NEW YORK UNIVERSITY Stern School of Business

Transcription

1 NEW YORK UNIVERSITY Stern School of Business B Spring 2005 Financial Accounting & Reporting Professor Joshua Ronen Section 30: Monday 6:00 9:00 Section 31: Tuesday 6:00 9:00 Section 35: Wednesday 6:00 9: Tisch Hall Phone; Fax -- Web Site: Teaching Assistant for B Monica Wuebbling Tel: Teaching Assistant for B Juan Camilo Reyes Tel: Teaching Assistant for B Rana Kashani Tel: Course Description This course provides an introduction to the fundamental concepts of financial accounting. Its purpose is to help students become intelligent readers of the main financial accounting reports (balance sheet, income statement, and cash flow statement). The perspective taken is that these reports provide information that is useful for resource allocation decisions in a broad sense. The informativeness of these reports is determined both by the cash and accrual accounting methods used to generate the reports and by the market and institutional settings in which resource allocation decisions are made. Corporations generate data that are useful for internal decision making. These decisions include pricing, quantity of production, mix of products, advertising, distribution decisions and a myriad of other decisions that are necessary for the day to day operations of the firm as well as for long term strategic policy formulations. Not all of these data, however, are communicated externally to stakeholders in the organization. These stakeholders include stockholders, lenders, suppliers, consumers, government, and many other bodies for whom the external financial reports provided by organizations can be potentially important in making their own decisions on resource allocation. Financial accounting pertains to the content of those external financial communications, what governs these communications, how they are prepared, and what could they potentially mean to the reader. Clearly, the financial information externally communicated is a subset of the financial data internally generated. Decisions on what subset to select for external reporting are part of what is generally referred to as financial accounting theory. Thus, a theory of financial accounting specifies

2 B Spring 2005 how standards for accounting choices are set and how managers may exercise discretion in the choice among such accounting methods when deciding on how to report an outcome of a given transaction and how to describe such a transaction. This course touches on the elementary features of the financial accounting system within the typical corporation and while the emphasis is primarily on understanding what the information contained in the financial reports means and how it could be used in making decisions, a prerequisite for this understanding is knowledge of the methods and the techniques used in generating the information and in the selection of those subsets of events that are chosen for description, recording, and ultimate dissemination. Generally, the course will provide an overview of cash and accrual accounting measures, financial reports, and the market and institutional settings in which resource allocation decisions take place. Also, specific accounting methods and use of accounting information in valuing firms will be briefly discussed as well. A typical content outline of the course would cover the nature of financial statements, the balance sheet and the income statement, analysis of transactions, revenue and expense recognition, cash flow statement, concepts of present and future values, inventory and cost of goods sold, long lived assets and depreciation and amortization expense, marketable equity securities, debt financing and interest expense, stockholders equity, leases, taxes, and inter-corporate investments. The course has no prerequisites. A copy of the textbook is on reserve in the periodicals sections of Bobst Library. You may also purchase the student study guide to accompany the text at the bookstore or you may borrow my copy for limited time periods. Office Hours My office hours are by appointment (room 313 Tisch Hall, ). My Teaching Assistants office hours will be announced, and will be held in KMEC The Teaching Assistants will be able to answer any questions related to the covered material including problems that may arise in connection with the homework. They can be reached via Monica Wuebbing mcw254@stern.nyu.edu, Juan Camilo Reyes jcr262@stern.nyu.edu and Rana Kashani rk699@stern.nyu.edu Teaching Philosophy I believe the most efficient use of class time aims at reinforcing what the student has tried to achieve on an individual basis before entering the classroom. In the classroom learning is achieved by (a) whole-hearted and serious studying of the assigned readings and solving the assigned problems or cases; (b) discussions of the material by the students and teacher in class; and (c) my underscoring of important points via short lectures. I do not give lectures per se. In light of this, adequate preparation for the class and participation during class are essential. Assignments The readings and assignments for the course are attached. All homework assignments are included in ALEKS (see instructions below under ALEKS) and should be completed before the class 2

