HADM 1210 Lecture Outline Chapter 1 1. Key outcome for the chapter is to learn the...

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HADM 1210 Lecture Outline Chapter 1 1. Key outcome for the chapter is to learn the general content, structure, and use of each financial statement Content: the categories of items (often called elements) reported on each of the four statements (A, L, OE, R, E, D). Structure: the equations that show how the elements within the statements are organized and related. Use: how the information is used in shareholder or creditor decisions. 2. Some examples of content (the accounts) - A L OE Notes payable A/P Cash A/R Inventory Land Building Taxes payable Notes payable Bonds payable 1st Income Statement 1/1 - 12/31 Revenues Expenses = Net Income *Retained earnings only Chapter 1 Outline.pdf Common stock Retained earnings 3. The structure of the statements (Note: the order of financial statement preparation is important given the articulation between the statements. Also, note the dates for each statement. 2nd Statement of Shareholders' Equity* 1/1 - 12/31 + Sales revenue Service Revenue Interest revenue Rent revenue Beginning Retained Earnings Net Income Dividends E Ending Retained Earnings Rent expense Salaries expense Advertising expense Interest expense Insurance expense 3rd Balance Sheet @ 12/31 Assets Dividends = Liabilities Common Stock + D Owners' Equity Ending Retained Earnings 4. Example problem - Land Buildings Salaries expense Accounts payable Sales revenue Cash Retained earnings 1/1/20 Common stock Steps to complete this problem 1. 2. 3. 4. 5. $42,500 197,550 5. Some examples of use - 125,350 38,050 389,950 133,600 311,000 65,000 Accounts receivable Supplies expense Required: Prepare a balance sheet, income statement and statement of shareholders' equity for the year ended 12/31/20 Notes payable Rent expense Dividends Advertising expense Income tax expense Utilities expense $90,000 110,600 63,800 21,200 95,500 11,250 35,000 5,250 Label each of the accounts above as either A, L, OE, R, E, D Determine the proper financial statement for each account Determine the proper sequence to prepare the statements Use the equations to property structure the accounts for each statement and complete computations If done correctly, the balance sheet equation will balance Would you buy this company's stock? How is the company performing relative to its peers? Is this company a good credit risk? HADM 1210 Lecture Outline Chapter 1 1. Key outcome for the chapter is to learn the general content, structure, and use of each financial statement Content: the categories of items (often called elements) reported on each of the four statements (A, L, OE, R, E, D). Structure: the equations that show how the elements within the statements are organized and related. Use: how the information is used in shareholder or creditor decisions. 2. Some examples of content (the accounts) - A L OE Notes payable A/P Cash A/R Inventory Land Building Taxes payable Notes payable Bonds payable 1st Income Statement 1/1 - 12/31 Revenues Expenses = Net Income *Retained earnings only Chapter 1 Outline.pdf Common stock Retained earnings 3. The structure of the statements (Note: the order of financial statement preparation is important given the articulation between the statements. Also, note the dates for each statement. 2nd Statement of Shareholders' Equity* 1/1 - 12/31 + Sales revenue Service Revenue Interest revenue Rent revenue Beginning Retained Earnings Net Income Dividends E Ending Retained Earnings Rent expense Salaries expense Advertising expense Interest expense Insurance expense 3rd Balance Sheet @ 12/31 Assets Dividends = Liabilities Common Stock + D Owners' Equity Ending Retained Earnings 4. Example problem - Land Buildings Salaries expense Accounts payable Sales revenue Cash Retained earnings 1/1/20 Common stock Steps to complete this problem 1. 2. 3. 4. 5. $42,500 197,550 5. Some examples of use - 125,350 38,050 389,950 133,600 311,000 65,000 Accounts receivable Supplies expense Required: Prepare a balance sheet, income statement and statement of shareholders' equity for the year ended 12/31/20 Notes payable Rent expense Dividends Advertising expense Income tax expense Utilities expense $90,000 110,600 63,800 21,200 95,500 11,250 35,000 5,250 Label each of the accounts above as either A, L, OE, R, E, D Determine the proper financial statement for each account Determine the proper sequence to prepare the statements Use the equations to property structure the accounts for each statement and complete computations If done correctly, the balance sheet equation will balance Would you buy this company's stock? How is the company performing relative to its peers? Is this company a good credit risk?

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Here is an outline of the key points from Chapter 1 I Overview of Financial Statements Purpose is to ... View the full answer