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Argosy University

COURSE SYLLABUS

ACC201

Principles of Accounting




Faculty Information

Faculty Name: Jong H. Lee

Campus: San Francisco Bay Area

Contact Information: (510) 435-7383


Office Hours:

Short Faculty Bio: DBA, Argosy University; MBA, Golden Gate University; BA, Sonoma State University. California CPA


Course description: This course provides an introduction to the preparation and use of accounting principles. Emphasis is on basic accounting procedures, measurement of income and expense, working capital, and investments. Includes material on corporations, capital budgeting, and interpretation of financial statements.


Course Pre-requisites: None


Required Textbook:


Warren, Reeve, & Duchac. (2007). Accounting. Thomson/South-Western. ISBN: 0324-38187-5


Optional but recommended:


Gleim’s Online Financial Accounting Made Easy http://www.gleim.com/account/


Technology: Pentium III CPU/ Windows 98; 128MB RAM, printer; Microsoft Office Acrobat (full version), Microsoft Internet Explorer 5.5 (PC) 5.0 (MAC) or Netscape Navigator 4.08. Norton Antivirus.


Course length: 7.5 Weeks


Contact Hours: 45 Hours


Credit Value: 3.0


Program Outcomes:


  1. Communication

    1. Communicate business concepts effectively, both written and orally appropriate to the audience

  1. Team

    1. Define the attributes of an effective team member and leader and the characteristics of an effective team in reaching specific business goals

  1. Cognitive

    1. Problem Solving – Given a business problem, select and defend a business solution chosen from specific alternatives

    2. Information Literacy – Given a business research question, access information from a variety of sources, select appropriate sources to respond to a business question

  1. Analysis/Application

    1. Integration – Describe the interrelationship of the functional business areas of statistics, accounting, operations, finance, marketing, and strategy

  1. Ethics/Diversity

    1. Diversity – Identify the issues and challenges related to diversity in current business organizations

    2. Ethics – Identify the issues and challenges related to ethics in current business organizations



Course Objectives:


  1. Describe a business transaction. (Program Outcome(s): 1, & 4)

    1. Explain the purpose of a business.

    2. Describe the ownership structure of a business.

    3. Describe common business activities.

    4. Identify the components of every business transaction.

    5. List the information required for making decisions in a business.

  2. Identify the basic elements of the accounting equation. (Program Outcome(s): 1, & 4)

    1. Define assets and liabilities.

    2. Explain the concept of owners’ equity.

    3. List the components of retained earnings.

    4. Describe revenues, expenses, and dividends.

  3. Illustrate how transactions can be stated in terms of the accounting equation. (Program Outcome(s): 1, & 4)

    1. Describe two ways of calculating assets.

    2. Describe two ways of calculating owner’s equity.

  4. Identify and describe the four basic financial statements of a sole proprietorship. (Program Outcome(s): 1, & 4)

    1. Describe four basic financial statements and the underlying business processes.

    2. Describe the statement that measures the operating performance of a company.

    3. Describe the statement of retained earnings.

    4. Describe the statement that measures the financial position of a company.

    5. Describe the statement of Cash flows.

    6. Explain the relationships that exist among the various financial statements.

  5. Identify the nature of a chart of accounts. (Program Outcome(s): 1, & 4)

    1. Define the chart of accounts.

    2. Describe the purpose of maintaining the chart of accounts.

    3. Define normal balances of accounts.

  6. Recognize the nature of an account and general rules of debits and credits. (Program Outcome(s): 1, & 4)

    1. Identify the five different types of accounts.

    2. Define Double-Entry Accounting and T-accounts.

    3. Record increases and decreases in the accounts.

    4. Identify the nature of various accounts in the financial statements.

  7. Describe the use of journals and ledgers. (Program Outcome(s): 1, & 4)

    1. Explain the function of journals and general ledger.

    2. Define the general ledger system and explain how it works.

  8. Prepare a trial balance. (Program Outcome(s): 1, & 4)

    1. List every account of an entity.

    2. Tally the debit and credit balances.

  9. Describe the adjusting and closing processes. (Program Outcome(s): 1, & 4)

    1. Explain why adjusting entries are passed and how to pass them.

    2. Define accrued revenues, accrued expenses, deferred revenues, and deferred
      expenses.

    3. Define and understand adjusted trial balance.

    4. Describe the meaning of closing and its necessity.

    5. Explain temporary, permanent, nominal, and real accounts.

    6. Journalize and post closing entries.

  10. Complete a worksheet. (Program Outcome(s): 1, & 4)

    1. Define a worksheet.

    2. Prepare a worksheet.

  11. Describe the components of the accounting cycle. (Program Outcome(s): 1, & 4)

    1. Record journal entries.

    2. Post journal entries.

    3. Prepare trial balance.

    4. Prepare and post adjusting journal entries.

    5. Prepare the adjusted trial balance.

    6. Prepare financial statements.

    7. Close the books.

    8. Prepare the Post-closing trial balance.

  12. Record all transactions to complete the accounting cycle for a sole proprietorship service business. (Program Outcome(s): 1, & 4)

