ACCT 2121 Review Session Kevin Zuniga

12/16/20

Accounting Basics

Accounting Basics ● Accounting Equation → A = L + E

● Asset = Debit Credit

● Liability = Debit Credit

● Equity = Debit Credit

● Expense = Debit Credit

● Revenue = Debit Credit

Expense and Revenue accounts are separate accounts

Accounting Basics Cont. ● Normal Balance for each type of account:

○ Asset → Debit Balance

○ Liability → Credit Balance

○ Equity → Credit Balance

○ Expense → Debit Balance

○ Revenue → Credit Balance

Whatever increases the account will be the normal balance

Journal Entries Examples

Received $1,700 from a customer who was on account as owing us money

Journal Entries Examples

Received $1,700 from a customer who was on account as owing us money

Account Debit Credits

Cash 1,700

Accounts Receivable 1,700

Journal Entries Examples

Paid one of our vendors $1,000 cash for a balance on account.

Account Debit Credits

Accounts Payable 1,000

Cash 1,000

Journal Entries Examples

Paid one of our vendors $1,000 cash for a balance on account.

Chapter 11

Chapter 11 Concepts

● If stock has a Par value: there is going to be APIC (Additional Paid In Capital)

● If stock doesn’t have a Par value: no APIC (Additional Paid In Capital)

● Treasury Stock: it is a contra-equity account

○ It will have a normal debit balance

Chapter 11 Concepts Cont.

● How to calculate cash received from issuing stock:○ # of Stocks Issued x Issue Price of Stock

● How to calculate Common/Preferred stock:○ # of Stocks Issued x Par Value of Stock

○ Par Value for Stocks and Bonds are 2 different things

● Additional Paid-In Capital (APIC)○ The difference between Cash Received and Total Par Value of the Stock

○ You use the two calculations above, then take the difference

Stocks Example Kevin Company had the following transactions.1. Issued 3,500 shares of $100 par preferred stock at $109 for cash.

Stocks Example Kevin Company had the following transactions.1. Issued 3,500 shares of $100 par preferred stock at $109 for cash.

Accounts Debit Credit

Cash 381,500

Preferred Stock 350,000

APIC-PS 31,500

Stocks Example Kevin Company had the following transactions.1. Issued 3,500 shares of $100 par preferred stock at $109 for cash.2. Issued 7,000 share of common stock with a par value of $15 for $110,000.

Stocks Example Kevin Company had the following transactions.1. Issued 3,500 shares of $100 par preferred stock at $109 for cash.2. Issued 7,000 share of common stock with a par value of $15 for $110,000.

Accounts Debit Credit

Cash 110,000

Common Stock 105,000

APIC-CS 5,000

Stocks Example Kevin Company had the following transactions.1. Issued 3,500 shares of $100 par preferred stock at $109 for cash.2. Issued 7,000 share of common stock with a par value of $15 for $110,000.3. Purchased 550 shares of treasury common stock for $13,000.Prepare the journal entries for the above stock transactions.

Stocks Example Kevin Company had the following transactions.1. Issued 3,500 shares of $100 par preferred stock at $109 for cash.2. Issued 7,000 share of common stock with a par value of $15 for $110,000.3. Purchased 550 shares of treasury common stock for $13,000.Prepare the journal entries for the above stock transactions.

Accounts Debit Credit

Treasury Stock 13,000

Cash 13,000

Dividends Concepts

● There are 3 dates for Dividend problems:

1. Date of Declaration

2. Date of Record

3. Date of Payment

● There is no journal entry for Date of record

○ You have to do a journal entry when a economic event as occurred

○ Nothing happens on the Date of Record

Dividends Example49er Corporation has 1,000,000 authorized shares of $20 par value common stock. As of June 30, 2020, there were 700,000 shares issued and outstanding. On June 30, 2020, the board of directors declared a $0.40 per share cash dividend to be paid on August 1, 2020, to stockholders of record on July 15, 2020. Prepare all necessary entries related to the dividends.

