ACCTS170
FINANCIALACCOUNTING–Summer2017SessionB
TTh9.00-12.15
Classroomtobeannounced
Instructor:JaniceAmmons,PhD
E-mail:[email protected]
CatalogCourseDescription
Introducesthebasicterminology,concepts,andstandardsunderlyingfinancialaccountingsystems.
Conceptswillincluderevenueandexpenserecognition,accountsreceivable,inventory,long-lived
assets,liquidity,andsolvency.Explorestheincomestatement,balancesheet,andstatementofcash
flows,oftenusingreportsfiledbypubliclytradedcompanies.Forcollegestudentsandbeyond.
1Credit.
CourseObjectives:Bytheendofthecourse,youwillbeableto
1.Classifyandinterpretkeyelementsoffinancialstatements.
2.Applyrelevantfinancialaccountingstandardsandreportingoptionstobusinesseventsand
transactionsforappropriatereportinginthefinancialstatements.
3.Evaluateaspectsoffinancialperformance(e.g.,revenuegrowth,liquidity,solvency,andcash
flows).
LearningStrategies
Tomeetthiscourse’slearningobjectives:
• Youwillstudyrealcompaniestounderstandwhatyouseeonfinancialreportsandrelated
disclosures.
• Youwillstudyfictitiouscompaniestounderstandthebusinesseventsandtheeffectsof
accountingtransactionsthatgiverisetoreportednumberswithinthefinancialstatements
and,whenappropriate,identifyestimatesandjudgmentsrelatedtothoseentries.
• Youwillapplyyourunderstandingtoanalyzebasicaspectsofthefinancialhealthofbothreal
andfictitiousfirms.
RequiredCourseMaterials
• Custome-textwithresources(informationwillbeemailedtostudents)
• Anon-programmable,non-graphingcalculatorfortestsandthefinalexam.
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GRADING
Youmustclearlydemonstratesufficientunderstandingofthesubjectareabyadequateperformanceontwo
testswithoutnotesortextsavailabletoyou.Themidtermwillaccountfor35percent,thefinalfor40percent,
andotherassessments(onlinequizzesandin-classactivitiesorotherassignments)25percent.Foronline
quizzes,youmayusethetextbook,videos,andnotes.
Themidtermexamdate:endofthethirdweek--July21(beginningat9am).
Thefinalexamdate:attheendofthefifthweek--August4(beginningat9am)
Thesedateswillnotbechangedforanystudent,andtherewillbenomake-upmidterm.Nostudentwillbegivenspecialprivilegesthat
areunavailabletootherstudents.Allstudentsareexpectedtotakeeachexamandcompletein-classandonlineactivities.Everystudent
musttakethefinalexaminordertogetalettergrade.
CheatingPolicy:Ifyoucheatonceinanyexam,youwillfailthiscourseinadditiontowhateverotherpenaltiestheCollegemaylevy.
CourseGradeScale:
LetterGrade
A
A-
B+
B
B-
C+
C
C-
D+
D
D-
F
NumericalRange
93-100
90-92
87-89
83-86
80-82
77-79
73-76
70-72
67-69
63-66
60-62
0-59
AbouttheCourseandYourParticipation
Theobjectiveofthiscourseistofamiliarizestudentswiththebasicprinciplesandpracticesof
financialaccounting.Thecoursefocusesonthefundamentalconceptsthatareimportantfor
prospectiveconsumersofcorporatefinancialinformation,suchasmanagers,stockholders,financial
analysts,andcreditors.Thecourseincludesanoverviewofhowcommoneconomiceventsare
recordedinthethreemainfinancialstatements(i.e.,theincomestatement,balancesheet,and
statementofcashflows).Themajorityofthecourseexaminesrevenuerecognition,expense
recognition,accountsreceivable,inventories,liabilities,andstockholder’sequity.Althoughasolid
understandingoftherulesandproceduresrequiredtoconstructfinancialstatementsisessential,this
courseemphasizestheanalysisoffinancialstatementsandotherfinancialdisclosuresandstudents
willbegintointerprethowmanagerialincentivesaffectthefinancialreportingprocess.
