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Please see the graded project section of the PDF file, on Pg 27

Please see the graded project section of the PDF file, on Pg 27 of the actual pages in the study guide.  Then could you look over my actual work and see if I did my work correctly. I was getting stuck and wanted a second opinion before turning this project in. I really don't want to fail this course if I can just fix something before I turn it in. Thank you so much!!!!!!

Study Guide



Financial Accounting




Jim Burcicki



About the Author


Jim Burcicki holds a B.S. in Accounting from King?s College,



graduating magna cum laude as an adult learner. He began as



a bookkeeper for a hospitality group that included three 2,000-



person banquet facilities, a Best Western, and historical landmark


hotels. After obtaining his degree, Jim worked as an accounting


software consultant for a large, regional public accounting firm.



He installed customized accounting software in businesses with



revenues ranging from $5 million to $150 million. Jim currently



teaches business programs as a Senior Instructor at Penn Foster



College. Jim is a proud veteran of the United States Army, having


served from 1977 to 1981.



All terms mentioned in this text that are known to be trademarks or service


marks have been appropriately capitalized. Use of a term in this text should not be


regarded as affecting the validity of any trademark or service mark.



Copyright © 2015 by Penn Foster, Inc.


All rights reserved. No part of the material protected by this copyright may be


reproduced or utilized in any form or by any means, electronic or mechanical,


including photocopying, recording, or by any information storage and retrieval


system, without permission in writing from the copyright owner.


Requests for permission to make copies of any part of the work should be


mailed to Copyright Permissions, Penn Foster, 925 Oak Street, Scranton,


Pennsylvania 18515.


Printed in the United States of America

























































Welcome to accounting, doorway to a world of possibilities!


You?ve chosen to study a vibrant, thought-provoking subject


that?s full of challenges and opportunities. Best of all, you?ll


find that the key ideas discussed in this course are useful in


many careers and in your personal life as well.



Let?s consider an example. One important lesson you can


learn from your study of accounting is to keep the big picture


in mind. Here?s a question demonstrating this concept: Toni


Tiller bought a pony for $50 and sold it for $60. Later she


bought the pony back for $70 and sold it to someone else for


$80. How much did Toni make on the pony?



We?ll return to this discussion in a minute. Before we do, let?s


turn our attention to this study guide. It?s designed to help


you develop an understanding of financial accounting in


conjunction with your textbook, Financial Accounting. There


are four lessons in the study guide, each containing three


assignments. Each assignment concludes with suggested


exercises and problems selected from the textbook, as well


as a self-check. The answers to these textbook problems are


found in the Financial Accounting Solutions Supplement,


located on your student portal.


You?re responsible for your success in this course. Here are


three tips that may help you achieve that success:



1. Know your learning style. Are you a visual learner, an


audio learner, or a kinesthetic learner? Do you learn best


by seeing examples, hearing explanations, or experiencing hands-on activity? If you don?t know, you might want


to check out various websites or library books that offer


free evaluations. Once you?re determined your learning


style, tailor your study habits to your best advantage.


If you?re a visual learner, pay special attention to the


charts, graphs, exhibits, and financial statements in the


text. Audio learners might consider recording key points


and listening to them while commuting or during other


quiet times. If hands-on is your style, work through the


examples in the text using pencil and paper.












2. Assume you?ll receive an A in the course. Give yourself


permission to succeed at the outset. Sit down before you


start the course and write a letter to your instructor


dated several months in the future that describes in


detail what you did to achieve your A. Any time you feel


your motivation faltering during the course, remind yourself that you?re an A student. Remember, whether you


think you can or think you can?t, you?re right.


3. Keep the big picture in mind. Let?s finish our discussion


of Toni Tiller. Was your answer $10? Or did you do the


big-picture accounting and determine that the correct


answer is $20? If you answered $10, let?s work through


the solution: Add the amounts Toni paid for the pony


($50 + $70 = $120). Add what she received when she


sold the pony ($60 + $80 = $140). Now calculate the


difference between what she earned and what she spent


($140 ? $120 = $20).