6/30/20

Dividends Example49er Corporation has 1,000,000 authorized shares of $20 par value common stock. As of June 30, 2020, there were 700,000 shares issued and outstanding. On June 30, 2020, the board of directors declared a $0.40 per share cash dividend to be paid on August 1, 2020, to stockholders of record on July 15, 2020. Prepare all necessary entries related to the dividends.

6/30/20

Accounts Debit Credit

Dividends 280,000

Dividends Payable 280,000

Dividends Example49er Corporation has 1,000,000 authorized shares of $20 par value common stock. As of June 30, 2020, there were 700,000 shares issued and outstanding. On June 30, 2020, the board of directors declared a $0.40 per share cash dividend to be paid on August 1, 2020, to stockholders of record on July 15, 2020. Prepare all necessary entries related to the dividends.

7/15/20

Dividends Example49er Corporation has 1,000,000 authorized shares of $20 par value common stock. As of June 30, 2020, there were 700,000 shares issued and outstanding. On June 30, 2020, the board of directors declared a $0.40 per share cash dividend to be paid on August 1, 2020, to stockholders of record on July 15, 2020. Prepare all necessary entries related to the dividends.

7/15/20

Accounts Debit Credit

N/A

N/A

Dividends Example49er Corporation has 1,000,000 authorized shares of $20 par value common stock. As of June 30, 2020, there were 700,000 shares issued and outstanding. On June 30, 2020, the board of directors declared a $0.40 per share cash dividend to be paid on August 1, 2020, to stockholders of record on July 15, 2020. Prepare all necessary entries related to the dividends.

8/1/20

Dividends Example49er Corporation has 1,000,000 authorized shares of $20 par value common stock. As of June 30, 2020, there were 700,000 shares issued and outstanding. On June 30, 2020, the board of directors declared a $0.40 per share cash dividend to be paid on August 1, 2020, to stockholders of record on July 15, 2020. Prepare all necessary entries related to the dividends.

8/1/20

Accounts Debit Credit

Dividends Payable 280,000

Cash 280,000

Practice Time

Practice

Number of Shares Issued?

The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500

Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200

Practice

Number of Shares Issued?

The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500

Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200

464,357 Shares($3,250,00/$7) (Total Value of CS/ Par Value)

Practice

Number of Shares Common Stock Outstanding?

The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500

Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200

Practice

Number of Shares Common Stock Outstanding?

The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500

Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200

434,357 Shares(464,357-30,000) (Total CS Issued- Treasury Stock)

Practice

Total Sales Price of the Common Stock when Issued?

The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500

Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200

Practice

Total Sales Price of the Common Stock when Issued?

The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500

Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200

$3,800,500

Practice

How much, on average, did the treasury stock cost per share?

The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500

Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200

Practice

How much, on average, did the treasury stock cost per share?

The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500

Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200

$10 per Share(300,000/ 30,000) (Total Value of TS/ Treasury Stock shares)

Practice

Average issue price of Common Stock?

The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500

Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200

Practice

Average issue price of Common Stock?

The following items were shown on the balance sheet of Kevin Corporation on December 31, 2021:Stockholders’ EquityPaid-In CapitalCommon stock, $7 par value, 500,000 shares $3,250,500 Additional paid-in capital in excess of par value (APIC) 550,000Total paid in capital 3,800,500

Retained Earnings 860,700Total paid-in capital and retained earnings 4,661,200Less: Treasury stock (30,000 shares) (300,000)Total stockholders’ equity $4,361,200

$8.18(3,800,500/464,357) (Total PIC/ Shares Issued)

Practice

On November 1, Karen declares and distributes a 20% stock dividend when the market value of the stock is $17 per share.