Wewillcombinelearninginaclassroomsettingwithself-directedexperiencestoprovideablended
orhybridenvironment.Throughbothout-of-classandin-classactivities,wewillengageinrelevant
learningexperiencestoimproveretentionandbuildcompetency.Thebenefitofyourworkoutsideof
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classisthatitwillfreeupclasstimeformoreapplicationandinteraction.Onlinequizzesand
homeworkallowyoudosomethingimmediatelywiththeknowledgeimpartedtoyoufromthevideos
andassociatedreadings.Studentshaveindicatedthatthesearevaluableinpreparingforin-class
activities.Myexperienceisthatconsistentstrongpreparationandparticipationalmostalwaysleads
toabetterunderstandingandbetterexamscores,resultinginsignificantlyhighergradesthanyou
wouldotherwiseearnifunpreparedforclass.
PrimaryTopics/Conceptsaddressedinclude:
• IntroductiontoU.S.GAAP,androlesofFASBandSEC
• AccountingProcess
• MappingBusinessActivityintoFinancialStatements–transactionanalysis
• BalanceSheetPresentation–Economicsofmarketvaluevs.balancesheetpresentation
• AccrualAccounting–revenuerecognitionandthematchingprincipleandincomestatement
presentation
• Analysisofworkingcapital,includinganalysisofaccountsreceivableandinventory
• InventoryandCostofGoodssold(includingFIFO,LIFO,WeightedAverage)
• Long-livedassets(tangibleandintangible;costscapitalizeoninitialacquisitionandtreatment
ofcostsincurredsubsequenttoacquisition;depreciationandamortization)
• Leasesandlong-termdebt
• Statementofcashflows
• Stockholders’Equity(earnedcapitalversuscontributedcapital;accountingforstock
issuances,stockrepurchases,dividends)
OverviewofChapterswithAssignedReadings
RefertotheCalendaronWileyEngageforDueDatesofgradedassessments
Chapters1isintendedtoprovideanoverviewoffinancialaccounting,theeconomiccontext,theusersoffinancial
statements,andanintroductiontothreebasicstatements:balancesheet;incomestatement;andstatementofcash
flows.
Assignedreadingfromchapter1ofourtext:
referencingnumberingattopoftextbookpages:2-20[frombeginningtomiddleofsection1.4.5];and26-27
[summary].
Chapter2continuestointroducefinancialstatementsanddistinguishesoperatingversusinvestingversusfinancing
activities.Thisdistinctionisimportanttounderstandingthestatementofcashflows,inparticular.
Understandingthiscontentwillenableyoutoidentifyrelevantfinancialstatementelementsnecessarytoaddress
questionssuchas:
• Whatpercentageofafirm'sassetsisfinancedbycurrentliabilities?Long-termliabilities?Stockholders'equity?
• Canafirmpayoffitscurrentliabilitieswithitsliquidassets?
• Whatpercentofsalesrevenueisspentonemployeecompensation?
• Isthecompanygrowing?
• Howmuchabovethecostofitsproductsdoesacompanychargeitscustomers?
• Willadebtcovenantthatrequirescurrentassetstoexceedcurrentliabilitiesbyaspecificamountaffectacompany's
selectionofshort-termorlong-termfinancingforapieceofmachinery?
• Howmuchofanewlong-termborrowingcanacompanyusetopurchaselandwithoutviolatingadebtcovenant?
• Whatdooverallpatternsofcashflowsacrossoperating,investing,andfinancingactivitiesconveyaboutbusiness
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strategy,performance,andchangesincashbalancesforacompanyovertimeoracrossdifferentfirms?
Assignedreadingforchapter2:
referencingnumberingattopoftextbookpages:30-47[frombeginningthroughsection2.6];and58-59
[summary]
Chapter3introducesbasicprinciples,assumptions,andvaluationbasesthatunderliefinancialaccounting.Thisincludes
thebasicprinciplesofaccrualaccounting:revenuerecognitionprinciple(whentorecordrevenue),andexpense
recognitionormatchingprinciple(whentorecordexpenses).
Assignedreadingfromchapter3:
referencingnumberingattopoftextbookpages:75-76[EconomicEntity,FiscalPeriod,CalendarYearversus
FiscalYear];bottomhalfofpage78[skimsection3.1.5summaryofbasicassumptions];79[valuationsonbalance
sheet,particularlyoriginalcost];82-middle83[historicalcost,adjustedhistoricalcost,principleof
objectivity];bottom84-top87[originalcost;3.3.2principlesofmatchingandrevenuerecognition];88-top
89[3.4.1Materiality].
