ACCY2001
Introductory Financial Accounting
Spring 2020
3.00 Credit Hours
Homework Assignment #1
Due Date: Tuesday, January 21, 2020.
To be submitted through Blackboard by 1pm.
Exercise 1 – Classifying financial statement items:
Below is a list of financial statement items. For each item, mark whether is part of assets (A),
liabilities (L), shareholders’ equity (SE), Revenue (R), or expense (E).
Assets: 1. Generates probable future economic benefits 2. must have control over it 3. Is it the
result/involved of a previous transaction or event?
Liabilities: 1. Requires you in the future to do something that involves money 2. Has the
transaction already occurred?
Shareholder’s equity: money invested in the firm by its owner
Revenue: money/assets generated
Expenses: money/assets used (or liabilities incurred) to generate revenues
Item:
(1) Accounts payable (money owed by a
company to its creditors)
(2) Accounts receivable (money owed to
a company by its debtors/customers)
(3) Cash and cash equivalents
(4) Common Stock
(5) Cost of goods sold
(6) Dividends Payable
(7) Income taxes
(8) Interest expense
(9) Inventories
(10) Land
(A) / (L) / (SE) / (R) / (E)
L
E
A
A
E
L
L
L
A
A
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(11)
(12)
(13)
(14)
(15)
(16)
(17)
Net sales
Notes payable
Notes receivable
Property, plant, and equipment
Research and development expense
Retained earnings
Taxes Payable
R
L
A
A
E
R
E
Dividends payable - dividends that a company's board of directors has declared to be payable to its shareholders. Until such time as the company actually
pays the shareholders, the cash amount of the dividend is recorded within a dividends payable account as a current liability.
Exercise 2 – Creating financial statements:
Below is a partial list of financial statement items for the year ending December 31, 2017 for
McDonald’s Corporation (some values have been changed for tractability):
Item
(1)
(2)
(3)
(4)
(5)
(6)
Accounts payable (liability)
Total revenues (revenue)
Common stock (Assets)
Cash and cash equivalents (Assets)
Long-term debt (Liability)
Beginning of period retained earnings
(Revenue)
(7)
Additional paid-in capital (assets)
(8)
Selling general, and administrative expenses
(expenses)
(9)
Accounts receivable (expense)
(10) Company-operated restaurant expenses
(expense)
(11) Inventories (assets)
(12) Interest expense (liability)
(13) Prepaid expenses and other current assets
(assets)
(14) Dividends declared and paid (liability)
(15) Property and equipment, net (assets)
(16) Income tax expense (liability)
(17) Net income (revenue)
(18) End of period retained earnings (revenue)
• The company did not issue any shares during the year
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Amount
(in millions)
$ 875
25,413
17
7,686
24,122
4,256
6,533
2,434
1,299
5,552
100
638
559
3,230
37,692
?
14,763
?
Current Assets= assets expected to be used up in a year on average
Current liabilities= any liabilities expected to be satisfied within a year
Long-term liabilities= liabilities that don’t need to be satisfied within a year
•
Don’t need to be paid off within next year
Stockholder equity= what owners of company own$
Required:
(1) Prepare McDonald’s balance sheet for December 31, 2017.
Add up all assets
ASSETS=17+ 7,686+6,533+100+559+37,692= $52,587
(2) Prepare McDonald’s income statement for the year 2017.
Tips:
(a) Start by classifying items as assets, liabilities, shareholder’s equity, revenues, and
expenses.
(b) Start with the income statement, then create the balance sheet.
(c) Remember: end of period retained earnings = Beginning of period retained earnings + net
income – dividends declared.
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McDonalds Corporation
Balance Sheet
December 31st, 2017
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MCDONALDS CORPORATION
INCOME STAREMENT
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Exercise 3 – Comparing income and cash flows:
Commented [GAB1]: Don’t need to do this one.
Record the impact of the items below (direction +/- and amount) on income and cash flows.
The company recorded $2,000 in sales;
only a quarter was paid by the end of the
quarter.
Salaries during the period were $300,
only $200 were paid by the end of the
quarter.
The company purchased a machine at
the end of the quarter in cash for $500.
The machine had not been used.
Tax expense for the period was $300,
only a third was paid by the end of the
quarter.
The company purchased cleaning
materials at the amount of $600 in cash.
Cleaning materials at the amount of
$200 were used during the quarter.
The company incurred $75 of expenses
during the quarter. 1/3 of the amount has
not been paid by the end of the quarter.
Net income / Net cash flow during the
quarter:
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Income
Cash
+$2,000
+$500
Exercise 4 – Hands-on Exercise:
1. Use the following link to download GoPro’s 2016 10K report:
http://d18rn0p25nwr6d.cloudfront.net/CIK-0001500435/d27aa80b-ef85-405d-8517cb32441b9a91.pdf
Pubic companies are required to file an annual 10K reports that consist of the financial statements
and much more.
2. The financial report section of the 10K starts with the “Report of Independent Registered Public
Accounting Firm”.
a. On what page can this report be found? 54
b. Which audit firm audits GoPro? Committee of Sponsoring Organizations of the
Treadway Commission
3. The following questions require the retrieval of information from the four financial statements
(balance sheet, statement of operations, statement of shareholders’ equity, and statement of cash
flows):
a. What was the value of GoPro’s total assets on December 31, 2016? $922,640,000
b. What was the value of GoPro’s total shareholders’ equity on December 31, 2016?
SE= assets – liability
Total asssets – total liablity
$922,640,000 - $475,695,000 = $446,945,00
c. Using the balance sheet equation, compute GoPro’s total liabilities on December 31,
2016. Make sure that the computed value matches the amount shown on the balance sheet
– Total liabilities on the balance sheet also include convertible senior notes.
$922,640,000-446,945,00= 475,695,000
d. What was GoPro’s net loss for the year ended December 31, 2016?
Total rev- total expenses = net loss
$1,185,481 – 419,003= $766,478
e. What was GoPro’s net cash used in operating activities during the year ended December
31, 2016? (can be found in the consolidated statement of cash flows)
$419,003
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