3 B Spring 2005 sessions to which they are assigned. The assignments comprise exercises, multiple-choice questions and problems contained in the ALEKS online system. Accordingly, they maybe completed online and would not need to be handed in. Exams There will be one midterm and a final. There will be no makeup for the exams. By the nature of accounting, the exams will be somewhat cumulative, but will emphasize the material since the prior exam. Also, there will be one quiz for each class session to be completed in ALEX after the class session but before the dates indicated in the attached calendar. Both the Midterm Exam and Final Exam are open book and notes. You will be allowed to bring to each exam a calculator. Presence If you are absent, you are responsible for what you have missed. From past experience, here is my advice: do not plan on missing classes on a regular basis. Class material is often not covered in your textbook/reading materials. Grading Policy Midterm Exam 1 25% Final Exam 1 35% Quizzes 2 20% Homework 3 20% 1. Grading will be re-weighted to take into account improvement over the semester. If a student s mean-adjusted score for the Final Exam improves relative to the meanadjusted score for the Midterm Exam, then the weight on the Midterm Exam is reduced by 10 points, and the weight on the Final Exam is increased by 10 points. Final course grades will adhere to the school mandated core grade distribution. If you feel that an Exam has been incorrectly graded, submit a written analysis of why you believe you were improperly graded within one week of the announcement of the grades. Requests made after that will not be considered. The entire Exam will be regraded points toward your final grade will be based on your performance on quizzes in ALEKS. At the end on the course, the percentage scores you have received on all quizzes will be averaged, and this average applied to the total of 20 points (e.g., an average quiz score of 79% will produce a quiz grade.79 x 20 = 15.8) points toward your final grade will be based on your completion of work in ALEKS, 5 points at the completion of each module. The modules are to be completed according to the following schedule: Accounting Cycle February 28 Assets March 28 Current Liabilities April 04 3

4 B Spring 2005 Corporations May 09 At the completion of each module, percentage you have completed in the Mastery pie for that module will be applied to 5 points to determine the number of points earned, as follows: 20-39% 1 point 40-59% 2 points 60-79% 3 points 80-89% 4 points % 5 points Text (1) Libby, Libby, and Short, Financial Accounting (4 th Edition, McGraw-Hill/Irwin, 2004, referenced as LLS in the syllabus.) (2) Lane and Schrand, MBA Companion to accompany Financial Accounting 4e. (3) ALEKS an online education system. Passwords and IDs will be assigned to you in advance. (No need to purchase ALEKS, this will be given to the students) ALEKS A central requirement for this course is the regular and productive use of ALEKS. ALEKS is an online system supporting your mastery of Accounting concepts and procedures; your work in ALEKS will constitute a significant part of your final grade in the course (see below). ALEKS is used over the World Wide Web; each of you will have a password-protected account in ALEKS which you can access from any computer connected to the Internet. All records of your work are kept on the ALEKS servers, not on the local computer. In ALEKS, you are assessed at regular intervals and guided in learning appropriate material, based on assessment results and on your continuing progress. At any given time during your use of ALEKS you will be in one of four "modules" (Accounting Cycle, Assets, Current Liabilities, Corporations), and, within the module, you will have a certain limited set of topics which are available to you. These topics are those for which you have demonstrated readiness; you must complete them in order to move forward in the material. As you progress, new topics will continually become available to you, but you cannot skip ahead to new topics before your readiness for them has been established. Further, the topics in ALEKS are divided up into units or "Chapters," each with a due date corresponding to the date of the class meeting on which those topics will be discussed. You should complete the material in ALEKS as preparation for your class meetings, in order to receive the maximum benefit from class time. After the class meeting, you should complete the Quiz in ALEKS corresponding to that unit. Your quizzes can be found in your ALEKS account by clicking the "Quiz" button. The quiz for any class meeting must be completed in the two days following the meeting; after that, it will become unavailable. *Registration with ALEKS.* In order to register with ALEKS you must purchase an ALEKS User's Guide from the campus bookstore. Inside the back cover of the User's Guide, you will 4