Chapter4focusesontheapplicationofsomeoftheprinciplesintroducedinchapter3,andpresentsthemechanics*by
whichtransactionsareenteredintoanaccountingsystem(andaffecttheaccountingequation).Chapter4alsodiscusses
thelogicandmechanicsofadjustingentriesmadeattheendofaccountingperiodsbeforethepreparationoffinancial
statements.Theseconceptsarefoundationaltoaccrualaccounting.
*Althoughyourtextbookpresentssomeentriesasjournalentrieswithdebitsandcredits,wewillemphasizeatransaction
analysisapproachinclass.
Assignedreadingfromchapter4:
referencingnumberingattopoftextbookpages:105-111[EconomicEvents,FundamentalAccountingEquation;
BusinessTransactions,theAccounting,Equation,andtheFinancialStatements];bottom119-129[Recognizing
GainsandLosses;PeriodicAdjustments--accruals&deferrals].Note:wewillusetheappendixlaterwithchapter
14.
Chapter5furtherdevelopsideasabouttheuseoffinancialaccountingnumbersforcontrolandprediction.Itaddresses
comparisonsovertime,comparisonsacrossfirms,andtheuseofratiosinfinancialstatementanalysis.
Assignedreadingfromchapter5:
referencingnumberingattopoftextbookpages:163-170[ControlandPrediction;FrameworkforUsingFinancial
Statements;ElementsofFinancialAnalysis;ReadingandStudyingtheFinancialStatementsandFootnotes];
middle173-179[AnalyzingtheFinancialStatements];bottom180-181[SummaryofFinancialRatios];190192[CashFlowAnalysisandCashFlowProfile];192-193[ProjectingFutureFinancialStatements];196-197
[Summary].
Chapter6isthefirstofthreechapters(6,7,and9)thatwilltakeacloserlookatassets.Chapter6focusesonaccounts
receivables.Bytheendofouractivitieswithchapter6,youshouldbeableto:
• Usebalancesheetdatatoidentifytotalaccountsreceivable,calculateanallowanceratio,andevaluate
whethercollectabilityimprovedorworsened.
• Analyzechangesinbaddebtexpenseonincomestatements
• Estimateuncollectibleaccounts(allowancefordoubtfulaccounts)usingagingmethod.
• Identifythefinancialstatementeffectsofunderestimatingbaddebts.
Assignedreadingfromchapter6:
referencingnumberingattopoftextbookpages:226-top230[6.1CurrentAssetClassification];bottom234-241
[AccountsReceivable];middle244-middle249[Agingasmethodofestimatingbaddebts;accountingforsales
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returns;whenshouldareceivableberecorded;balancesheetvaluationofreceivables];bottom253-254
[Summary].
Chapters7focusesonmerchandiseinventory(acurrentasset)andvariouscategoriesoflong-livedassets(bothtangible
andintangible).Inventoryisamajorassetforretailersanditscost(whichwilllaterbeexpensedthroughcostofgoods
sold)isakeydriverofthegrossprofitratio(akeyprofitabilitymetric).Howquicklytheinventoryissold(howquicklyit
turnsover)isalsoimportantinassessingtheefficiencyofafirm'sworkingcapitalmanagement.Chapter7willaddress
waystoassigncostsattheendofaperiodtoinventoryandcostofgoodssoldusingcostflowassumptions(FIFO,LIFO,
andAverage).
Assignedreadingfromchapter7:
referencingnumberingattopoftextbookpages:269-top271[Relativesizeofinventories;accountingfor
inventory];bottom275[onlybasicideaofperpetualmethod];bottom278-top288[7.5SellingInventory:Which
CostFlowAssumption];291-294[ReviewProblemandSummary].
Chapter9addresseslong-livedassets(bothtangibleandintangible),whatcostsshouldbeincludedinthecapitalizedcost
ofthoseassets,theaccountingtreatmentofpost-acquisitionexpenditures,howthecostofalong-livedassetisallocated
overitsusefullifethroughdepreciationoramortizationmethods,andthecalculationofgainsorlossesonthedisposition
oflong-livedassets.
