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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
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Where are you now?
From the following information for Laurel, Inc., prepare the financial statements for the
year ending December 31, 2015.
Cash
Accounts Receivable
Inventory
Building
Equipment
Accumulated Depreciation
Security Deposit
Accounts Payable
Salaries Payable
Taxes Payable
Note Payable, Long-Term
Common Stock
Paid In Capital- Ex Par
Retained Earnings
Treasury Stock
Sales
Cost of Goods Sold
Salary Expense
Rent Expense
Depreciation Expense
Office Expense
Interest Revenue
Interest Expense
Income Tax Expense
58,000
15,000
80,000
200,000
100,000
20,000
3,000
12,000
4,000
6,000
40,000
5,000
45,000
334,000
10,000
410,000
200,000
50,000
36,000
10,000
10,000
1,000
5,000
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.
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From the following for 2015 for CoJo, Inc. prepare an Income Statement and a Balance Sheet.
assume a December 31 year end.
Accounts Payable
Accounts Receivable
Accumulated Depreciation
Administrative Expenses
Advertising Expense
Building
Capital in Excess of Par
Cash
Common Stock ($1 Par)
Cost of Goods Sold
Depreciation Expense
Equipment
Gain on sale of equipment
Interest Expense
Inventory
Notes Payable, Long-Term
Patent
Rent Expense
Retained Earnings
Sales
Sales Returns and Allowances
Salaries Payable
Salary Expense
Tax Expense
Taxes Payable
200,000
120,000
56,000
58,000
20,000
300,000
288,000
98,000
12,000
500,000
32,000
140,000
6,000
10,000
180,000
100,000
50,000
36,000
143,000
900,000
4,000
60,000
120,000
29,000
29,000
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Calculating the Earnings Per Share
There are two levels of EPS
B_____________
D_____________
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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:
Cash
Accounts Receivable
Inventory
Prepaid Insurance
Equipment
Accumulated Depreciation
Land
Security Deposits
Accounts Payable
Wages Payable
Rent Payable
Interest Payable
Taxes Payable
Note Payable
Common Stock ($1 each)
Retained Earnings
Sales
Cost of Goods Sold
Wage Expense
Rent Expense
Office Expenses
Depreciation Expense
Advertising Expense
Insurance Expense
Interest Expense
Income Tax Expense
Balance
12/31/15
Balance
12/31/14
80,000
68,000
70,000
500
340,000
80,000
120,000
12,000
35,000
6,000
7,500
6,000
16,000
120,000
300,000
120,000
1,200,000
575,000
260,000
24,000
70,000
60,000
15,000
9,000
14,000
52,000
20,000
35,000
90,000
3,000
270,000
20,000
10,000
30,000
10,000
6,000
7,000
5,000
140,000
160,000
50,000
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.
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Now you do one -
Not dying is not the same as living.
The following balances are for Misty Company at December 31,
Cash
Accounts Receivable
Inventory
Prepaid Rent
Equipment
Accumulated Depreciation-Equipment
Security Deposit
Accounts Payable
Salaries Payable
Interest Payable
Taxes Payable
Note Payable
Common Stock
Retained Earnings
Sales
Cost of Goods Sold
Salary Expense
Rent Expense
Interest Expense
Depreciation Expense
2014
10,000
40,000
80,000
6,000
180,000
50,000
8,000
40,000
10,000
-0-0100,000
10,000
114,000
2015
30,000
50,000
60,000
3,000
210,000
60,000
9,000
50,000
-05,000
______
70,000
50,000
124,000
200,000
100,000
40,000
24,000
6,000
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.:
Cash
Accounts Receivable
Allowance for Doubtful Accounts
Inventory
Prepaid Rent
Equipment
Accumulated Depreciation
Land
Security Deposit
Patent
Accounts Payable
Wages Payable
Rent Payable
Taxes Payable
Interest Payable
Note Payable
Common Stock ($1 each)
Retained Earnings
Sales
Cost of Goods Sold
Wage Expense
Rent Expense
Office Expenses
Depreciation Expense
Bad Debt Expense
Interest Expense
Income Tax Expense
Balance
12/31/16
Balance
12/31/15
120,000
70,000
10,000
30,000
66,000
35,000
5,000
80,000
5,000
240,000
40,000
320,000
60,000
20,000
1,000
9,000
79,000
6,000
5,000
25,000
5,000
110,000
120,000
150,000
1,000,000
600,000
155,000
60,000
27,000
20,000
10,000
13,000
30,000
9,000
60,000
10,000
38,000
2,000
130,000
60,000
90,000
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.
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Learning Module #2
Managerial Element
temerity
comes out of
Concentration
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
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Fixed Costs are
Variable Costs are
Calculating Break-even
Target Profit
Using the Contribution Margin%
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“ 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.
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Gracie Company sells Dodds. The following is an income statement for a recent month.
Sales
Cost of goods sold
Gross Margin
Operating Expenses
Salaries and commissions
Rent
Utilities
Other
Net Income
$250,000
150,000
100,000
$42,000
18,000
7,000
3,000
70,000
$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
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Acme Company sells anvils and the following is per anvil
Unit Selling Price
Variable Costs
$20
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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 $
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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
Variable Costs
Fixed Costs
Total Costs
Profit per unit
$30
$12
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$ 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)
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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 %
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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
Inventory
Cart
Total
5,000
10,000
35,000
50,000
Liabilities
Owners’ Equity
Common Stock
50,000
Retained Earnings
Total
-050,000
Income Statement Using
Contribution Margin Format
For the First Year
Sales
Cost of Sales
Gross Margin
Operating Expenses
Wages
Other
Total Operating Expenses
Operating Income
60,000
12,000
48,000
Sales
23,000
10,000
33,000
15,000
How many hot dogs do you need to sell to break-even
Per Year
Per Month
Professional tip
Per Week
Per Day
In negotiating, go ___________ then ________________.
Per Hour
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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
Cost of goods sold
Gross margin
Operating expenses:
Salaries and commissions
Utilities
Rent
Other
Total operating expenses
Income
$ 500,000
300,000
200,000
$ 80,000
20,000
22,000
18,000
140,000
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