5 B Spring 2005 find a 20-character Access Code. Also, you will need a 10-character Course Code. You need to have both the Access Code and the Course Code in order to register. Your course codes are the following: Course # & Section TA Course Code B Monica Wuebling VQQCP-HHE4C B Juan Camilo Reyes FHVEC-LCPLC B Rana Kashani MXLDV-NWCH9 When you have the Access Code and Course Code, go to the following website: Click on the button to upper left marked "Click here to Register with ALEKS." You will be prompted, first, for the Course Code, then for your name and (optionally) address and Student ID, and finally for your Access Code. You will be provided with a Login Name and Password for subsequent access to your account. The first time that ALEKS is accessed from a given computer, the ALEKS plugin will be installed on that computer. This is a small (5 MB) software component that is needed by ALEKS, provided free of charge to all ALEKS users. Normally, installation is fully automatic, and requires only a minute or so. If there is any difficulty with installation, please contact ALEKS Customer Support: ALEKS Corporation Customer Support support@aleks.com (714) x201 You can access your account subsequently from the same website as given previously, using your Login Name and Password. You will not need to use your Access Code or Course Code again. After Registration you will take a brief "Tutorial," or Introduction to the ALEKS tools, followed by your first assessment. You have the option of skipping your initial assessment; if you do so, ALEKS will assume that you have no prior knowledge of Accounting. If you have any knowledge of Accounting, it is in your best interests to take the assessment; otherwise you might have to spend some time working through topics that you already know. *ALEKS Assessments.* All ALEKS assessments are adaptive, meaning that the questions asked are adjusted based on the answers given. The more knowledge you show, the more advanced the questions you will be asked. ALEKS assessments cover all topics in the current module, and are "blind," meaning that the results are not affected by your previous work in ALEKS. It is possible that an assessment will show that you have forgotten some material you previously learned; in this case you will need to review that material after the assessment, before moving on to new topics. 5

6 B Spring 2005 On all ALEKS assessments, you should take particular care in how you use the "I don't know" button. If you click "I don't know," ALEKS will believe that you do **not** know that topic, regardless of what you have done in the past in ALEKS, and will require you to review it following the assessment. So, don't click "I don't know" unless you are truly unfamiliar with that topic. If you have any idea of how to answer the question, give it your best shot. *ALEKS Learning Mode.* Most of your time in ALEKS will be spent in Learning Mode, working practice problems. ALEKS can provide a practically infinite variety of algorithmicallygenerated practice problems, but in most cases you will only do a few problems per topic in order to establish your grasp of the concept. Every time you do a problem, ALEKS will give you immediate feedback on your answer and tell you how many more problems you need to do for that topic. Note that if you make mistakes, ALEKS requires a little extra practice, but it doesn't start you over; you always get credit for the problems which you have answered correctly. 6

7 Section Date Course # Lecture Content Homework Due 1 2/7 B LLS, Ch. 1, familiarize accnt001 Information classification into assets, liabilities, and change of equity 2/8 B yourselves with the accnt002 Information classification into revenue, expense, or other 2/9 B American Eagle accnt003 Account classification into financial statements Introduction, outfitters and accnt004 Information classification into financial statements Overview of Abercrombie & Fitch accnt005 Effects of a transaction on assets, liabilities, and equity Financial Statements Annual Reports; LLS accnt007 Components of annual report and Business Ch. 2 accnt008 Balancing the basic accounting equation Decisions, Investing accnt009 Changes to stockholders' equity: Problem type 1 and Financing accnt010 Changes to stockholders' equity: Problem type 2 Decisions and the accnt011 Completing a corporate balance sheet Balance Sheet accnt012 Completing an income statement accnt013 Completing a retained earnings statement accnt014 Effect of transactions on accounts accnt301 Creating a basic income statement accnt302 Creating a basic equity statement accnt303 Creating a basic balance sheet accnt304 Basic tabular transaction 2 2/14 B /15 B /16 B Operating Decisions and the Income Statement LLS, Ch. 3 accnt016 Normal account balances accnt017 Trial balance errors accnt018 Basic journal entry with the step-through method accnt019 Journalization of transactions accnt020 Ending balances of accounts accnt021 Adjusting entry calculations accnt022 Adjusting entries: Accruals accnt023 Adjusting entries with deferrals: Problem type 1 accnt024 Adjusting entries with deferrals: Problem type 2 accnt028 Permanent and temporary accounts 3 2/28 B /22 B /23 B LLS, Ch. 4 and 5 accnt025 Property, plant, and equipment section of a balance sheet: Basic problem accnt026 Effects of adjusting entries on financial statements: Problem type 1 accnt027 Effects of adjusting entries on financial statements: Problem type 2 7