AssignedpagesfromChapter9:
referencingnumberingattopoftextbookpages:356-360[RelativeSizeofLong-livedAssets;FinancialStatement
Effects];361[9.4Whatcoststocapitalize];364-365[9.5Postacquisitionexpenditures:Bettermentsor
Maintenance];bottom365-top375[9.6CostAllocation--DepreciationandAmortization--emphasizestraightlinecalculationsandotherbasicconcepts);376-top378[9.7.1RetirementofLong-LivedAssets;9.7.2Saleof
Long-LivedAssets];379-381[9.8IntangibleAssets;9.9Copyrights,Patents,Trademarks;9.11Goodwill;9.13
ResearchandDevelopmentCosts];383-385[Summary].
Withchapter10,wereviewcurrentliabilitiesandapplysometoolsofanalysis.Thiswillbecloselyrelatedtoupcoming
conceptsinchapter11onlong-termliabilitiesandanalysisofcapitalstructure(debtversusequityfinancing).
Understandingthiswillallowyouto:
• Usebalancesheetandincomestatementdatatoinferhowmuchacompanypaiditssuppliersduringaperiod.
• Identifytheeffectsofgiftcertificateandotherunearned(deferred)revenuetransactions.
• Distinguishcurrentliabilitiesfromlong-termliabilities.
• Identifyadditionalcapacityforcurrentliabilitieswithoutviolatingadebtcovenant.
• Explainthetreatmentassociatedwithdeferredrevenueaccountsintermsoftheprinciplesofrevenue
recognitionandmatching.
• Explainhowananalystwouldlikelyreacttoasharpincreaseintheamountofdeferredrevenueonthebalance
sheet.
AssignedpagesfromChapter10:
referencingnumberingattopoftextbookpages:402-412[Whatisaliability;Relativesizeofliabilitiesand
economicconsequences;Currentliabilitiesandeconomicconsequences;Accountspayable;Short-termnotes;
Currentmaturitiesoflong-termdebts;unearnedrevenue];432-433[Summary].
Chapter11emphasizeslong-termliabilities,includingnotespayable,bondspayable,andleaseobligations.Economic
consequencescreatedbyborrowingandthefinancialstatementimpactofleasingchoicesareaddressed.An
understandingoftheseconceptsshouldallowyouto:
• Calculatetheadditionaldebt(long-termnotespayableorleasingobligation)thatacompanycantakeonbeforeit
violatestermsofaborrowingarrangement.
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• Explainwhyacompanymaywanttostructureleasesasoperatingleases.
• Computetheeffectsondebt-to-equityanddebt-to-assetratiosofoperatingleaseversuscapitalleaseobligations.
• Howanalystscanmakeadjustmentstoratiostobetterevaluatetherelativeleverageandriskofcompaniesthathave
madedifferentleasingchoices.
AssignedpagesfromChapter11:
referencingnumberingattopoftextbookpages:447-top450[Relativesizeoflong-termliabilitiesandeconomic
consequencesofreportinglong-termdebt];456-top458[Bondspayable–basicterminology];466-top470
[Leases];bottom477-479[Summary].
Chapter12examinesaccountingforshareholders’equity.Itreviewsdistinctionsbetweendebtandequity.Itaddresses
howtoaccountforstockissuancesandhowtocomputecontributedcapitalandthebookvalueofeachshareofcommon
stock.Ch12presentshowtoaccountforsharerepurchases(treasurystock).Youshouldalsogainanunderstandingofthe
differencebetweenacompany’sbookvalueanditsmarketvalue.
AssignedpagesfromChapter12:
referencingnumberingattopoftextbookpages:497-top506[relativeimportanceofliabilities,contributed
capital,andearnedcapital;debtandequitydistinguished;economicconsequencesassociatedwitheffectson
financialratios;accountingforshareholdersequity—commonstockandpreferredstock];bottom508-523
[Featuresofcommonstock;marketvalue;bookvalue;parvalue;accountingforstockissuances;treasurystock;
definitionofstockoption;retainedearningsanddividends;negativeretainedearnings];526[Reviewproblem
transactions1,2,3];528-530[Summaryreviewbulletsforthosesectionsassigned].
Chapter14reviewsthestructureofthestatementofcashflows,theindirectmethodofcomputinganddisclosingcash
providedorusedbyoperatingactivities,thenatureoftheadjustmentstoconvertaccrual-basednetincometonet
operatingcashflows,andtheanalysisofthestatementofcashflows.
Assignedreading:
referencingnumberingattopoftextbookpages:590-middle599;609-612;bottom615-617andAppendix4A
131-141–nottheT-accountsbutthenatureofadjustmentsintheoperatingsectionofthestatementofcash
flows.
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