Principles of Accounting

Federal Budget http://www.whitehouse.gov/omb/budget/historicals Receipts Outlays Surplus or Deficit (–) 2000 2,025,191 1,788,950 236,241 2001 1,991,082 1,862,846 128,236 2002 1,853,136 2,010,894 -157,758 2003 1,782,314 2,159,899 -377,585 2004 1,880,114 2,292,841 -412,727 2005 2,153,611 2,471,957 -318,346 2006 2,406,869 2,655,050 -248,181 2007 2,567,985 2,728,686 -160,701 2008 2,523,991 2,982,544 -458,553 2009 2,104,989 3,517,677 -1,412,688 2010 2,162,706 3,457,079 -1,294,373 2011 2,303,466 3,603,059 -1,299,593 2012 2,449,988 3,536,951 -1,086,963 2013 2,775,103 3,454,647 -679,544 2014 3,021,487 3,506,089 -484,602 2015 estimate 3,176,072 3,758,577 -582,505 2016 estimate 3,525,179 3,999,467 -474,288 2017 estimate 3,754,980 4,217,798 -462,818 2018 estimate 3,944,415 4,423,296 -478,881 2019 estimate 4,134,973 4,652,637 -517,664 2020 estimate 4,332,242 4,886,367 -554,125 Table 1.1—SUMMARY OF RECEIPTS, OUTLAYS, AND SURPLUSES OR DEFICITS (–): 2000-2020 (in millions of dollars) Year Total Federal Budget Chapter 14 Chapter Summary – We learned about… 1-75 1. The budgeng process and the beneﬁts it provides. 2. The relaonship between budgeng and human behavior. 3. A sales budget and related schedule of cash receipts. 4. Preparaon of an inventory purchases, cost of goods budgets and related schedule of cash payments. 5. Preparaon of a selling and administrave expense budget and related schedule of cash payments. 6. Preparaon of a cash budget. 7. Preparaon of a pro forma income statement, balance sheet, and statement of cash ﬂows. Problem 16-2 from HW4 1-76 Backups 1-77 Diﬀerent Budgets in a company in real life • Strategic Plan – 3-5 year roadmap for company – Assembled before master budget/ Spring or Summer – Underpins all budgets – Contains long-term ﬁnancial direcon • Master Budget – Usually assembled for next year in Fall for a calendar year ﬁscal year company – Includes operang budgets, capital budgets and pro-forma ﬁnancial statements • Income statement, balance sheet, cash ﬂow • In order to complete a master budget most eﬀecvely, one will need targets, assumpons and priories set forth by management and/or budget commiee which need to link to the strategic plan 1-78

MGT | 45 | Principles of Accounting | lecture notes | Federal Budget http://www.whit

PS_3_Summer_2016.xlsx.pdf-Problem 9-1 Conroe Company reported the

AAPL Trend Analysis a picture is worth a 1,000 words 1-10 2010 2011 2012 2013 2014 2015 Annual Net Sales $65,225 $108,249 $156,508 $170,910 $182,795 $233,715 $- $50,000 $100,000 $150,000 $200,000 $250,000 $ millions Net sales (in $millions) Vercal Analysis • Vercal analysis uses percentages to compare individual components of ﬁnancial statements to a key statement ﬁgure. • Vercal analysis compares within the same period • A common-size ﬁnancial statement is a vercal analysis in which each ﬁnancial statement item is expressed as a percentage of a given measure. 1-11 Vercal Analysis of Income Statement • In income statements, all items are usually expressed as a percentage of sales. 1-12 Milavec Company Vercal Analysis 1-13 AAPL Income Statement Vercal Analysis 1-14 (In millions, except number of shares which are reflected in thousands and per share amounts) Three years ended September 26, 2015 2015 % sales 2014 % sales 2013 % sales Net sales $ 233,715 100% $ 182,795 100% $ 170,910 100% Cost of sales 140,089 60% 112,258 61% 106,606 62% Gross margin 93,626 40% 70,537 39% 64,304 38% Operating expenses: Research and development 8,067 3% 6,041 3% 4,475 3% Selling, general and administrative 14,329 6% 11,993 7% 10,830 6% Total operating expenses 22,396 10% 18,034 10% 15,305 9% Operating income 71,230 30% 52,503 29% 48,999 29% Other income and expense 1285 1% 980 1% 1156 1% Income before provision for income taxes 72,515 31% 53,483 29% 50,155 29% Provision for income taxes 19,121 8% 13,973 8% 13,118 8% Net income $ 53,394 23% $ 39,510 22% $ 37,037 22% Vercal Analysis of Balance Sheet • For balance sheets, all items are usually expressed as a percentage of total assets. 1-15 Milavec Company Vercal Analysis 1-16 AAPL Balance Sheet Vercal Analysis 1-17 (In millions, except number of shares which are reflected in thousands) 9/26/2015 % Total 9/27/2014 % Total 9/28/2013 % Total ASSETS: Current assets: Cash and cash equivalents $ 21,120 7% $ 13,844 6% $ 14,259 7% Short-term marketable securities 20,481 7% 11,233 5% 26,287 13% Accounts receivable, less allowances of $53 and $55, respectively 16,849 6% 17,460 8% 13,102 6% Inventories 2349 1% 2111 1% 1764 1% Deferred tax assets 5,546 2% 4,318 2% 3,453 2% Vendor non-trade receivables 13,494 5% 9,759 4% 7,539 4% Other current assets 9,539 3% 9,806 4% 6,882 3% Total current assets 89,378 31% 68,531 30% 73,286 35% Long-term marketable securities 164,065 56% 130,162 56% 106,215 51% Property, plant and equipment, net 22,471 8% 20,624 9% 16,597 8% Goodwill 5,116 2% 4,616 2% 1,577 1% Acquired intangible assets, net 3,893 1% 4,142 2% 4,179 2% Other assets 5,556 2% 3,764 2% 5,146 2% Total assets $ 290,479 100% $ 231,839 100% $ 207,000 100% LIABILITIES AND SHAREHOLDERS’ EQUITY: Current liabilities: Accounts payable $ 35,490 12% $ 30,196 13% $ 22,367 11% Accrued expenses 25,181 9% 18,453 8% 13,856 7% Deferred revenue 8,940 3% 8,491 4% 7,435 4% Commercial Paper 8,499 3% 6,308 3% Current portion of long term debt 2,500 1% Total current liabilities 80,610 28% 63,448 27% 43,658 21% Deferred revenue – non-current 3,624 1% 3,031 1% 2,625 1% Long Term Debt 53,463 18% 28,987 13% 16,960 8% Other non-current liabilities 33,427 12% 24,826 11% 20,208 10% Total liabilities 171,124 59% 120,292 52% 83,451 40% Commitments and contingencies Shareholders’ equity: Common stock 27,416 9% 23,313 10% 19,764 10% Retained earnings 92,284 32% 87,152 38% 104,256 50% Accumulated other comprehensive income/(loss) -345 0% 1,082 0% -471 0% Total shareholders’ equity 119,355 41% 111,547 48% 123,549 60% Total liabilities and shareholders’ equity $ 290,479 100% $ 231,839 100% $ 207,000 100%