    1. Examine all the transactions of a sole proprietor that have taken place for the period in question.

    2. Perform the steps required to complete the accounting cycle of a service business.

  13. Recognize and understand the accounting for a merchandising business. (Program Outcome(s): 1, & 4)

    1. Describe the Acquisition and Payment process.

    2. Explain the relation between inventory and cost of goods sold.

    3. Define purchases, purchase returns, and purchase discounts and allowances.

    4. Describe the procedure followed for acquisition of goods.

    5. Explain the gross profit method to estimate the ending inventory balance.

    6. Explain the payment process for Acquisitions and recognition of resulting liabilities.

    7. Explain the sales and the collection process.

    8. Differentiate between cash and credit sales.

    9. List the factors involved in revenue recognition.

    10. Record entries for sales, sales returns, sales discounts, and accounts receivables.

  14. Describe basic accounting concepts regarding cash. (Program Outcome(s): 1, & 4)

    1. Explain the concept of the time value of money.

    2. Define and explain the purpose of cash reconciliation.

    3. Prepare bank reconciliation.

  15. Recognize the classifications, characteristics, and accounting principles for temporary receivables. (Program Outcome(s): 1, & 4)

    1. Define Accounts receivables, notes receivables, and other temporary receivables.

    2. Describe the accounting methods for uncollectible receivables.

    3. Prepare an aging of accounts receivables schedule.

    4. Explain accounting for cash collections from customers.

    5. Describe method for writing off uncollectible receivables.

  16. Make the necessary calculations and recordings to account for payroll, payroll taxes and other current liabilities. (Program Outcome(s): 1, & 4)

    1. Describe the process of calculation of payroll expense and payroll taxes.

    2. Record the entries to account for payroll expense and payroll tax liability.

    3. Explain the special business risks pertaining to payroll.

    4. List and describe the accounting process for other current liabilities.



Assignment Table. Weekend Session I, Module 1 & 2

Weekend Session II, Module 3 & 4


Module

Module Topics

Readings

Assignments













1

  • Analyzing and Accounting for Business Transactions

  • The Financial Statements

  • Business Risks

  • Chart of Accounts

  • Debits and Credits

Warren, Reeve, and Duchac

Chapter 1

Chapter 2

Discussion Questions:


  1. You are planning to start a new merchandising business dealing in children’s toys and stationery products. You heard that recently two businesses in the same sphere had to be shutdown due to accounting malpractices. Therefore, to ensure that the business is a success, you are leaving no stones unturned. You decide to do a risk analysis for the various business risks that you may encounter due to accounting malpractices.

    1. What could be the top 3 business risks, related to accounting, that you foresee in the new business and why?

    2. What measures can you adopt to eliminate these risks? List and explain at least 2 measures.




  1. You have been nominated by your institution for a seminar because of your proficiency in basic accounting concepts. The participants and audience include college professors, practicing CPAs, and fellow students. The theme of the seminar is Basic Accounting Principles. You have been asked to share whether or not the statement “Debit means decrease and credit means increase” is true?


List and discuss the various points that you will share with the audience.


  1. You are an employee of a Wealth Management consultancy. As your first accounting assignment for the consultancy, you are auditing the chart of accounts for a client. You notice that all receivables are treated as assets and all payables as liability in the chart of accounts. Is this correct? Explain your answer.


Assignments:


  1. The balance of Pepsi Bottling Group at December 31, 2003 and December 31, 2002 reported the following amounts (in billions):


Dec. 31, 2003 Dec. 31, 2002

Total Assets $22 $21


Total Liabilities $11 $12


The following transactions relating to issuance of stock and payment of dividends took place during January 1, 2003 and December 31, 2003. For each transaction, compute the amount of Pepsi Bottling Group’s net income or net loss during the year.

  1. Pepsi issued $ 1 billion of stock and paid no dividends.

  2. Pepsi issued no stock and paid dividends of $2 billion.

  3. Pepsi issued $5 billion of stock and paid dividends of $1 billion.


Which of the above situations indicates the strongest operating results for Pepsi? Which situation indicates the weakest results? Give reasons for each answer. Use the Template_A_I for providing the solution.




  1. Visit the http://www.sec.gov/ Web site.

  • Go to Filings and Forms (Edgar) Web page.

  • Access the Search for Company Filings Web page.

  • Go to the Historical Edgar Archives Web page.

  • In the Search box, enter the name of the company selected by you for analysis, and click Search. Following is a list of some organizations that you may want to research on. You are free to select any other organization.

