BA 264 - Intermediate Accounting

2. Understand the historical development, role, and theoretical basis of accounting standards.

4. Understand the recording, summarizing, and reporting procedures in the accounting cycle.

5. Understand the format and content of financial statements (Income Statement, Balance Sheet, Statement of Retained Earnings, and Statement of Cash Flows) and be able to prepare each of the four financial statements in proper form.

6. Understand income and expense determination and measurement and recognition issues related to assets and liabilities and understand internal control issues.

7. Understand the valuation and estimation concepts used in developing inventory information

8. Understand proper accounting for property, plant, and equipment and the treatment of disposal and related depreciation. In addition, gain an understanding of the valuation of intangible assets and the related amortization.

9. Possess employable business and accounting skills and work well in teams and with others.
Course Outline:
I. The accounting profession

A. Objective: To provide a brief sketch of the accounting profession, its beginnings, its professional organization, and to identify the sources of generally accepted accounting principles as they are used today.

1. Given a list of accounting organization, briefly identify them and indicate their significance to the accounting profession:

a. APB

b. AICPA

c. SEC

d. Michigan Board of Accountancy

e. MACPA

f. FASB

g. Committee on Accounting Procedures (ARBs)

h. IMA

2. Explain the development process for new accounting standards

II. The conceptual framework of accounting

A. Objective: To demonstrate an understanding of the basic principles and objectives of accounting

1. Given a list of concepts and principles, the student should cite an example of each and use them to justify an accounting choice in situations which there is no guidance:

a. Relevance

i. predictive Value

ii. feedback Value

iii. timelines

b. Reliability

i. timeliness

ii. verifiability

iii. neutrality

c. Comparability

d. Consistency

e. Cost Effectiveness

f. Materiality

g. Conservatism

h. Accounting Entity

i. Going Concern

j. Arm’s Length transaction/Related Parties

k. Accrual Accounting

III. Review of the accounting process

A. Objective: To provide a comprehensive review of the accounting cycle

1. Given transactions and appropriate stationary, the student should complete a problem which requires the student to:

a. Record transactions and post information to the general and subsidiary ledgers

b. Complete adjustments as described in the problem

c. Prepare an Income Statement, Balance Sheet, and Statement of Retained Earnings.

d. Identify and close temporary accounts

e. Reverse appropriate adjusting entries

2. Given a group of improperly recorded items, the student should indicate:

a. The necessary correcting entry

b. The effect of the error on current statements

c. The effect of the error on next years statements, assuming the error went undetected

IV. The statement of income and changes in retained earnings

A. Objective: demonstrate use of revenue recognition, matching and other accounting principles and assumptions in determination of net income. Preparation of an income statement and statement of comprehensive income (single and multi-step formats)

1. Given adjusted accounts, the student should prepare an Income Statement in both single and multi-step formats and a Statement of Retained Earnings.

2. Given income statement data, the student will use intra-period tax allocation procedures for income from continuing operation, discontinued operation, extraordinary items, and changes in accounting principle as appropriate

3. Given data, the student will demonstrate proper financial presentation for each of the following:

a. Prior period adjustments

b. Discontinued operation

c. Extraordinary items

d. Change in accounting principle

V. The Balance Sheet and Statement of Cash Flows

A. Objective: Prepare a properly classified balance sheet

1. Given a list of accounts, classify each account using the classifications provided

2. Given data, prepare a classified balance sheet in report form

3. Given data, prepare a classified balance sheet in financial position format

4. Given an incorrect balance sheet and needed additional information, prepare a proper balance sheet

B. Objective: Preparation of the statement of cash flows

1. Given comparative balance sheets and additional ledger data, prepare a statement of cash flows

VI. Time value of money

A. Objective: demonstrate an understanding of compound interest and present value techniques

1. Given any 3 of the following 4 items, the student should compute the missing item

a. Interest rate (i)

b. Number of periods (n)

c. Present value of an amount (PV)

d. Future value of an amount (FV)

2. Given any 3 of the following 4 items, the student should compute the missing item, for either ordinary annuities or annuities due

a. Interest rate (i)

b. Number of periods (n)

c. Payment (annuity) (pmt)

d. Present value or future value (PV or FV)

3. Student should demonstrate business and accounting applications of these techniques

VII. Cash

A. Objective: demonstrate the importance of a good internal control system for cash

1. Given details of a situation, student will be asked to comment on the internal controls or lack of same

2. Given cash, cash items, and other asset accounts, indicate how they would be arranged properly on a classified balance sheet