On November 1, 2021, Karen Corporation’s stockholders’ equity section is as follows:

Common stock, $16 par value, 50,000 shares issued $800,000 Paid-in capital in excess of par value 125,000Retained earnings 364,250Total stockholders’ equity $1,289,250

STEP 1: Get # of new shares issued

Practice

On November 1, Karen declares and distributes a 20% stock dividend when the market value of the stock is $17 per share.

On November 1, 2021, Karen Corporation’s stockholders’ equity section is as follows:

Common stock, $16 par value, 50,000 shares issued $800,000 Paid-in capital in excess of par value 125,000Retained earnings 364,250Total stockholders’ equity $1,289,250

STEP 1: Get # of new shares issued

10,000 new shares issued

(50,000 * .20)

Practice

On November 1, Karen declares and distributes a 20% stock dividend when the market value of the stock is $17 per share.

On November 1, 2021, Karen Corporation’s stockholders’ equity section is as follows:

Common stock, $16 par value, 50,000 shares issued $800,000 Paid-in capital in excess of par value 125,000Retained earnings 364,250Total stockholders’ equity $1,289,250

STEP 2: Get Value of New Shares Issued

Practice

On November 1, Karen declares and distributes a 20% stock dividend when the market value of the stock is $17 per share.

On November 1, 2021, Karen Corporation’s stockholders’ equity section is as follows:

Common stock, $16 par value, 50,000 shares issued $800,000 Paid-in capital in excess of par value 125,000Retained earnings 364,250Total stockholders’ equity $1,289,250

STEP 2: Get Value of New Shares Issued

$160,000

(10,000 * $16 par)

Practice

On November 1, Karen declares and distributes a 20% stock dividend when the market value of the stock is $17 per share.

On November 1, 2021, Karen Corporation’s stockholders’ equity section is as follows:

Common stock, $16 par value, 50,000 shares issued $800,000 Paid-in capital in excess of par value 125,000Retained earnings 364,250Total stockholders’ equity $1,289,250

STEP 3: Create Journal Entries

Practice

On November 1, Karen declares and distributes a 20% stock dividend when the market value of the stock is $17 per share.

On November 1, 2021, Karen Corporation’s stockholders’ equity section is as follows:

Common stock, $16 par value, 50,000 shares issued $800,000 Paid-in capital in excess of par value 125,000Retained earnings 364,250Total stockholders’ equity $1,289,250

STEP 3: Create Journal Entries

Dr Stock Dividend 170,000Cr CS Dividend Distributable 160,000Cr PIC- CS 10,000

Dr CS Dividend Distributable 160,000Cr Common Stock 160,000

Practice

Round Corporation has been authorized to issue 30,000 shares of $101 par value, 5%, cumulative preferred stock and 1,000,000 shares of $6 par common stock. On February 3, 2021, the company declared a $270,000 cash dividend. There are 4 years of dividends in arrears.

At December 31, 2020, the ledger contained the following balances pertaining to stockholders’ equity:

Preferred Stock $550,000 Paid-in Capital in Excess of Par Value—Preferred Stock 80,000Common Stock 2,400,000Paid-in Capital in Excess of Par Value—Common Stock 6,600,000Retained Earnings 3,630,000

Preferred:

Common:

Practice

Round Corporation has been authorized to issue 30,000 shares of $101 par value, 5%, cumulative preferred stock and 1,000,000 shares of $6 par common stock. On February 3, 2021, the company declared a $270,000 cash dividend. There are 4 years of dividends in arrears.

At December 31, 2020, the ledger contained the following balances pertaining to stockholders’ equity:

Preferred Stock $550,000 Paid-in Capital in Excess of Par Value—Preferred Stock 80,000Common Stock 2,400,000Paid-in Capital in Excess of Par Value—Common Stock 6,600,000Retained Earnings 3,630,000

Preferred: $137,500

Common: $132,500

(550,000 * .05 * 5 years)

(270,000 – 137,500)

Practice

Round Corporation has been authorized to issue 30,000 shares of $101 par value, 5%, non-cumulative preferred stock and 1,000,000 shares of $6 par common stock. On February 3, 2021, the company declared a $270,000 cash dividend. There are 4 years of dividends in arrears.