Whatever your motivation for choosing to study accounting,


you have an exciting future ahead of you. May your achievements be matched by your pleasure in realizing them.






When you complete this course, you?ll be able to















Understand important accounting principles and


concepts in order to prepare basic financial statements


Understand the fundamentals of bookkeeping while


using the general journal, general ledger, and trial


balance to prepare financial statements



Understand adjustments and closing entries to prepare


financial statements and a post-closing trial balance



Understand periodic and perpetual inventory systems;


accounting for the purchases and sales of inventory; and


how to account for shipping, freight, and other selling


expenses in preparation of a multi-step income statement and classified balance sheet



Instructions to Students


























Account for inventory, the use of different inventory


costing methods, and their effects on financial





Understand the role of ethics in accounting, the use of


internal controls, and the major provisions of the


International Financial Reporting Standards (IFRS)


Understand cash and accounts receivable and the


methods and internal controls for reporting on the


balance sheet



Understand, account for, and report various long-term


assets on the balance sheet



Distinguish between different liabilities and account for


and report current liabilities and long-term debt on the


balance sheet


Understand the treatment of stock as paid-in capital,


dividends, and retained earnings in the stockholders?


equity section of the balance sheet



Prepare a statement of cash flows using the direct and


indirect methods and evaluate the company?s performance as it relates to cash


Perform a horizontal and vertical analysis of financial


statements and compute various financial ratios






Your Financial Accounting course provides you with the


materials listed below.


1. This study guide, which includes








A lesson assignments page that lists the schedule of


assigned readings in your textbook


Self-checks and answers that allow you to measure


your understanding of the course material



Instructions to Students






2. Your course textbook, Financial Accounting, Third


Edition, by Robert Kemp and Jeffrey Waybright, which


contains your assigned readings, exercises, and problems


3. Financial Accounting Solution Manual, located as a


supplement on your student portal.






Throughout the Financial Accounting textbook, you?ll


notice references to MyAccountingLab. MyAccountingLab


is a textbook supplement that allows instructors to assign


questions that can be completed in an Excel-simulated





MyAccountingLab isn?t part of the Financial Accounting


course. Ignore any textbook references to MyAccountingLab.


If you wish to supplement your learning by acquiring


MyAccountingLab, you?ll need to contact the publisher


directly to purchase the supplemental material. Since the


questions aren?t being assigned, Penn Foster won?t be able


to provide support for MyAccountingLab.






This study guide is intended to help you achieve the maximum


benefit from the time you spend on this course. It doesn?t


replace the textbook in any way. It serves as an introduction


to material that you?ll read in the book and as an aid to


assist you in understanding this material.


This study guide provides your assignments in four lessons.


Each lesson contains three assignments, a set of textbook


problems and exercises for each assignment, a self-check for


each assignment, and a comprehensive examination on the


material covered in the lesson. Be sure to complete all work


related to a lesson before moving on to the next lesson.






Instructions to Students



For each lesson, do the following:



1. Read the introduction to the lesson in this study guide.


2. Read the assigned pages in your textbook.



3. Complete the self-check in this study guide for each


assignment in the lesson. Remember: Do not send your


answers to the self-checks to the school.


4. Determine your own progress by comparing your


answers for the self-checks to the answers given in the


answer section of this study guide.



5. Complete the suggested exercises and problems selected


from your textbook.


6. Determine your own progress by comparing your


answers for the exercises and problems to the answers


given in the Financial Accounting Solution Manual.



7. Review the material covered in the lesson to prepare for


the lesson examination.



Now you?re ready to begin Lesson 1. When you?ve finished the


assigned readings and self-checks and are confident that you


have a good grasp of the material covered, complete the


graded project for Lesson 1. This graded project serves as the


exam for Lesson 1. Lessons 2?4 have multiple-choice examinations that you?ll access via your student portal.


At any point in your studies, you can email your instructor


for further information or clarification of your study materials. Your instructor?s guidance and suggestions should be


very helpful to you as you progress with your course.



Take some time now to review the lesson assignments.


Then, begin your study of financial accounting with Lesson 1,


Assignment 1.