MGT | 45 | Principles of Accounting | lecture notes | AAPL Trend Analysis a picture 

MGT_45_Chapter_4.pptx-MGT 45: Principles of Accounting Tuesday

Learning Objecve 5 Explain how accounng for credit card sales aﬀects ﬁnancial statements. 1-36 Credit Card Sales • Rather than maintaining a credit granng department, many companies ﬁnd it cost beneﬁcial to accept credit cards. • The credit card company deducts a fee, usually between 2% and 8%, from the gross amount of the sales, and pays the merchant the net balance (gross sales less credit card fee). • For a cost, let some other party collect and take the collecon risk 1-37 Credit Card Sales Event 1 Recording a Credit Card Sale Allen's Tutoring Services accepts a credit card in payment for services of $1,000. The credit card company charges a fee of 5% of the gross sale. Asset Source Assets = Liab. + Accounts Receivable = + Common Stock + Retained Earnings Revenue - Expenses = Net Income Cash Flow 950 = n/a + n/a + 950 1,000 - 50 = 950 n/a Stockholders' Equity 1-38 Credit Card Sales Event 2 Collecon of a Credit Card Receivable Allen's Tutoring Services collects the full amount due from the credit card company. Asset Exchange = Liab. + Cash + Accts. Rec. = + Com. Stk. + Retained Earnings Revenue - Expenses = Net Income Cash Flow 950 + (950) = n/a + n/a + n/a n/a - n/a = n/a 950 OA Assets Stockholders' Equity 1-39 Learning Objecve 6 Explain how the 4 diﬀerent inventory cost ﬂow methods (speciﬁc idenﬁcaon, FIFO, LIFO, and weighted average) aﬀect ﬁnancial statements. 1-40 Inventory Cost Flow Methods and how the inventory is valued Four Common Inventory Cost Flow Methods Speciﬁc Identiﬁcatio n First-in, First-Out (FIFO) Last-in, First-Out (LIFO) Weighted Average 1-41 Speciﬁc Idenﬁcaon • When a company’s inventory consists of many high- priced, low-turnover goods, the record keeping necessary to use speciﬁc idenﬁcaon is more praccal. 1-42 • What is turnover? First-in, First-out or FIFO The ﬁrst-in, ﬁrst-out cost ﬂow method requires that the cost of the items ﬁrst purchased ﬁrst be assigned to Cost of Goods Sold. Most logical, most popular 1-43 Assume TMBC Company purchased two idencal inventory items: the ﬁrst for $100 and the second for $110. Using ﬁrst-in, ﬁrst-out , the cost assigned to the ﬁrst item sold would be $100 (the ﬁrst cost in). The cost of goods sold assigned to the second item sold would be $110. Assuming same price per unit, proﬁt would be higher for item 1. First-in, First-out or FIFO 1-44 The last-in, ﬁrst-out cost ﬂow method requires that the cost of the items purchased last be assigned to Cost of Goods Sold ﬁrst . This method has tax advantages due to normally recording higher cost of goods sooner. Not always…. Can help with cash ﬂow Last-in, First-out or LIFO 1-45

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