At December 31, 2020, the ledger contained the following balances pertaining to stockholders’ equity:

Preferred Stock $550,000 Paid-in Capital in Excess of Par Value—Preferred Stock 80,000Common Stock 2,400,000Paid-in Capital in Excess of Par Value—Common Stock 6,600,000Retained Earnings 3,630,000

Preferred:

Common:

Practice

Round Corporation has been authorized to issue 30,000 shares of $101 par value, 5%, non-cumulative preferred stock and 1,000,000 shares of $6 par common stock. On February 3, 2021, the company declared a $270,000 cash dividend. There are 4 years of dividends in arrears.

At December 31, 2020, the ledger contained the following balances pertaining to stockholders’ equity:

Preferred Stock $550,000 Paid-in Capital in Excess of Par Value—Preferred Stock 80,000Common Stock 2,400,000Paid-in Capital in Excess of Par Value—Common Stock 6,600,000Retained Earnings 3,630,000

Preferred: $27,500

Common: $242,500

(550,000 * .05)

(270,000 – 27,500)

Operating, Investing, Financing Activity?

Operating, Investing, or Financing Activity?

Cash?

Operating, Investing, or Financing Activity?

Cash?

Operating!

Operating, Investing, or Financing Activity?

Land?

Operating, Investing, or Financing Activity?

Land?

Investing!

Operating, Investing, or Financing Activity?

PP&E?

Operating, Investing, or Financing Activity?

PP&E?

Investing!

Operating, Investing, or Financing Activity?

Prepaid Insurance?

Operating, Investing, or Financing Activity?

Prepaid Insurance?

Operating!

Operating, Investing, or Financing Activity?

Common Stock?

Operating, Investing, or Financing Activity?

Common Stock?

Financing!

Operating, Investing, or Financing Activity?

Short-Term Notes Payable?

Operating, Investing, or Financing Activity?

Short-Term Notes Payable?

Operating!

Multiple Choice Questions

1. Which of the following statements regarding financing activities is NOT true?

A. Cash dividends paid to a company's stockholders are reported as cash outflows from financing activities. B. When a company issues stock for cash, it reports a cash inflow from financing activities. C. When a company repurchases stock with cash, it reports a cash outflow for financing activities. D. When a company repays a loan, it reports a cash outflow from investing activities.

Multiple Choice Questions

1. Which of the following statements regarding financing activities is NOT true?

A. Cash dividends paid to a company's stockholders are reported as cash outflows from financing activities. B. When a company issues stock for cash, it reports a cash inflow from financing activities. C. When a company repurchases stock with cash, it reports a cash outflow for financing activities. D. When a company repays a loan, it reports a cash outflow from investing activities.

Multiple Choice Questions

2. Which of the following would be included in cash flows from operating activities?

A. Cash proceeds from sales. B. Cash received from an issuance of bonds. C. Dividends paid to stockholders. D. Cash used for purchases of equipment.

Multiple Choice Questions

2. Which of the following would be included in cash flows from operating activities?

A. Cash proceeds from sales. B. Cash received from an issuance of bonds. C. Dividends paid to stockholders. D. Cash used for purchases of equipment.

Multiple Choice Questions

The company would report a net cash inflow from operating activities of:A. $17,500B. $18,500C. $21,500D. $23,300

Multiple Choice Questions

The company would report a net cash inflow from operating activities of:A. $17,500B. $18,500C. $21,500D. $23,300

(20,000 + 3000 – 1000 + 400 + 900)

Last Thoughts

How I Would Study for the Exam

1. Look at PowerPoints and notes a. Focus on the important topics for each chapter

2. Do practice problems and journal entries a. Then, redo those practice problems and journal entries

b. Keep redoing them until you are comfortable with the problem/journal

3. Study with materials that you are going to use on the exam

Any Questions?