Good luck and have fun!



Instructions to Students












Instructions to Students






Read in the


study guide:



Read in


the textbook:



Pages 15?18



Chapter 2



Assignment 1



Pages 9?12



Assignment 3



Pages 21?24



Assignment 2



Chapter 1



Chapter 3



Graded Project 061579



Material in Lesson 1



Lesson 2: Accounting for Merchandising





Read in the


study guide:



Read in


the textbook:



Pages 57?61



Chapter 5



Assignment 4



Pages 50?53



Assignment 6



Pages 65?68



Assignment 5



Examination 061580



Chapter 4


Chapter 6



Material in Lesson 2



Lesson 3: The Value of Money





Read in the


study guide:



Read in


the textbook:



Pages 80?86



Chapter 8



Assignment 7



Pages 72?77



Assignment 9



Pages 89?92



Assignment 8



Examination 061581



Chapter 7 and Appendix B


Chapter 9



Material in Lesson 3






Lesson 1: Business, Accounting, and You






Lesson 4: Corporations





Read in the


study guide:



Read in


the textbook:



Pages 104?106



Chapter 11



Assignment 10



Pages 96?99



Assignment 12



Pages 109?112



Assignment 11



Examination 061582



Chapter 10



Chapter 12



Material in Lesson 4



Note: To access and complete any of the examinations for this study


guide, click on the appropriate Take Exam icon on your student portal.


You should not have to enter the examination numbers. These numbers


are for reference only if you have reason to contact Student CARE.






Lesson Assignments



Lesson 1



Business, Accounting,


and You



Assignment 1 introduces three types of business and the


entities used in creating these businesses. Generally Accepted


Accounting Principles (GAAP) and International Financial


Reporting Standards (IFRS) are shown to govern the standards,


practices, and reporting of accounting information. The


accounting equation, transactions, and financial statements


(and their relationship to each other) are discussed.


Assignment 2 introduces the concept of double-entry bookkeeping and fundamentals for analyzing, journalizing, and


posting transactions as they occur in business.



Assignment 3 shows the adjusting and closing process in


preparation of an adjusted trial balance to be used to prepare


financial statements.


When you complete this lesson, you?ll be able to










Understand important accounting principles and


concepts in order to prepare basic financial statements


Understand the fundamentals of bookkeeping while


using the general journal, general ledger, and trial


balance to prepare financial statements



Understand adjustments and closing entries to prepare


financial statements and a post-closing trial balance







Read Assignment 1 in this study guide. Then read Chapter 1


in your textbook, Financial Accounting.



Why Study Accounting?



An often-asked question is ?Why do I need to take accounting?


I?m not going to be an accountant.? Accounting teaches the


language of business. Students receive report cards at school.






Financial statements are the report cards for businesses.


Everything that happens in a business is quantified on a


financial statement. If business professionals don?t know how


the numbers are put together and used, how can they run


their business effectively? The numbers should provide an


objective look at the health of a company at a specific point


in time.



What Is Accounting?



Accounting is keeping score of what?s happening in the


business. This is known as financial accounting, and the


results are reported on the financial statements. The financial


statements allow investors and creditors to make investment


decisions, suppliers and customers to determine the financial


condition of the company, and managers to make corrections


and better decisions concerning the operations of the business.



How Are Businesses Organized?



There are three common types of businesses?service,


merchandising, and manufacturing. The organization of the


business can be set up as a sole proprietorship, partnership,


corporation, or limited liability company. Each has advantages


and disadvantages. Exhibit 1-1 in the textbook summarizes


the different types of business organizations.



What Accounting Principles


and Concepts Govern the


Field of Accounting?



The Financial Accounting Standards Board (FASB) set the


principles that govern how we report financial information,


called the Generally Accepted Accounting Principles (GAAP).


The International Financial Reporting Standards (IFRS) were


created for businesses located in countries that didn?t have


their own accounting standards.






Financial Accounting



How Is the Accounting Equation Used


to Record Business Transactions?



The basic accounting equation states that the assets must


equal the liabilities plus the owner?s equity. This sets the


basic framework for accounting. For example, assets can be


broken down into current assets and long-term assets.