B. Objective: Develop an understanding of bank reconciliations for control purposes

1. Given book and bank statement data, the student should reconcile figures to a correct cash balance and make necessary entries to adjust the book cash balance

2. Given book and bank statement data, the student should develop a four-column reconciliation of receipts and disbursements to the correct cash balance

VIII. Marketable securities

A. Objective: Develop an understanding of the presentation of marketable securities on the statements

1. Given data, student will present marketable securities on the financial statements using cost or market.

2. Given information student will make necessary entries to:

a. Purchase marketable securities

b. Record revenue earned

c. Record adjustments to market for Trading or Available for Sale securities

d. Sell a marketable securities

IX. Receivables

A. Objective: Valuation of accounts receivable for balance sheet presentation; through the use of an allowance account

1. Given ledger information, the student should adjust the allowance by:

a. Increasing it by a percent of sales

b. Increasing it by a portion of total accounts receivable (aging the receivables)

2. Given account information, the student should

a. Write off an uncollectible when an allowance is maintained

b. Write off an uncollectible account when no allowance is maintained

c. Record collection of an account after it has been written off as uncollectible (reinstate the account)

B. Objective: demonstrate financing through use of receivables

1. Prepare entries and show financial statement presentation of financing by assignment of receivables

2. Prepare entries and financial statement disclosure of financing by factoring of receivables

X. Inventory cost allocation, estimating, and valuation

A. Objective: Illustrate and describe the most common inventory cost allocation methods

1. From a set of data, the student should record purchase and sale transactions and determine the proper ending inventory valuation using

a. Periodic FIFO

b. Periodic LIFO (unit lifo)

c. Periodic Weighted Average

d. Perpetual FIFO

e. Perpetual LIFO

2. The student should cite three advantages and three disadvantages of the LIFO method

B. Objective: Proper treatment of cash discounts on merchandise purchases

1. Prepare entries and portion of income statement treating purchase discounts as

a. Reduction of purchase cost using the gross method

b. Reduction in purchase cost using the net method

C. Objective: demonstrate importance of accurate physical inventory for income determination

1. Given a list of items which may or may not be included in the inventory, determine the correct ending inventory for statement purposes

2. Given a situation, the student will indicate the effect of an inventory error made in one period and its effects on future periods

a. Make an appropriate correcting entry for the prior period error, assuming it is discovered in the period following the error

b. Indicate the effect of such error inventory if it went undetected on succeeding years statements

D. Objective: Describe and illustrate use of lower of cost or market with floor and ceiling limitations according to ARB No. 43 1. Given cost, selling price, current replacement cost, normal selling expenses, and normal profit for an item, determine the appropriate value for an item in the inventory

E. Objective: demonstrate use of inventory estimation procedures

1. Given average gross profit, student will compute ending inventory when sales, purchases, and beginning inventory figures are provided

2. Given beginning inventories, purchases, markups, markdown, sales, transfers, etc., the student will estimate the ending inventory at both cost and retail using conventional retail method

3. Given data and appropriate price index, determine the value of an inventory using dollar value LIFO

4. Given information at cost and retail and appropriate index, determine the inventory using retail LIFO technique

XI. Plant and Intangible Assets - Acquisition, Depreciation & Retirement

A. Objective: Record acquisitions of property and equipment

1. Student will record acquisitions of land, bldg., and equipment by:

a. Cash purchase

b. Exchange

c. Deferred payment

d. Self-construction

2. Given a list of items, indicate whether they should be charged to land, building, equipment, or expensed in the current period

3. Indicate how Patents, Copyrights, Trademarks, Goodwill, Organization Costs, and Franchises are treated for accounting purposes

B. Objective: Allocation of cost of asset over its service life

1. Determine depreciation using the following methods:

a. Straight line

b. Sum-of-the-year-digits

c. Declining balance

d. Units of production

e. MACRS (Modified Accelerated Cost Recovery System) 1986 tax revision

C. Objective: Record the retirement of an asset

1. Given account data, record the sale of a plant asset

2. Given account data, record the exchange of similar and dissimilar assets when gains or losses result, and cash is either paid or received given data, record loss of an asset through fire or other casualty when there is insurance coverage

Facilitated Discussion: 20-60%

Group Work: 0-20%

Mediated Instruction: 0-20%
Mandatory Course Components:
Graded homework and exams.
Equivalent Courses:
None