement on which each belongs, either the income statement (IS) or the balance sheet (BS). Also indicate whether each is a revenue (R), expense (E), asset (A), liability (L), or owners' equity (OE) item.

 

Appears on Which Statement?

Type of Account

1.

Retained earnings

 

_________________

_________________

2.

Buildings

 

_________________

_________________

3.

Common stock

 

_________________

_________________

4.

Accounts payable

 

_________________

_________________

5.

Football ticket sales

 

_________________

_________________

6.

Salaries expense

 

_________________

_________________

7.

Accounts receivable

 

_________________

_________________

 

Exercise 5

Following accounts are related to Galaxy Corporation for the year ended December 31, 2016:

Sales revenue

$165,000

Cash

$ 30,000

Accounts receivable

14,000

Selling expenses

44,000

Equipment

42,000

Common stock

41,000

Accounts payable

12,000

Interest income

3,000

Salaries and wages expense

40,000

Cost of sales

51,000

Inventories

22,000

Prepaid expenses

2,000

Income taxes payable

5,000

Income taxes expense

18,000

Notes payable

20,000

Retained earnings

?

Read the information for Galaxy Corporation. Determine the following amounts for Galaxy Corporation:

Total assets at the end of 2016

b) Total liabilities at the end of 2016                                _________________________

  1. Whatpartieshave a claim on Galaxy Corporation’ assets? Explain you answer in the terms of the accounting 

Exercise 6

Carefully look over the following financial statement from an actual company.

Bronze Corporation

Consolidated Statement of Operations

Year Ended December 31, 2012

($ millions)

Revenues:

Fare $ 21,657

Cargo    669

Other     2,499

Total operating revenues  24,825

Expenses:

Aircraft fuel 8,717

Wages, salaries and benefits  6,242

Depreciation and amortization 999

Other rentals and landing fees 2,428

Maintenance, materials and repairs 1,133

Commissions, booking feed and credit card expense  1,050

Aircraft rentals 550

Food service 535

Other operating expenses  2,744

Special charges       386

Total operating expenses 24,784

OPERATING INCOME 41

Other income (expense):

Interest income 25

Interest expense (662)

Interest capitalized 50

Miscellaneous – net           230

       (357)

Income (Loss) Before Reorganization  (316)

Reorganization Items, Net  (2,179)

Income (loss) Before Income Taxes (2,495)

Income Tax (Benefit) (569)

NET EARNINGS (LOSS) $ (1,926)

Required:

  1. Which financial statement is this? Did the title confuse you, or is it an accurate description of what follows? Do you think it is betterthan the title you are accustomed to?
  2. Does this business appear to be a retailer, a manufacturer, or a service company? How can you tell?
  3. What business do you believe they are in? Again, what tells you this?
  4. compute gross profit for this company? Why or why not?

Exercise 7

For each item given below, explain why the account requires a subsidiary ledger, and what information would be given for each entry in this subsidiary ledger.

Assets

Current assets:

Cash $   4,743

Marketable securities 774

Accounts receivable, net 3,976

Inventories 1,423

Other current assets 1,416

Total current assets 12,332

Property and equipment, net 2,698

Investments 3,144

Other 475

Total Assets $18,649

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable $ 7,075

Accrued and other 2,698

Total current liabilities 9,773

Long-term debt 1,784

Deferred revenue on warranty contracts 878

Total liabilities 12,435

Stockholders’ equity:

Common stock 2,496

Retained earnings 3,718

Total stockholders’ equity 6,214

Total Liabilities and Stockholders’ Equity $18,649

Exercise 8

Use the following transactions for ABC Company and answer the questions listed below:

  • ABCpurchasesshoes from Nike on 
  • ABCreturnsdefective shoes to Nike before payment is made to Nike for the shoes purchased in transaction 
  • ABCpaysfor the shoes purchased from 
  • ABCsellsshoes to its customers for cash and on 
  • Creditcustomersreturn shoes to ABC for a 
  • Creditcustomerspay their account balances to 

Required: For each transaction described above, describe the economic effects of the transaction on the company under a periodic inventory system.

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