Liabilities can be broken down into current liabilities and


long-term liabilities. Equity can be broken down into common


stock and retained earnings. Each of these can be broken


down even further. It?s important to build a framework


(a structure) in your mind as to where everything goes and


how they?re interrelated. As transactions occur in a business,


they?re recorded in these categories of accounts. For example,


if you invest capital in the form of cash, then the assets and


equity increase, keeping the accounting equation in balance.



What Do Financial Statements Report,


and How Are They Prepared?


The four most common financial statements are



1. Balance sheet?A statement that shows what a company


owns (assets), what it owes (liabilities), and what the


owners can claim (owner?s equity) as of a particular date



2. Income statement?A statement that shows how much a


company has earned (revenue) and spent (expenses) for a


period of time


3. Statement of retained earnings?A statement that shows


how owner?s equity has changed over a period of time.


(Don?t be confused by the introduction of the term


stockholders? equity. In a corporation, owner?s equity is


called stockholders? equity because the owners hold


stock certificates. But the definition is the same; a


stockholder is an owner.)


4. Statement of cash flows?A statement that accounts for


the cash position of a company as of a particular date



Lesson 1






Every business has a balance sheet and income statement.


The statement of retained earnings and statement of cash


flows are optional. Also, additional statements can be created


as needed. For example, a manufacturing concern will have


statements of manufactured goods. There isn?t a set number


of statements that a particular business may have, but all


businesses will have the first two.


Exhibit 1-2 in the textbook illustrates the relationship


between the first three financial statements. The net income


from the income statement is shown as a line item on the


statement of retained earnings. The retained earnings is


shown as a line item on the balance sheet.



Before moving on to your next assignment, work through the


following accounting exercises and practice problems. When


you?ve completed the work, check your answers against the


answers provided on your student portal. Then, take some


time to complete Self-Check 1.



TexTbook exercises and Problems for assignmenT 1


At the end of each assignment, you?ll be asked to complete selected


exercises and practice problems from the text as a review of what


you?ve learned. We urge you to complete the exercises and problems, as accounting is best learned by doing. The more you practice,


the more proficient you?ll become.


1. Short Exercises S1-2 through S1-14 (pages 30?33)


2. Exercises (Group B): E1-23B through E1-30B (pages 37?39)


3. Problems (Group B): P1-36B through P1-40B (pages 44?47)


Check your answers in the financial accounting solutions


supplement that is found on your student portal.






Financial Accounting



Self-Check 1


At the end of each section of financial accounting, you?ll be asked to pause and check


your understanding of what you?ve just read by completing a ?Self-Check? exercise.


Answering these questions will help you review what you?ve studied so far. Please


complete self-check 1 now.


1. Which statement is false?


a. The proprietorship form of business organization protects the personal assets of the


owners from creditors of the business.


b. A proprietorship has a single owner.


c. Accounting is the information system that measures business activities, processes that


information into reports, and communicates the results to decision makers.


d. The FASB determines how accounting is practiced in the United States.


2. The primary objective of financial reporting is to





























in an ethical manner.


useful to managers in making daily decisions.


to the federal government.


useful for investment and lending decisions.



3. Wilbur Corp. operates a fishing tackle shop. The company needs to borrow money to expand;


therefore, it prepared financial statements to present to the banker. Wilbur Corp. obtained


appraisals of all the assets of the business to ensure that the balance sheet would reflect the


most current value of the assets. Wilbur Corp. has violated which principles or concepts?


a. Reliability principle


b. Cost principle



c. Going-concern principle


d. Stable-monetary-unit concept



4. Which statement is false?


a. Assets are economic resources that are expected to benefit future periods.


b. Expenses are decreases in stockholders? equity that result from delivering goods and


services to customers.


c. Revenues are assets that represent economic benefits.


d. Liabilities are economic obligations to outsiders.


5. A payment on account


a. decreases assets.


b. increases liabilities.



c. increases stockholders? equity.


d. increases assets.





