3311ch01 - Chapter 01 - Environment and Theoretical...

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Chapter 01 - Environment and Theoretical Structure of Financial Accounting Requirement 1 Pete, Pete, and Roy Operating Cash Flow Year 1 Year 2 Cash collected $160,000 $190,000 Cash disbursements: Salaries (90,000) (100,000) Utilities (30,000) (40,000) Purchase of insurance policy (60,000 ) - 0 - Net operating cash flow $(20,000 ) $ 50,000 Requirement 2 Pete, Pete, and Roy Income Statements Year 1 Year 2 Revenues $170,000 $220,000 Expenses: Salaries (90,000) (100,000) Utilities (35,000) (35,000) Insurance (20,000 ) (20,000 ) Net Income $ 25,000 $ 65,000 Requirement 3 Year 1 : Amount billed to customers $170,000 Less: Cash collected (160,000 ) Ending accounts receivable $ 10,000 Year 2: Beginning accounts receivable $ 10,000 Plus: Amounts billed to customers 220,000 $230,000 Less: Cash collected (190,000 ) Ending accounts receivable $ 40,000 1-1 Exercise 1-1
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Chapter 01 - Environment and Theoretical Structure of Financial Accounting Requirement 1 Year 2 Year 3 Revenues $350,000 $450,000 Expenses: Rent ($80,000 ÷ 2) (40,000) (40,000) Salaries (140,000) (160,000) Travel and entertainment (30,000) (40,000) Advertising (25,000 ) (20,000 ) * Net Income $115,000 $190,000 Requirement 2 Amount owed at the end of year one $ 5,000 Advertising costs incurred in year two 25,000 30,000 Amount paid in year two (15,000 ) Liability at the end of year two 15,000 Less cash paid in year three (35,000 ) Advertising expense in year three $20,000 * The FASB Accounting Standards Codification represents the single source of authoritative U.S. generally accepted accounting principles. The specific citation for each of the following items is: 1-2 Exercise 1-2 Exercise 1-4
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Chapter 01 - Environment and Theoretical Structure of Financial Accounting 1. The topic number for business combinations: FASB ASC 805: “Business Combinations.” 2. The topic number for related party disclosures: FASB ASC 850: “Related Party Disclosures.” 3. The topic, subtopic, and section number for the initial measurement of internal-use software: FASB ASC 350–40–30: “Intangibles–Goodwill and Other–Internal–Use Software–Initial Measurement.” 4. The topic, subtopic, and section number for the subsequent measurement of asset retirement obligations: FASB ASC 410–20–35: “Asset Retirement and Environmental Obligations–Asset Retirement Obligations–Subsequent Measurement.” 5. The topic, subtopic, and section number for the recognition of stock compensation: FASB ASC 718–10–25: “Compensation–Stock Compensation–Overall– Recognition.” 1. Liability 2. Distribution to owners 3. Revenue 4. Assets, liabilities and equity 5. Comprehensive income 6. Gain 7. Loss 8. Equity 9. Asset 10. Net income 11. Investment by owner 12. Expense 1-3 Exercise 1-6
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Chapter 01 - Environment and Theoretical Structure of Financial Accounting List A List B o 1. Predictive value a. Decreases in equity resulting from transfers to owners. h
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3311ch01 - Chapter 01 - Environment and Theoretical...

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