8 The Adjustment Process and Statement Preparation; Communicating and Interpreting Accounting Information 4 3/7 B /1 B /3 B Reporting Cost Flows 3/14 B /15 B /16 B accnt029 Closing entries accnt030 Effects of closing entries on account balances accnt031 Correcting entries accnt032 Reversing entries: Selecting which entries should be reversed accnt033 Reversing entries: Preparing a reversing entry accnt034 Creating a balance sheet with asset depreciation accnt305 Balance sheet subtotals accnt307 Balance sheet classification LLS, Ch. 13 accnt200 Statement of cash flows transaction classification accnt201 Transactions affecting cash flow, net income, or both accnt203 Statement of cash flows: Operating activities, direct method accnt202 Statement of cash flows: Operating activities, indirect method accnt209 Preparation of statement of cash flows: Indirect method accnt220 Statement of cash flows: Effects of selling equipment accnt204 Computing cash from investing activities accnt205 Computing cash from financing activities accnt206 Statement of cash flows: Property, plant, and equipment Spring Recess 5 3/21 B /8 B /9 B Reporting and Interpreting Assets; Receivables and Revenue Recognition; Revision Session LLS, Ch. 6 (omit pp ) accnt054 accnt064 accnt065 accnt066 accnt067 accnt068 accnt069 accnt070 accnt071 accnt073 Cash and cash equivalents Maturity dates Computing interest on a promissory note Computing principal, interest rate, or term of a promissory note Bad debts expense: Direct write-off method Bad debts expense: Percentage of sales method Bad debts expense: Balance sheet approach Allowance method: Journal entry Notes receivable: Basic journal entry Notes receivable: Recording accrued interest 8

9 accnt076 accnt077 Accounts receivable in the balance sheet Changes to net realizable value 6 3/28 B /22 B /23 B Midterm Exam 7 4/4 B /29 B /30 B Reporting and Interpreting Inventories LLS, Ch. 7 accnt078 Inventory costs accnt079 FIFO versus LIFO accnt080 Inventory errors: Problem type 1 accnt082 Inventory errors: Problem type 2 accnt084 Merchandise inventory calculation: FOB and consigned goods accnt085 Use of periodic inventory system for merchandise inventory calculation: Problem type 1 accnt086 Use of periodic inventory system for merchandise inventory calculation: Problem type 2 accnt087 Use of perpetual inventory system for merchandise inventory calculation accnt088 Income statement with periodic inventory: Problem type 1 accnt089 Merchandise inventory: Lower of cost or market method accnt092 Income statement with periodic inventory: Problem type 2 accnt093 Periodic inventory: Buyer's entries accnt094 Perpetual inventory: Adjusting the Merchandise Inventory account accnt095 Income statement with periodic inventory: Problem type 3 8 4/11 B /5 B /6 B Long-Lived Assets; Reporting and Interpreting Liabilities LLS, Ch. 8 and Ch. Supplement 8A; MBA Companion (pp ) accnt096 accnt097 accnt098 accnt099 accnt101 accnt102 accnt103 accnt104 Acquisition of an asset Acquisition of an asset: Date to compute depreciation Revenue versus capital expenditures Straight-line depreciation of asset purchased at beginning of year Double-declining-balance depreciation of asset purchased at beginning of year Sum-of-the-years'-digits depreciation of asset purchased at beginning of year Straight-line depreciation of asset purchased during the year Units-of-production depreciation of asset purchased during the year 9

