ACCT 2121 Review Session - UCAE
Transcript of ACCT 2121 Review Session - UCAE
ACCT 2121 Review Session Kevin Zuniga
12/16/20
Accounting Basics
Accounting Basics ● Accounting Equation → A = L + E
● Asset = Debit Credit
● Liability = Debit Credit
● Equity = Debit Credit
● Expense = Debit Credit
● Revenue = Debit Credit
Expense and Revenue accounts are separate accounts
Accounting Basics Cont. ● Normal Balance for each type of account:
○ Asset → Debit Balance
○ Liability → Credit Balance
○ Equity → Credit Balance
○ Expense → Debit Balance
○ Revenue → Credit Balance
Whatever increases the account will be the normal balance
Journal Entries Examples
Received $1,700 from a customer who was on account as owing us money
Journal Entries Examples
Received $1,700 from a customer who was on account as owing us money
Account Debit Credits
Cash 1,700
Accounts Receivable 1,700
Journal Entries Examples
Paid one of our vendors $1,000 cash for a balance on account.
Account Debit Credits
Accounts Payable 1,000
Cash 1,000
Journal Entries Examples
Paid one of our vendors $1,000 cash for a balance on account.
Chapter 11
Chapter 11 Concepts
● If stock has a Par value: there is going to be APIC (Additional Paid In Capital)
● If stock doesn’t have a Par value: no APIC (Additional Paid In Capital)
● Treasury Stock: it is a contra-equity account
○ It will have a normal debit balance
Chapter 11 Concepts Cont.
● How to calculate cash received from issuing stock:○ # of Stocks Issued x Issue Price of Stock
● How to calculate Common/Preferred stock:○ # of Stocks Issued x Par Value of Stock
○ Par Value for Stocks and Bonds are 2 different things
● Additional Paid-In Capital (APIC)○ The difference between Cash Received and Total Par Value of the Stock
○ You use the two calculations above, then take the difference
Stocks Example Kevin Company had the following transactions.1. Issued 3,500 shares of $100 par preferred stock at $109 for cash.
Stocks Example Kevin Company had the following transactions.1. Issued 3,500 shares of $100 par preferred stock at $109 for cash.
Accounts Debit Credit
Cash 381,500
Preferred Stock 350,000
APIC-PS 31,500
Stocks Example Kevin Company had the following transactions.1. Issued 3,500 shares of $100 par preferred stock at $109 for cash.2. Issued 7,000 share of common stock with a par value of $15 for $110,000.
Stocks Example Kevin Company had the following transactions.1. Issued 3,500 shares of $100 par preferred stock at $109 for cash.2. Issued 7,000 share of common stock with a par value of $15 for $110,000.
Accounts Debit Credit
Cash 110,000
Common Stock 105,000
APIC-CS 5,000
Stocks Example Kevin Company had the following transactions.1. Issued 3,500 shares of $100 par preferred stock at $109 for cash.2. Issued 7,000 share of common stock with a par value of $15 for $110,000.3. Purchased 550 shares of treasury common stock for $13,000.Prepare the journal entries for the above stock transactions.
Stocks Example Kevin Company had the following transactions.1. Issued 3,500 shares of $100 par preferred stock at $109 for cash.2. Issued 7,000 share of common stock with a par value of $15 for $110,000.3. Purchased 550 shares of treasury common stock for $13,000.Prepare the journal entries for the above stock transactions.
Accounts Debit Credit
Treasury Stock 13,000
Cash 13,000
Dividends Concepts
● There are 3 dates for Dividend problems:
1. Date of Declaration
2. Date of Record
3. Date of Payment
● There is no journal entry for Date of record
○ You have to do a journal entry when a economic event as occurred
○ Nothing happens on the Date of Record
Dividends Example49er Corporation has 1,000,000 authorized shares of $20 par value common stock. As of June 30, 2020, there were 700,000 shares issued and outstanding. On June 30, 2020, the board of directors declared a $0.40 per share cash dividend to be paid on August 1, 2020, to stockholders of record on July 15, 2020. Prepare all necessary entries related to the dividends.
6/30/20
Dividends Example49er Corporation has 1,000,000 authorized shares of $20 par value common stock. As of June 30, 2020, there were 700,000 shares issued and outstanding. On June 30, 2020, the board of directors declared a $0.40 per share cash dividend to be paid on August 1, 2020, to stockholders of record on July 15, 2020. Prepare all necessary entries related to the dividends.
6/30/20
Accounts Debit Credit
Dividends 280,000
Dividends Payable 280,000
Dividends Example49er Corporation has 1,000,000 authorized shares of $20 par value common stock. As of June 30, 2020, there were 700,000 shares issued and outstanding. On June 30, 2020, the board of directors declared a $0.40 per share cash dividend to be paid on August 1, 2020, to stockholders of record on July 15, 2020. Prepare all necessary entries related to the dividends.
7/15/20
Dividends Example49er Corporation has 1,000,000 authorized shares of $20 par value common stock. As of June 30, 2020, there were 700,000 shares issued and outstanding. On June 30, 2020, the board of directors declared a $0.40 per share cash dividend to be paid on August 1, 2020, to stockholders of record on July 15, 2020. Prepare all necessary entries related to the dividends.
