ACCT101-Handout01

ACCT101-Handout01 - Fall 08 Acct 101 L12, L13, L16 Handout...

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Unformatted text preview: Fall 08 Acct 101 L12, L13, L16 Handout #01 1 Financial Statements and Business Decisions ! Note: For the following lectures, please download the handouts from LMES. ! Accounting identifies, reports, and communicates • Relevant • Reliable • Comparable Information to users. ! Who are the users of accounting information? ! Type of Business Organization • Sole proprietorship: Owned by one owner. • Partnership: Owned by at least two owners called partners. • Corporation: Separate entity separate legal status, business chartered, incorporated under laws, owned by shareholders. Type of Business Organization Characteristic Sole Proprietorship Partnership Corporation Limited liability Unlimited liability Owners are shareholders Owners are partners Business entity Legal entity Business taxed Unlimited life ! Balance Sheet ASSETS = LIABILITIES + STOCKHOLDER&S EQUITY ! Income Statement / Statement of Earnings REVENUES ¡ EXPENSES = NET INCOME ! Statement of Retained Earnings Beginning R/E + NET INCOME ¡ DIVIDENDS = Ending R/E ! Statement of Cash Flows Beginning CASH + CHANGE IN CASH = Ending CASH Fall 08 Acct 101 L12, L13, L16 Handout #01 2 Source: Financial Accounting, Libby/Libby/Short, Mcgraw-Hill Companies, Inc. MAXIDRIVE CORP. Income Statement For the Year Ended December 31, 2006 (in thousands of dollars) Revenues Sales revenue 37,436 $ Expenses Cost of goods sold 26,980 $ Selling, general and administrative 3,624 Research and development 1,982 Interest expense 450 Total expenses 33,036 Pretax income 4,400 $ Income tax expense 1,100 Net income 3,300 $ MAXIDRIVE CORP. Statement of Retained Earnings For the Year Ended December 31, 2006 (in thousands of dollars) Retained earnings, January 1, 2006 6,805 $ Net income for 2006 3,300 Dividends for 2006 (1,000) Retained earnings, December 31, 2006 9,105 $ MAXIDRIVE CORP. Balance Sheet At December 31, 2006 (in thousands of dollars) Assets Cash 4,895 $ Accounts receivable 5,714 Inventories 8,517 Plant and equipment 7,154 Land 981 Total assets 27,261 $ Liabilities and Stockholders’ Equity Liabilities Accounts payable 7,156 $ Notes payable 9,000 Total liabilities 16,156 $ Stockholders’ Equity Contributed capital 2,000 $ Retained earnings 9,105 Total stockholders’ equity 11,105 Total liabilities and stockholders’ equity 27,261 $ MAXIDRIVE CORP. Statement of Cash Flows For the Year Ended December 31, 2006 (in thousands of dollars) Cash flows from operating activities: Cash collected from customers 33,563 $ Cash paid to suppliers and employees (30,854) Cash paid for interest (450) Cash paid for taxes (1,190) Net cash flow from operating activities 1,069 $ Cash flow from investing activities: Cash paid to purchase equipment (1,625) $ Net cash flow from investing activities (1,625) Cash flow from financing activities: Cash received from bank loan 1,400 $ Cash paid for dividends (1,000) Net cash flow from financing activities 400 Net decrease in cash during the year (156) $ Cash at beginning of the year 5,051 Cash at end of the year 4,895 $ Fall 08 Acct 101 L12, L13, L16...
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This note was uploaded on 12/07/2009 for the course ACCT ACCT 101 taught by Professor H during the Fall '08 term at HKUST.

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ACCT101-Handout01 - Fall 08 Acct 101 L12, L13, L16 Handout...

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