Review Session 1

  1. What is supply? in balance sheet current assets
  2. No single line for total of Stockholders’ equity. There is only a “Total liability and Stockholders’ equity.
  3. No indentation for asset
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          Cash Flow Statement

Cash flows from *** activities
    1.                                      ***
    2.                                      ***
    3.                                      ***
    Net cash provided by *** activities         ***
Net increase in cash                            ***
Cash at beginning of period                     ***
cash at end of period                           ***
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  1. Long term investment: > 1 year
  2. Operating cycle: cash -> cash in producing revenue
  3. Accounting principles: relevance; faithful; comparability; consistency; verifiability; timeliness; understandability
  4. Economic entity assumption: separated from activities of a.shareholders b.other entities.
  5. Accounts payable belongs to short-term liability
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                        Balance Sheet

                            Assets
Current assets
  cash                                      ***
  Accounts receivalbe                       ***
  Prepaid insurance                         ***
Total current assets
None current assets
Property, plant, and equipement
  land                                      ***
  Buildings                                 ***
  Less: Accumulated depreciation--
        buildings                           *** *** (aseest - depreciation)
  Equipment                                 ***
  Less: Accumulated depreciation--
        equipment                           *** *** *** (here is the total none-current assets)
Intangible assets
  patent                                            ***
    Total assets                                    ***


        Liabilities and Stockholders' Equity

Current liabilities
  Account payable                           ***
  Current maturity of note payalbe          ***
  Interest payable                          ***
    Total current Liabilities                    ***
Long-term liabilities
  Note payable                                   ***
    Total Liabilities                            ***
Stockholders equity
  Common Stock                              ***
  Retained earnings                         ***
    Total Stockholders equity                    ***
Total liabilities and Stockholders equity        ***
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  1. Working capital: current assets - current liabilities Current ratio: current assets / current liabilities Earning per share = net income / wighted-average shares outstanding Debt to assets ratio = total liabilities / total assets Free cash flow = net cash - capital expenditures - dividends
  2. Solvency? see: a.free cash flow = cash provided by orperating - capital expenditures - b.debt to assets ratio Liquidity? see: a.current ratio b.working capital

Review Session 2

  1. accounting records? see if it affect the basic acounting equation
  2. What’s the increase and decrease side for each account? What is the normal balance for each account?
  3. periodicity assumption & fiscal year
  4. Revenue recognition principle: performance obligation is statisfied (rather than cash is received)
  5. Fair value <–> Book value Depreciation reflects book value by allocating the cost of an asset to expense over its life
  6. Accrual-basis statement <–> Cash-basis statement a.depriciation? b.prepaid insurance? c.accrued salaries?
  7. Deposit == prepaid
  8. Perpetual inventory system <–> Periodic system help purchase department to make decision by avoiding lost sales dut to “stock-outs” as well as carrying too much inventory on hand
  9. Income measurement process in a merchandising company: revenue - cost of good sold - operating expenses
  10. Channel stuffing: make no sense; unethical; unwanted goods will not be treated as sales in the first place customers return those goods
  11. Make estimation of the amount of returns if it is significant, os that revenues will not be overstated
  12. Reduce price to increase number of goods sold? a.consider gross profit > operating expenses b.consider competitiors when making decision; they can also cut prince
  13. Cost of good sold section
  14. Quality of earnings ratio: using aggressive accounting techniques to accelerate the recognition of net incom
  15. Freight out –> operating expenses
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                      Income statement
Sales
  revenue from Sales                        ***
  Less: return and allowance                ***
Net Sales                                   ***
Cost of goods sold                          ***
Gross profit                          ***
Operating Expenses
  Salary                          ***
  rent                            ***
  ad                              ***
  depreciation                    ***
  util                            ***
  insurance                       ***
  freight-out                     ***
    Total operating expenses                ***
Income from operations                      ***
Other revenues and gains
  Gain on disposal of plant                 ***
Other Expenses and losses
  Interest Expenses                         ***
Income before income taxes                  ***
Income tax expense                          ***
Net Income                            ***
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  1. current inventory = inventory in previous period + puchased goods - cost of goods sold
  2. FOB shipping point & FOB destination ??? how about consigned goods???
  3. why not physical flow? a.indistinguishable items b.manipulate net income through specific identification of items sold
  4. FIFO: higher profit (phantom profit) –> deplet cash quickly (more income taxes) FILO
  5. inventory too high: a.inventory outages –> losing sales opportunities / customer ill will
  6. LIFO reserve: ending inventory of (FIFO - LILO)
  7. FILO is different under perpetual system and periodic system ???
  8. Lower of cost or market

Review Session 3

  1. Cost of Goods Available for sale -> ending inventory in units -> ending inventory -> cost of goods sold
  2. Three primary factors of fraud: opportunities, Financial pressure, rationalization
  3. Sarbanes-Oxley Act
  4. Cash: cash, saving account, checking account balance
  5. Cash Management: prepare a cash budget;bill clients;establish a line of credit with bank;long-term loan
  6. return on assets = profit margin * asset turnover
  7. structure of depreciation schedule year, unit * cost/unit = annual expense, accumulated depreciation, book value
  8. callable bonds, convertible bond; secured bonds, unsecured bonds

  9. obligations of issued bond: a.interest b.payment at maturity

  10. pension – long term; unearned rent revenue – current
  11. operation leasing and unused operating line of credit
  12. contingent liability
  13. corporation: seperate legal existence; limited liability; transferable of ownership act under its own name possesses most of the privileges and is subject to the same duties and responsibilities as a natural person
  14. outstanding, issued, authorized, treasury
  15. dividend: cash, retained earning, declare

Review Session 4

  1. none cash activities a. issuance of stock for Assets b. conversion of bonds for assets c. issuance of bonds or notes for assets d. noncash exchange for PP&E
  2. bond belongs to CFI

Review Session 5

  1. discontinued operations
  2. solvency profitability liquidity
  3. higer P-E is good
  4. earnings per share is a deceptive ratio income decrease equity increase

  5. 20-year bond times interest earned;debt to assets ratio short-term loan current ratio; AR turnover common stockholder earnings per share; ROE efficient using assets Assets turnover how near to sale is the inventory Inventory turnover

  6. average: turnovers earnings per share share = common stock / par value return on equity