7/15/20
Accounts Debit Credit
N/A
N/A
Dividends Example49er Corporation has 1,000,000 authorized shares of $20 par value common stock. As of June 30, 2020, there were 700,000 shares issued and outstanding. On June 30, 2020, the board of directors declared a $0.40 per share cash dividend to be paid on August 1, 2020, to stockholders of record on July 15, 2020. Prepare all necessary entries related to the dividends.
8/1/20
Dividends Example49er Corporation has 1,000,000 authorized shares of $20 par value common stock. As of June 30, 2020, there were 700,000 shares issued and outstanding. On June 30, 2020, the board of directors declared a $0.40 per share cash dividend to be paid on August 1, 2020, to stockholders of record on July 15, 2020. Prepare all necessary entries related to the dividends.
8/1/20
Accounts Debit Credit
Dividends Payable 280,000
Cash 280,000
Practice Time
Practice
Number of Shares Issued?
The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500
Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200
Practice
Number of Shares Issued?
The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500
Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200
464,357 Shares($3,250,00/$7) (Total Value of CS/ Par Value)
Practice
Number of Shares Common Stock Outstanding?
The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500
Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200
Practice
Number of Shares Common Stock Outstanding?
The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500
Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200
434,357 Shares(464,357-30,000) (Total CS Issued- Treasury Stock)
Practice
Total Sales Price of the Common Stock when Issued?
The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500
Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200
Practice
Total Sales Price of the Common Stock when Issued?
The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500
Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200
$3,800,500
Practice
How much, on average, did the treasury stock cost per share?
The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500
Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200
Practice
How much, on average, did the treasury stock cost per share?
The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500
Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200
$10 per Share(300,000/ 30,000) (Total Value of TS/ Treasury Stock shares)
Practice
Average issue price of Common Stock?
The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500
Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200
Practice
Average issue price of Common Stock?
The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500
Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200
$8.18(3,800,500/464,357) (Total PIC/ Shares Issued)
Practice
On November 1, Karen declares and distributes a 20% stock dividend when the market value of the stock is $17 per share.
On November 1, 2021, Karen Corporation’s stockholders’ equity section is as follows:
Common stock, $16 par value, 50,000 shares issued $800,000 Paid-in capital in excess of par value 125,000Retained earnings 364,250Total stockholders’ equity $1,289,250
STEP 1: Get # of new shares issued
Practice
On November 1, Karen declares and distributes a 20% stock dividend when the market value of the stock is $17 per share.
On November 1, 2021, Karen Corporation’s stockholders’ equity section is as follows:
Common stock, $16 par value, 50,000 shares issued $800,000 Paid-in capital in excess of par value 125,000Retained earnings 364,250Total stockholders’ equity $1,289,250
STEP 1: Get # of new shares issued
10,000 new shares issued
(50,000 * .20)
Practice
On November 1, Karen declares and distributes a 20% stock dividend when the market value of the stock is $17 per share.
On November 1, 2021, Karen Corporation’s stockholders’ equity section is as follows:
Common stock, $16 par value, 50,000 shares issued $800,000 Paid-in capital in excess of par value 125,000Retained earnings 364,250Total stockholders’ equity $1,289,250
STEP 2: Get Value of New Shares Issued
Practice
On November 1, Karen declares and distributes a 20% stock dividend when the market value of the stock is $17 per share.
On November 1, 2021, Karen Corporation’s stockholders’ equity section is as follows:
Common stock, $16 par value, 50,000 shares issued $800,000 Paid-in capital in excess of par value 125,000Retained earnings 364,250Total stockholders’ equity $1,289,250
STEP 2: Get Value of New Shares Issued
$160,000
(10,000 * $16 par)
Practice
On November 1, Karen declares and distributes a 20% stock dividend when the market value of the stock is $17 per share.
On November 1, 2021, Karen Corporation’s stockholders’ equity section is as follows:
Common stock, $16 par value, 50,000 shares issued $800,000 Paid-in capital in excess of par value 125,000Retained earnings 364,250Total stockholders’ equity $1,289,250
STEP 3: Create Journal Entries
Practice
On November 1, Karen declares and distributes a 20% stock dividend when the market value of the stock is $17 per share.
On November 1, 2021, Karen Corporation’s stockholders’ equity section is as follows:
Common stock, $16 par value, 50,000 shares issued $800,000 Paid-in capital in excess of par value 125,000Retained earnings 364,250Total stockholders’ equity $1,289,250
STEP 3: Create Journal Entries
Dr Stock Dividend 170,000Cr CS Dividend Distributable 160,000Cr PIC- CS 10,000
Dr CS Dividend Distributable 160,000Cr Common Stock 160,000
Practice
Round Corporation has been authorized to issue 30,000 shares of $101 par value, 5%, cumulative preferred stock and 1,000,000 shares of $6 par common stock. On February 3, 2021, the company declared a $270,000 cash dividend. There are 4 years of dividends in arrears.
