1. Welcome to Week 8! Financial Accounting: Chapter 5 Ashton Converse Short Term Investments/Receivables

2. Objectives/Schedule  Welcome  Review  Converse about Concepts  Discussion  Income Statement  Quiz Return  Group Assignment (chapter 4 and 5)  Accounting Clip  Practice of Financial Statements  How to Account for Receivables

3. Review: beyond memorize…learn  How are electronics improving business?  What is a firewall?  What do you need to access an encrypted document?  What things can limit the success of internal control?  What is EFT and what does it mean?  How does a bank reconciliation help a company?  What do nearly all large companies have?  Why are accountants expected to maintain a higher standard?

4. Term Adventure  Creditor  The party/person to whom money is owed (receiver)  Debtor  The party/person who owes money (giver)  Debt Instrument  A receivable or a payable, usually some form of note.  Equity Security  Stock certificate that represents the investor’s ownership in a corporation

5. Do You Remember/Know?  What does maturity mean?  The date that a debt must be paid  The length of time from inception to maturity is called what?  Term, time-period, period  Investments that a company plans to hold for one year or less are called what?  Short-term Investments

6. Converse about Concepts  Trading Investments  Stock investments that are to be sold in the near future with the intent of generating profits on the sale.  Account Example: Ford buys IBM stock  2013  Feb 13. Short-Term Investments………..100,000  Cash………………………………………………………100,000  Purchased investment Assets = Liabilities + Stockholders’ Equity +100,000 =0 +0 -100,000

7.  Now, lets say that on February 28 th Ford receives a cash dividend of $3,700 from IBM.  How would Ford record the dividend revenue? 2013 February 28Cash…………..3,700 Dividend Revenue………….3,700 Assets=Liabilities +OE + Revenues +3,700= +3,700  Ford made a gain due to the market value of the investment being 102,000.  Ford made an unrealized gain…they did not sell the investment yet Trading Investments Cont…

8. Converse about Concepts The Balance Sheet  Short-term investments are current assets  STI are almost as liquid as cash…they come right after cash Income Statement  Investments will usually earn interest revenue and dividend revenue  Investments create gains and losses Read through the Mid-Chapter Summary Problem (p. 222)  When you finish, discuss with others what you learned and what you do not know.  Then read and talk about the managers “Decision Guidelines”

9. Financial Statements  Do you think you can write these fully out if given direct information about a companies transactions?  What are the main key parts to the Balance Sheet?  Assets, Liabilities, and Owners’ Equity  Make sure you know more than just these 3…  What are the main parts to the Income Statement?  Revenues, Expenses, and Net Income or Net Loss  Know more than just these few  What are the main parts to the Statement of Cash Flows?  Investing Activities, Operating Activities, and Financing Activities

10. Balance Sheet Example

11. Income Statement Example

12. Statement of Cash Flows Ex.

13. Application and Practice Family Adventures Inc. Financial Statement Practice  Family Adventures Inc., began operations on April 1, 20X6. During April, the business provided travel services and ideas for families. It is now April 30, and investors wonder how well Family Adventures Inc. performed during its first month. They also want to know the company’s financial position at the end of April and its cash flows during the month.  The following data are listed in alphabetical order. Prepare the Air & Sea Travel financial statements at the end of April 20X6.  In a group of 2 to 4 work together to help Family Adventures Inc.  With the following information on the next PPT slide, create their Income Statement, Balance Sheet, and Statement of Cash Flows  Do we have all the information we need…do the numbers all match up?

14. List of Family Adventure Accounts o Accounts Payable…$15,800 o Accounts Receivable…2,000 o Operating Activities…208,000 o Cash balance at beginning of April…4,300 o Cash Balance at end of April…33,300 o Sale of land…22,000 o Investing Activities…(77,000) o Common Stock…50,000 o Inventory…28,000 o Dividends…2,100 o Notes Payable…8,000 o Sales…40,000 o Financing Activities…(102,000) o Land…18,000 o Office Supplies…500 o Retained Earnings…3,700 o Acquisition of land…40,000 o Rent Expense…1,100 o Salary Expense…1,200 o Service Revenue…8,500 o Utilities Expense…400 o Costs of Services…3,740 o Interest Expense…12,800 o Cost of Goods Sold…13,000 o Bonus Expense…8,000 o Holiday Party Expenses…10,000

15. Welcome to Day 2 of Week 8!  I know you are tired, ready to be done with school, and do not want to study.  I know financial accounting can be boring.  I know the feeling of being a senior and looking forward to the end…which is the beginning of something new and fantastic.  SO, lets work together to enjoy this 2 nd part of the semester and get you ready for your next adventure. Keep up the hard work…don’t let go yet

16. Objectives/Schedules  Welcome  Hand-Back Papers and Quizzes  Roster Check (attendance)  Review  Application and Practice: time for working on statements  Few Terms  Notes  Discussion via video clip (10 – 19)  Exam Talk

17. Review  What is the main focus of Chapter 5?  What is a creditor?  What does it mean to be a debtor?  If a investment is mature today, what does this mean?  What are trading investments?

18. Check it Out  What are receivables?  Monetary claims against a business or individual  Acquired mainly by selling goods or services and by lending money.  There are 2 Types of main receivables 1. Accounts Receivable 2. Notes Receivable  Notes are more serious and the debtor may even need to promise some security  We call this collateral

19. Accounting for Uncollectible Receivables  Important: some receivables may not be collected.  So, selling on credit creates both a benefit and a cost:  Benefit: Customers who cannot pay cash immediately can buy on credit, so sales and profits increase.  Cost: The company cannot collect from some customers.  This is called uncollectible-account expense  Other ways may mention “less allowance”  Meaning, receivables they will do not expect to collect

20. Notes Receivable  What is principal?  The amount borrowed by a debtor, and lent by who…  Creditor  What is interest?  The borrower’s cost of renting money from a lender.  Interest is revenue for who?  Lender (creditor)  Interest is an expense for who?  Borrower (debtor)

21. VIDEO CLIP!  Try to listen and understand all that you can.  Afterwards we will discuss some of your thoughts about the economy.  What does this mean for the accountants?  What different parts of the statements will need to changes specifically?

22. Midterm Exam  This is not fully made yet…  But there will probably be the following format.  Multiple Choice  Fill in the Blank  Short Response  Essay  Transactions  Statements  Journal  Etc.

23. Class is Paused for the Weekend! HHave a great weekend! II am happy to be your teacher and I am interested in seeing what dreams you chase in the future! SStudy Hard and Enjoy the Weekend! HHere comes Halloween and Thanksgiving right behind it!!!!