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Learning Module #1 That was talking, this is doing.
Doing is different than talking.
Curly Sue
What this course is and what it isn’t
The Plan
The website
Where are you now?
From the following information for Laurel, Inc., prepare the financial statements for the year ending December 31, 2015.
Cash / 58,000Accounts Receivable / 15,000
Inventory / 80,000
Building / 200,000
Equipment / 100,000
Accumulated Depreciation / 20,000
Security Deposit / 3,000
Accounts Payable / 12,000
Salaries Payable / 4,000
Taxes Payable / 6,000
Note Payable, Long-Term / 40,000
Common Stock 5,000
Paid In Capital- Ex Par 45,000
Retained Earnings 334,000
Treasury Stock 10,000
Sales 410,000
Cost of Goods Sold 200,000
Salary Expense 50,000
Rent Expense 36,000
Depreciation Expense 10,000
Office Expense 10,000
Interest Revenue 1,000
Interest Expense 5,000
Income Tax Expense 30,000
Laurel, Inc. declared and paid a $5,000 dividend in 2015. The beginning Common Stock was $50,000 and beginning Retained Earnings was $259,000. Prepare a Trial Balance, Income Statement, Balance Sheet and Statement of Owners’ Equity for Laurel.
From the following for 2015 for CoJo, Inc. prepare an Income Statement and a Balance Sheet. assume a December 31 year end.
Accounts Payable / 200,000Accounts Receivable / 120,000
Accumulated Depreciation / 56,000
Administrative Expenses / 58,000
Advertising Expense / 20,000
Building / 300,000
Capital in Excess of Par / 288,000
Cash / 98,000
Common Stock ($1 Par) / 12,000
Cost of Goods Sold / 500,000
Depreciation Expense / 32,000
Equipment / 140,000
Gain on sale of equipment / 6,000
Interest Expense / 10,000
Inventory / 180,000
Notes Payable, Long-Term / 100,000
Patent / 50,000
Rent Expense / 36,000
Retained Earnings / 143,000
Sales / 900,000
Sales Returns and Allowances / 4,000
Salaries Payable / 60,000
Salary Expense / 120,000
Tax Expense / 29,000
Taxes Payable / 29,000
Calculating the Earnings Per Share
There are two levels of EPS
B______
D______
Cash Flows
From the following information for Molly’s Munchies, prepare a Statement of Cash Flows for the year ended December 31, 2014 using the indirect method.
The following data is for Fred’s Follies:
Balance Balance
12/31/15 12/31/14
Cash80,00020,000
Accounts Receivable68,00035,000
Inventory70,00090,000
Prepaid Insurance 500 3,000 Equipment 340,000 270,000
Accumulated Depreciation80,00020,000
Land 120,000
Security Deposits12,00010,000
Accounts Payable35,000 30,000
Wages Payable 6,000 10,000
Rent Payable 7,500 6,000
Interest Payable 6,000 7,000
Taxes Payable 16,000 5,000
Note Payable 120,000 140,000
Common Stock ($1 each) 300,000 160,000
Retained Earnings 120,000 50,000
Sales 1,200,000
Cost of Goods Sold 575,000
Wage Expense 260,000
Rent Expense 24,000
Office Expenses 70,000
Depreciation Expense60,000
Advertising Expense15,000
Insurance Expense 9,000
Interest Expense14,000
Income Tax Expense 52,000
Some of the equipment was acquired on March 31, 2015 by exchanging 60,000 shares of common stock worth $60,000. The additional common stock (other than that issued for the purchase of the equipment) was sold on June 30, 2015 for $1 per share. The company did not sell any equipment during the year. All the rest of the equipment and the land purchased during the year was purchased for cash. The retained earnings balance for both years is after all closing entries have been made. The Note Payable requires payments of $20,000 principal plus interest at 10% on June 30th of each year.
Now you do one - Not dying is not the same as living.
The following balances are for Misty Company at December 31,
2014 2015
Cash 10,000 30,000
Accounts Receivable 40,000 50,000
Inventory 80,000 60,000
Prepaid Rent 6,000 3,000
Equipment 180,000 210,000
Accumulated Depreciation-Equipment 50,000 60,000
Security Deposit 8,000 9,000
Accounts Payable 40,000 50,000
Salaries Payable 10,000 -0-
Interest Payable -0- 5,000
Taxes Payable -0- ______
Note Payable 100,000 70,000
Common Stock 10,000 50,000
Retained Earnings 114,000 124,000
Sales 200,000
Cost of Goods Sold 100,000
Salary Expense 40,000
Rent Expense 24,000
Interest Expense 6,000
Depreciation Expense 10,000
The common stock outstanding was 10,000 shares on January 1, 2014. On April 1, 2015, Misty issued 10,000 shares of common stock in exchange for $10,000 of equipment. On July 1, 2015, Misty sold an additional 30,000 shares of common stock. During 2015, the company paid a dividend of ______. No equipment was sold during the year. The tax rate is 30% and 1/2 of 2015 taxes were paid in 2015.
On the next page, prepare a Statement of Cash flows in good form using the indirect method.
