Chapter 3 the balance sheet and the statement of changes in stockholder’
equity
1. three major financial statements and their functions p39
2.three-stage process for Balance Sheet
2.1 recognition p 41 (whether or not record and report)
2.1.1 judge the recognition standards through the definition of elements : asset, liability, stockholders’ equity p42-43
2.2 measurement p43 (how much to record) exhibit3-2
★
2.2.1 historical cost
2.2.2 current cost ( current replacement cost) 2.2.3 current market value
2.2.4 net realizable value 2.2.5 present value
Eg. Raw materials bought on May 5 for $100
If I need to buy the ‘same’ stock of raw materials I should pay for $120 on Dec. 31
If I sell this ‘same’ stock of raw materials I will get 115 on Dec. 31
Raw materials-goods in process-(+30) product-sales revenue (target contract price 200)
Chapter 6 cash and receivables
Chapter 7/8 inventories
Chapter 9 property plant and equipment Chapter 10 depreciation and depletion
Chapter 11 intangibles
Chapter 12 current liabilities and
contingencies
Chapter 13 long-term liabilities
ASSET
★
LIABILITY★
EQUITY
ASSET=LIABLITY+EQUITY
Chapter 15 contributed capital
Chapter 14 investments
Chapter 3 the balance sheet ★
Full Picture for Intermediate Accounting (I)
Current
No-Cu rrent
Current
No-Current
Present value takes the time value of money into consideration 2.3 reporting classification (fill in the BS) exhibit3-4
★
3. exercises requirment
E3-4,E3-5,E3-8,E3-9,P3-10
4.excercise answer example
E3-1P59 Current assets
Answer E3-1
JENKINS COMPANY
Current Asset Section of Balance Sheet
December 31, 2004
Chapter 6 cash and receivables
1. cash and cash equivalents p170
2. bank reconciliation p172
2.1 causes of the difference
2.1.1 outstanding checks
2.1.2 deposits in transit
2.1.3 charges made directly by the bank
2.1.4 deposits made directly by the bank
2.1.5 errors
2.2 procedures for preparing a bank reconciliation
2.3 illustration ★
3. receivables p176
3.1 trade receivables
3.2 nontrade receivables
4. accounts receivable p178★★
4.1 cash (sales) discount ★
4.1.1 gross method
4.1.2 net method
4.1.3 illustration 6-2
4.2 sales returns and allowances
4.3 uncollectible accounts for accounts receivable p181 ★
4.3.1 estimated bad debts method
4.3.1.1 Percentage of sales (net credit sales)
4.3.1.2 Percentage of outstanding accounts receivable
4.3.1.3 Aging of accounts receivable
4.3.2 Writing off uncollectible accounts
4.3.3 Collection of an account previously written off
4.4 generating immediate cash from accounts receivable★
4.4.1 pledging
4.4.2 assigning
4.4.3 factoring
5. Notes receivable p189 ★★
5.1 shot-term interest-bearing notes receivable
5.2 short-term non-interest-bearing notes receivable
5.3 notes receivable discounted ★
6.
exercises requirment p196 E6-2, E6-6,E6-10,E6-11,E6-15,E6-23Chapter 7 inventories: cost measurement and flow
assumptions
1. Classifications of inventory p211
1.1 merchandising company –merchandise inventory
1.2 manufacturing company –raw materials, goods in process, finished goods 2. flow of inventory costs ★ (exhibit 7-1)p212
3. Alternative inventory systems p213 3.1 perpetual inventory system 3.2 periodic inventory system
3.3 difference between these two systems 4. Items included in inventory p214
5. Inventory costs p215
5.1 manufacturing overhead costs
5.2 purchases discounts ★ p217 (exhibit 7-2) 5.2.1 gross price method
5.2.1 net price method
6. cost flow assumptions p217 ★★ (exhibit 7-4) 6.1 specific identification
6.2 FIFO★
6.3 weighted average cost flow★
6.3.1 weighted average method (usually for periodic inventory system) 6.3.1 moving average method (more reasonable for perpetual inventory system) 7 exercises requirment p235
E7-1, E7-2, E7-3,E7-5,E7-7(FIFO,Average),E7-8(FIFO,Average)
Chapter 8 inventory: special valuation issues
1. Lower of cost or market (LCM) ★P242 1.1 selects the market value
1.1.1 Ceiling 1.1.2 Floor
1.1.3 Current replacement cost
1.2 comparisons of market value to cost 1.3 reports the result (allowance method) 1.3.1 BS
1.3.2 IS
1.4 exhibit 8-1, exhibit8-3 2. exercises requirment
E8-1,E8-3 P264
Chapter 9 property, plant, and equipment: acquisition and
disposal p272
1. Acquisition of property, plant, and equipment p273★
1.1 lump-sum purchase 1.2 deferred payments 1.3 donations
1.4 exchange of other asset ★
1.4.1 Exchanges of dissimilar productive assets 1.4.2 Exchanges of similar productive assets 1.5 self-construction ★
1.5.1 Interest during construction 1.5.2 Fixed overhead costs
Market Value
2. Costs subsequent to acquisition p286 2.1 improvements and replacements 2.2 repairs and maintenance 3. Disposal of PPE p288
4. exercises requirment p295
E9-3,E9-4,E9-7,E9-8,E9-11,E9-12,E9-14,E9-16
Chapter 10 Property, plant, and equipment: usage
period-depreciation and depletion p305
1. factors involved in depreciation p305 1.1 asset cost
1.2 service life 1.3 residual value
2. methods of cost allocation p306★
2.1 activity methods 2.2 time-based methods 2.2.1 straight line 2.2.2 accelerated
2.2.2.1 sum of the years’ digits 2.2.2.2 declining balance
3. impairment of noncurrent assets p316 4.depletion p319
5. exercises requirment p324 E10-2,E10-6,E10-12
Chapter 11 intangibles p336
1.accounting for intangibles p336 ★ 1.1 cost of intangible
1.2 amortization or impairment of intangible assets 1.3 research and development costs
2.classification of intangibles p340 2.1 identifiable intangible asset 2.1.1 patents
2.1.2 copyrights 2.1.3 franchises
2.1.4 computer software costs
2.1.5 leases and leasehold improvement
2.1.6 trademarks and trade names 2.1.7 deferred charges
2.1.8 organization costs 2.2 unidentifiable intangibles 2.2.1 internally developed goodwill 2.2.2 purchased goodwill
3. exercises requirment p352 E11-5, E11-9
Chapter 12 current liabilities and contingencies p364
1. notes payable p367★
2. sales and use taxes p371 3.income taxes payable p373
4.warranty obligations p375★
4.1 expense warranty accrual method 4.2 sales warranty accrual method
5.contingencies p378
5.1 accrual of loss contingencies
5.2 disclosure of loss contingencies in notes to the financial statements
6. exercises requirment p386 E12-3,E12-4,E12-6,E12-10,E12-11