At December 31, 2020, the ledger contained the following balances pertaining to stockholders’ equity:
Preferred Stock $550,000 Paid-in Capital in Excess of Par Value—Preferred Stock 80,000Common Stock 2,400,000Paid-in Capital in Excess of Par Value—Common Stock 6,600,000Retained Earnings 3,630,000
Preferred:
Common:
Practice
Round Corporation has been authorized to issue 30,000 shares of $101 par value, 5%, cumulative preferred stock and 1,000,000 shares of $6 par common stock. On February 3, 2021, the company declared a $270,000 cash dividend. There are 4 years of dividends in arrears.
At December 31, 2020, the ledger contained the following balances pertaining to stockholders’ equity:
Preferred Stock $550,000 Paid-in Capital in Excess of Par Value—Preferred Stock 80,000Common Stock 2,400,000Paid-in Capital in Excess of Par Value—Common Stock 6,600,000Retained Earnings 3,630,000
Preferred: $137,500
Common: $132,500
(550,000 * .05 * 5 years)
(270,000 – 137,500)
Practice
Round Corporation has been authorized to issue 30,000 shares of $101 par value, 5%, non-cumulative preferred stock and 1,000,000 shares of $6 par common stock. On February 3, 2021, the company declared a $270,000 cash dividend. There are 4 years of dividends in arrears.
At December 31, 2020, the ledger contained the following balances pertaining to stockholders’ equity:
Preferred Stock $550,000 Paid-in Capital in Excess of Par Value—Preferred Stock 80,000Common Stock 2,400,000Paid-in Capital in Excess of Par Value—Common Stock 6,600,000Retained Earnings 3,630,000
Preferred:
Common:
Practice
Round Corporation has been authorized to issue 30,000 shares of $101 par value, 5%, non-cumulative preferred stock and 1,000,000 shares of $6 par common stock. On February 3, 2021, the company declared a $270,000 cash dividend. There are 4 years of dividends in arrears.
At December 31, 2020, the ledger contained the following balances pertaining to stockholders’ equity:
Preferred Stock $550,000 Paid-in Capital in Excess of Par Value—Preferred Stock 80,000Common Stock 2,400,000Paid-in Capital in Excess of Par Value—Common Stock 6,600,000Retained Earnings 3,630,000
Preferred: $27,500
Common: $242,500
(550,000 * .05)
(270,000 – 27,500)
Operating, Investing, Financing Activity?
Operating, Investing, or Financing Activity?
Cash?
Operating, Investing, or Financing Activity?
Cash?
Operating!
Operating, Investing, or Financing Activity?
Land?
Operating, Investing, or Financing Activity?
Land?
Investing!
Operating, Investing, or Financing Activity?
PP&E?
Operating, Investing, or Financing Activity?
PP&E?
Investing!
Operating, Investing, or Financing Activity?
Prepaid Insurance?
Operating, Investing, or Financing Activity?
Prepaid Insurance?
Operating!
Operating, Investing, or Financing Activity?
Common Stock?
Operating, Investing, or Financing Activity?
Common Stock?
Financing!
Operating, Investing, or Financing Activity?
Short-Term Notes Payable?
Operating, Investing, or Financing Activity?
Short-Term Notes Payable?
Operating!
Multiple Choice Questions
1. Which of the following statements regarding financing activities is NOT true?
A. Cash dividends paid to a company's stockholders are reported as cash outflows from financing activities. B. When a company issues stock for cash, it reports a cash inflow from financing activities. C. When a company repurchases stock with cash, it reports a cash outflow for financing activities. D. When a company repays a loan, it reports a cash outflow from investing activities.
Multiple Choice Questions
1. Which of the following statements regarding financing activities is NOT true?
A. Cash dividends paid to a company's stockholders are reported as cash outflows from financing activities. B. When a company issues stock for cash, it reports a cash inflow from financing activities. C. When a company repurchases stock with cash, it reports a cash outflow for financing activities. D. When a company repays a loan, it reports a cash outflow from investing activities.
Multiple Choice Questions
2. Which of the following would be included in cash flows from operating activities?
A. Cash proceeds from sales. B. Cash received from an issuance of bonds. C. Dividends paid to stockholders. D. Cash used for purchases of equipment.
Multiple Choice Questions
2. Which of the following would be included in cash flows from operating activities?
A. Cash proceeds from sales. B. Cash received from an issuance of bonds. C. Dividends paid to stockholders. D. Cash used for purchases of equipment.
Multiple Choice Questions
The company would report a net cash inflow from operating activities of:A. $17,500B. $18,500C. $21,500D. $23,300
Multiple Choice Questions
The company would report a net cash inflow from operating activities of:A. $17,500B. $18,500C. $21,500D. $23,300
(20,000 + 3000 – 1000 + 400 + 900)
Last Thoughts
How I Would Study for the Exam
1. Look at PowerPoints and notes a. Focus on the important topics for each chapter
2. Do practice problems and journal entries a. Then, redo those practice problems and journal entries
b. Keep redoing them until you are comfortable with the problem/journal
3. Study with materials that you are going to use on the exam
Any Questions?