Financial Statements for a Corporation CHAPTER 15 Financial statements provide the primary source of...
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Transcript of Financial Statements for a Corporation CHAPTER 15 Financial statements provide the primary source of...
Financial Statements for a Corporation
CHAPTER 15
Financial statements provide the primary source of information needed by owners and managers to make decisions about future business activities.
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6. Contra account amounts
REVENUE SECTION OF AN INCOME STATEMENT FOR A MERCHANDISING BUSINESS
11
22
33 44
55
66 7788 99
1. Heading
7. Contra account total
3. Title of revenue account 8. Net Sales
4. Sales amount 9. Net sales amount
5. Less contra accounts
2. Revenue section
page 449
Total Sales - Sales Discount - Sales Returns & Allow = Net Sales
4COST OF MERCHANDISE SOLD SECTION OF AN INCOME STATEMENT FOR A MERCHANDISING BUSINESS
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2233
page 450
446655
1. Cost of Merchandise Sold section
2. Beginning inventory
3. Purchases section
4. Total cost of merchandise available for sale
5. Ending inventory
6. Cost of merchandise sold
Cost of Merchandise Sold - The original price of all merchandise sold during a fiscal period.
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COMPLETING AN INCOME STATEMENT FOR A MERCHANDISING BUSINESS
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22
44
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page 452
77
3366
7. Component percentage
6. Double lines
5. Net Income after Federal Income Tax
4. Less Federal Income Tax Expense
3. Net Income before Federal Income Tax
2. Expenses section
1. Gross Profit on Sales
The revenue remaining after cost of merchandise sold has been deducted - Gross Profit on Sales
LESSON 15-2 Analyzing an Income Statement
USING COMPONENT PERCENTAGES Hobby Shack analyzes the relationship between Sales and four
income statement components:• Cost of Merchandise Sold - Want to be low
• Gross Profit on Sales - Want to be high
• Total Expenses - Want to be low
• Net Income Before Federal Income Tax - Want to be high
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Price-EarningsRatio
=Earnings
perShare
÷Market Price
per Share
Earningsper Share
=Number of
SharesOutstanding
÷Net Incomeafter FederalIncome Tax
FINANCIAL RATIOS - A comparison between two items of financial information. page 459
Earnings per Share - The amount of net income after federal income tax belonging to a single share of stock. Measures co’s performance.
Price-Earnings Ratio - Relationship between the market value per share & earnings per share of a stock. Shows price of stock relative to earnings.
$32.13=2,500÷$80,313.95
10.7=$32.13÷$345.00
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15-3 STATEMENT OF STOCKHOLDERS’ EQUITY
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3344
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page 461
1. Heading2. Capital Stock and Par Value
5. Total stock issued at the end of the year
3. Stock at the beginning of the year4. Stock issued during the year
Shows changes in a corporation’s ownership for a fiscal period. Contains two sections - Capital Stock & Retained Earnings.
Par Value - A value assigned to a share of stock & printed on a stock certificate.
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RETAINED EARNINGS SECTION OF THE STATEMENT OF STOCKHOLDERS’ EQUITY
112233
44
page 462
4. Dividends declared
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77
55
2. Beginning balance
7. Total stockholders’ equity6. Ending balance3. Net income after federal
income tax
5. Increase in retained earnings1. Retained Earnings
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CURRENT ASSETS SECTION OF A BALANCE SHEET
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22
33
44
55
page 465
3. Book value of accounts receivable
4. Remaining current asset accounts1. Heading
2. Begin assets section 5. Current assets
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PLANT ASSETS SECTION OF A BALANCE SHEET
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33
page 466
44
551. Write the heading Plant Assets.
2. Calculate the book value of office equipment.
3. Use the same procedure to calculate the book value of store equipment.
4. Calculate total plant assets.
5. Calculate total assets.
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LIABILITIES SECTION OF A BALANCE SHEET
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33
page 467
1. Heading
2. Account title and amount of each current liability
3. Total liabilities
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Current Liabilities - Liabilities due within a short time, usually with in a year.Long Term Liabilities - Liabilities owed for more than a year (ex: mortgage)
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STOCKHOLDERS’ EQUITY SECTION OF A BALANCE SHEET
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page 468
5. Total liabilities and stockholders’ equity
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55
2233
2. Capital stock
1. Stockholders’ Equity
3. Retained earnings
4. Total stockholders’ equity
6. Double rules66