10 accnt105 accnt106 accnt107 accnt108 accnt110 accnt111 accnt112 accnt113 accnt114 accnt115 accnt116 accnt117 Double-declining-balance depreciation of asset purchased during the year Sum-of-the-years'-digits depreciation of asset purchased during the year Revision of depreciation Amortization calculations Depletion Scrapping an asset Selling an asset Trading an asset: Unlike (dissimilar) exchange Trading an asset: Like (similar) exchange for financial reporting purposes Trading an asset: Like (similar) exchange for tax purposes Revenue versus capital expenditures: Journal entry Property, plant, and equipment section of balance sheet: Advanced problem 9 4/18 B /12 B /13 B Present values and Leases; Reporting and Interpreting Bonds LLS, Ch. 9 (pp only); MBA Companion (pp. 1-19); LLS, Ch. 10 accnt118 Accounting for contingencies accnt119 Interest computation with notes payable: Problem type 1 accnt120 Interest computation with notes payable: Problem type 2 accnt030 Effects of closing entries on account balances accnt132 Accounting for accrued interest payable: Journal entries accnt133 Accounting for issued note payable on account: Journal entry accnt134 Accounting for short-term note payable: Journal entry accnt141 Revenue recognition: Basic questions accnt177 Cash received from issuance of bonds accnt178 Computing the amount of discount or premium of bonds accnt179 Computing the carrying value of bonds accnt180 Computing the semiannual interest payment of bonds accnt181 Straight-line method of amortization of bonds accnt182 Selling price of a bond: Problem type 1 accnt183 Selling price of a bond: Problem type 2 accnt184 Effective-interest method of amortization of bonds accnt185 Effective-interest method vs. straight-line method of amortization of bonds accnt186 Issuance of bonds: Journal entry accnt187 Bonds issued between interest dates: Journal entry accnt188 Straight-line method of amortization of bonds: Journal entry 10

11 10 4/25 B /19 B /20 B Reporting and Interpreting Stockholders Equity. 11 5/2 B /26 B /27 B Reporting and Interpreting Investments; Catch up and Review accnt189 Effective-interest method of amortization of bonds: Journal entry accnt190 Retirement of bonds accnt192 Balance sheet presentation of bonds LLS, Ch. 11 accnt159 Annual dividends for preferred stock accnt160 Preferred stock and common stock dividends accnt164 Treasury stock entries accnt163 Issuance of stock entries accnt165 Issuing stock in exchange for fixed assets accnt161 Stockholders' equity: General questions accnt162 Stockholders' equity: Book value per share accnt167 Preparation of stockholders' equity section of the balance sheet accnt166 Preparation of corrected stockholders' equity section of the balance sheet accnt170 Earnings per share accnt172 Cash dividend entries accnt168 Income statement classification accnt175 Preparing a corporate income statement accnt176 Preparing a statement of retained earnings LLS, Ch. 12 accnt193 Marketable securities: Computing unrealized gains and losses accnt194 Cost method entries accnt195 Equity method entries accnt196 Investment in bonds entries: Bond purchase accnt197 Investment in bonds entries: Receipt of interest Computing unrealized gains and losses for marketable securities: Journal accnt198 entry Financial statement effects of unrealized gains and losses for marketable accnt199 securities accnt218 Cost method: Financial statement effects accnt219 Equity method: Financial statement effects 12 5/9 B /10 B /11 B Final Exam Regular Class Time and Place 11

12 SUN Due Dates for the Quizzes Spring 2005 FEBRUARY MON TUE WED THU FRI SAT Ch Ch. 3 8 Ch Ch Ch Ch Ch. 1-2 Q Ch. 3 Q Ch Q Q Q Q Q Q

13 SUN 6 MARCH MON TUE WED THU FRI SAT 7 Ch Ch Ch. 6 2 Ch. 13 Q Ch. 6 Q Q Q. 6 4 Q Q Ch Midterm 22 Midterm 29 Ch Midterm Q Ch Q. 7 13

14 SUN APRIL MON TUE WED THU FRI SAT 1 Q Ch Ch Ch Ch Ch Ch Ch Ch Ch. 8 Q Ch Q Ch. 11 Q Ch. 12 Q Q Q Q Q Q Q Q Q

15 SUN MAY MON TUE WED THU FRI SAT 2 Ch Final 3 Final 4 Final Q