Basic Accounting: Concepts, Techniques and Conventions

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Southern New Hampshire University (SNHU)
School of Business – Graduate Programs – www.snhu.edu
Managerial Accounting - ACC 500

CHAPTER 15
COVERAGE OF LEARNING OBJECTIVES

LEARNING OBJECTIVE
FUNDAMENTAL
ASSIGNMENT
MATERIAL
ADDITIONAL ASSIGNMENT MATERIAL EXCEL,
COLLAB., & INTERNET EXERCISES
LO1: Read and interpret the basic financial statements. 19, 20, 25, 30
36 43
LO2: Analyze typical business transactions using the balance sheet equation. A1, A2, B1, B2 22, 23, 26, 27
28, 29, 30, 31
36, 37 41, 42
LO3: Distinguish between the accrual basis of accounting and the cash basis of accounting. A3, B3 21, 36
LO4: Relate the measurement of expenses to the expiration of assets. 27 42
LO5: Explain the nature of dividends and
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Most businesses tend to have net losses during their infant months, so Srinivas 's ability to show a net income for April is good. Indeed, the rate of return on beginning investment is $4,000 ÷ $120,000 = 3.33% per month, or 40% per year. Many points can be raised, including the problem of maintaining an "optimum" cash balance so that creditors can be paid neither too quickly nor too slowly. See the next solution also.

15-A3 (5-10 min.)

Revenue (cash basis): Cash sales $30,000 Cash collected from credit customers 15,000
Total revenue $45,000

The accrual basis provides a more accurate measure of economic performance. As long as the two recognition criteria are met (earned and realized), the $100,000 measure of revenue on the accrual basis is preferred to the $45,000 measure of revenue on the cash basis. The $100,000 is the more accurate measure of accomplishments for April.

15-B1 (10-15 min.)

This is straightforward. Computations are in millions of dollars.

A = 8,363.2 - (4,213.5 +2,921.3) = 1,228.4 B = 2,589.0 + 907.0 = 3,496.0 C = 2,921.3 – 907.0 – 0.0 +2.2 = 2,016.5 D = 4,213.5 + 136.6 = 4,350.1 E
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