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The following data is for Calvin’s Catnip Treats, Inc.:
Balance Balance
12/31/16 12/31/15
Cash 120,000 66,000
Accounts Receivable 70,000 35,000
Allowance for Doubtful Accounts 10,000 5,000
Inventory 30,000 80,000
Prepaid Rent 5,000
Equipment 320,000 240,000
Accumulated Depreciation 60,000 40,000
Land 20,000
Security Deposit 1,000
Patent 9,000 9,000
Accounts Payable 79,000 60,000
Wages Payable 6,000 10,000
Rent Payable 5,000
Taxes Payable 25,000 38,000
Interest Payable 5,000 2,000
Note Payable 110,000 130,000
Common Stock ($1 each) 120,000 60,000
Retained Earnings 150,000 90,000
Sales 1,000,000
Cost of Goods Sold 600,000
Wage Expense 155,000
Rent Expense 60,000
Office Expenses 27,000
Depreciation Expense 20,000
Bad Debt Expense 10,000
Interest Expense 13,000
Income Tax Expense 30,000
The land was acquired on April 1, 2016 by exchanging 20,000 shares of common stock worth $20,000. The additional common stock (other than that issued for the purchase of the land) was sold on July 1, 2016 for $1 per share. All equipment purchased during the year was purchased for cash. The retained earnings balance for both years is after all closing entries have been made. The Note Payable requires payments of $20,000 principal plus interest at 10% on December 31st of each year.
Learning Module #2
Managerial Element
temerity Concentration comes out of
a combination of confidence
and hunger.
(Arnold Palmer)
We have been studying Financial Accounting
Which deals with ______
Managerial accounting is ______
Cost Behavior
We sell Tasteys. They cost $90 to make and sell for $ 300 each. Our only other expenses are the rent of $300 per month, utilities of $100 per month and a $10 per unit sales commission we pay to the salespeople. We sold ten during the year.
A Contribution Margin Statement
Fixed Costs are
Variable Costs are
Calculating Break-even
Target Profit
Using the Contribution Margin%
“ The art of conversation lies in listening. ” — Malcolm Forbes
Your Club is thinking about having a dinner. They expect to charge about $30 per head. They need to rent a room in Baker for $300 (includes servers). In addition to the $300, Baker will charge you $10 per dinner. How many dinners must you sell just to break even? How many dinners must you sell to make a profit of $600?
Sarah sells cookies. She uses ingredients that cost $.20 per cookie and sells them for $.50 each. She pays her sales force a 10% commission on all cookies sold. She pays rent of $1,000 per month. Her other fixed costs are $2,000 per month. How many cookies must she sell to break-even? How many cookies does she need to sell to make $2,000 per month? Prepare a contribution margin statement at the level where she is making $2,000 per month.
Gracie Company sells Dodds. The following is an income statement for a recent month.
Sales$250,000
Cost of goods sold 150,000
Gross Margin 100,000
Operating Expenses
Salaries and commissions $42,000
Rent 18,000
Utilities 7,000
Other 3,000 70,000
Net Income $30,000
Gracie sells one product, Dodds at $20 each. Cost of goods sold is variable. A 10% sales commission, included in salaries and commissions, is the only other variable cost. Gracie tells you that the income statement is not helpful, for she cannot determine such things as the break-even point.
Redo the statement using the contribution margin format.
What is the breakeven in units and dollars
Acme Company sells anvils and the following is per anvil
Unit Selling Price$20
Variable Costs 12
Total fixed costs $ 400,000
Total volume 100,000 units
Prepare an income statement using the contribution margin format
What is Acme’s Break Even point in units
In $
Now assume that Acme wants to make $1,000,000 per year. How many anvils does the company need to sell to accomplish this (in units and dollars).
The CFO of Garven Company provides the following per-unit analysis, based on a volume of 100,000 units
Selling Price$30
Variable Costs $12
Fixed Costs 9
Total Costs 21
Profit per unit $ 9
Answer each of the following questions independent of your answers to the other questions
1) What total profit does Garven expect to earn?
2) What would be the total profit at 110,000 units? (Be careful- they are fixed costs)
3) What is the break-even point in units?
4)Garven’s managers think they can increase volume to 120,000 units by spending an additional $ 60,000 on salespeople. What total profit would they earn if they make this move?
5)Break-even using Contribution Margin %
Now look at a Hot Dog Stand
You have decided to open a hot dog stand at the corner of Court and Union. The following is your opening balance sheet. You own the only 50,000 shares of stock outstanding for your company. You sell the dogs for $2.00 each. You pay your worker a fixed salary of $20,000 plus $.10 for each dog she sells. (Dogs cost $.40 each- how do I know that?)
Assets
Cash 5,000
Inventory 10,000
Cart 35,000
Total 50,000
Liabilities
Owners’ Equity
Common Stock 50,000
Retained Earnings -0-
Total 50,000
Income Statement Using
Contribution Margin Format
For the First Year
Sales 60,000 Sales
Cost of Sales 12,000
Gross Margin 48,000
Operating Expenses
Wages 23,000
Other 10,000
Total Operating Expenses 33,000
Operating Income 15,000
How many hot dogs do you need to sell to break-even
Per Year
Per Month Per Week Per Day Per Hour
Professional tip In negotiating, go ______then ______.
Homework Managerial
Problem 1. Salmon Company makes Things. Things sell for $30 each and cost $10 each to make. Fixed costs are estimated to be $1,500,000 next year.
What is the breakeven point in units and sales dollars for Salmon based on the above information
How many Things must Salmon sell to make $1,200,000 next year?
Problem 2 Billy Bob’s has given you the following income statement for June 2013.
Sales$ 500,000
Cost of goods sold 300,000
Gross margin 200,000
Operating expenses:
Salaries and commissions $ 80,000
Utilities 20,000
Rent 22,000
Other 18,000
Total operating expenses 140,000
Income 60,000
Billy Bob sells one product, a running shoe for $100 per pair. A 10% sales commission, included in Salaries and commissions is the only other variable cost. The manager tells you that this financial statement is not very helpful to her.
Redo the income statement using the contribution margin format.
For Billy Bob’s determine the break-even in sales dollars and in units