Lesson 1






Self-Check 1


6. Which transaction increases stockholders? equity?


a. Collection of an account receivable


b. Issuance of common stock for cash



c. Payment of salaries


d. Cash purchase of land



7. A balance sheet reports the











assets, liabilities, and stockholders? equity on a particular date.


difference between revenues and expenses during the period.


change in the retained earnings during the period.


cash receipts and cash payments during the period.



8. If assets increase $40,000 during the period and liabilities decrease $8,000 during the period,


stockholders? equity must have


a. increased $32,000.


b. decreased $48,000.



c. decreased $32,000.


d. increased $48,000.



9. The following is information about the assets and liabilities at the end of 2013 and 2014:


























If net income was $1,500 and there were no dividends, how much did equity increase from


new stock issuances?


a. $40,500


b. $45,000



c. $6,000


d. $4,500



10. The amount of net income shown on the income statement also appears on the


a. statement of financial position.


b. balance sheet.



c. statement of retained earnings


d. statement of cash flows.



Check your answers with those on page 117.






Financial Accounting










Read Assignment 2 in this study guide. Then read Chapter 2


in your textbook, Financial Accounting.



How Are Accounts Used to Keep


Business Transactions Organized?



The books of accounting for a business are very similar to


the chapters of a textbook. And, just as textbook has a table


of contents that lists the chapters of the textbook, the


accounting books for a business have a chart of accounts.


On the chart of accounts are the following categories:


1. Assets



2. Liabilities



3. Stockholders? Equity


4. Revenues


5. Expenses



Each category is further broken down into general ledger


accounts, like subsections. The accounting ?book? titled


Assets would have accounts like Cash and Accounts


Receivable. In the general ledger account ?Cash,? information


about cash is entered, just as information is written in a


chapter of a textbook.



Lesson 1






What Are Debits,


Credits, and T-Accounts?



The definition of a debit isn?t plus or minus. It isn?t increase


or decrease. A debit is simply what?s on the left. This is the


same with a credit. A credit is what?s on the right. A debit or


credit must be considered in context. The context is what?s


considered the normal balance, which simply is what


increases that category of accounts?a debit or credit.



The normal balance of an asset is a debit. The normal balance of a liability is a credit. The normal balance of equity is


a credit. The normal balance of a revenue account is a credit.


The normal balance of an expense account is a debit.


Double-entry accounting requires that every transaction


affects at least two general ledger accounts. The transaction


must affect at least one debit and at least one credit. The


sum of the debits must always equal the sum of the credits.


Therefore, if you?re going to increase an asset account (the


normal balance of an asset is a debit), then you must debit


that account. Using a double-entry accounting means you


must make a credit somewhere else because debits must


equal credits. That means whichever account you choose,


you?ll credit that account. If choosing a liability account,


know that you?ll be increasing the liability account because


the normal balance of a liability account is a credit (which


increases that account).



Notice that the asset is a debit. Also, notice that the liability


is a credit. If increasing the liability using a credit, then to


decrease it, use a debit. This is why debits and credits don?t


have the definition of increase or decrease, plus or minus. If


increasing the asset using a debit, and you?d decrease a


liability using a debit. The debit depends on its context or


the normal balance of the category of account.



To see this more clearly, T-accounts are used. The middle of


page 56 of the textbook shows a T-account. The debit is on


the left, and the credit is on the right. If the account was an


asset, the debit would go on the left. If the account was a


liability, the debit would still go on the left. However, the


meaning of each account changes based on the normal


balance. If it?s an asset, the asset will increase on the debit





Financial Accounting



side. If it?s a liability, the liability will increase on the credit


side, which means it will decrease on the debit side.


Exhibit 2-1 illustrates the categories of accounts and


T-accounts, showing whether the account increases or


decrease by using a debit or credit for that type of account.



How Are the General Journal and


General Ledger Used to Keep Track


of Business Transactions?



All transactions that occur in a business are journalized, or


recorded in a journal. Remember, there are two parts to every


transaction?a debit and a credit. There can be more than


one debit or more than one credit for each transaction.


However, the debits must equal the credits.


After a transaction has been journalized, it must be posted




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