    • Microsoft Corp

    • Annaly Mortgage Management Inc

    • Publix Super Markets Inc.

    • Winn Dixie Stores Inc.

    • Abercrombie & Fitch Co

  • In the displayed results, scroll down the list of forms to Form 10-K (mentioned in the ‘Form Type’ column) for the most recent filing date. Select “html” under format type.

  • From the list of documents, double click on the document titled “d10k.htm” or the document description that states Form 10-K.

  • Go to Item 1 titled “Business” and Item 6 titled “Selected Financial Data”.

  • Print a copy of the 10-K or save as a MS Word document.

  • Carefully note the various revenue and expense items that appear on the statement of operations.

  • In addition, notice how Assets and Liabilities appear on the Balance Sheet (B/S) and the typical kinds of assets and liabilities that are seen on a balance sheet.


Based on the analysis of Form 10-K, answer the following questions. You can submit your responses in a MS Word document.

    1. What is the company’s primary business activity?

    2. Identify the amount of total assets, total revenues, operating income, stockholders’ equity for the year 2003 or the most recent filing date, whichever is later. On which financial statement will you find each amount reported?




  1. John started his bike dealership, a sole proprietorship, on April 1, 2004, selling new and used bikes. The gross profit earned on new bike sales is 40%. John used $40,000 of his personal funds to start the business.

  1. On April 1, the business buys $30,000 worth of new bikes from his supplier with cash.

  2. On April 30th, customer brings in used bikes and business buys them for $7500.

  3. On June 30th, new bikes are sold for $30,000. Half of these sales are on account.

  4. On June 30th, the business sells all the used bikes for $15,000 cash.


Record the above transactions into T-accounts for John. For recording the answers, use Template_A_I.
















2

  • The Matching Concept

  • The Adjusting Process

  • The Closing Process

  • Journalize and Posting Entries

Warren, Reeve, and Duchac

Chapter 3

Discussion Questions:


  1. In the last quarter of 2004, ABC Inc. launched an advertising campaign for one of its new premium products, expensive cologne targeted at women. The advertising expenses for the entire campaign were to the tune of $20 million. The product is expected to go into production in the first quarter of 2005. The CFO of ABC Inc. wants to expense the entire amount of the advertising expense in 2004. However, the statutory auditors are of the opinion that expensing the advertising expense in 2004 is not proper accounting treatment.

    1. In your opinion, is the CFO right in his assertion?

    2. Are the statutory auditors right? Give reasons for your answers.




  1. You are the owner of a security agency, dealing in products to safeguard apartments, vehicles, and stores. The business has been in operation for almost 12 months now. Your partner suggests that conducting an audit would be advantageous and emphasizes, “Audit is a good mitigator of business risk”. The cost of conducting the audit would be $3000.


Given that there is a cost associated with conducting the audit, Is this a correct choice for mitigating risks? Discuss.


  1. You have been running a sole-proprietorship business dealing in cosmetic products. You have been accurately recording all your sale and purchase transactions in journals and using the journals, in the general ledger accounts. Lately, you have observed that the entire exercise is taking a lot of time. You are therefore considering recording the transactions directly into the general ledger accounts.

Is this ethical and will you be following the accounting norms if you undertake such a step? Why or why not? Discuss.


Assignments:

  1. The MS Excel file contains the trial balance and adjustment information for a merchandising company.


Prepare a worksheet for the company at the end of the financial period.

You can use Template_A_I for the solution.




  1. Final Project

Assume that your business has been in operation for six months from the date of inception. Replicate the transactions entered into in Phase I six times with different amounts from before so you have a minimum of thirty total transactions, with at least six transactions of each kind, such as six entries for sales, six entries for purchases of assets, or if you selected a merchandising company, then six transactions for purchase of inventory. For the transaction amounts, estimate the figures based on your analysis.

3

  • Steps in the Accounting Cycle

  • Procedures for the Acquisition of Goods

  • Gross Profit Method and Cost of Good Sold

  • Estimating Ending Inventory

  • Procedures for Acquisitions Payments

  • Sales and the Collection Process

Warren, Reeve, and Duchac

Chapter 4

Chapter 6

Discussion Questions:


  1. During 2002, Enron Corporation hid large liabilities from its balance sheet. Worldcom admitted to recording expenses as assets. Both companies tried to improve their financial appearance by window dressing their financial statements.


Is this an ethical issue? If yes, what is the ethical issue?

Use the accounting equation to show how Enron abused good accounting. Use a separate accounting equation to demonstrate WorldCom’s error.


Enron : Assets = Liabilities + Owners’ Equity

(were understated) (was overstated)

Worldcom: Assets = Liabilities + Owners’ Equity

(were overstated) (was overstated)

When companies report untrue financial data, investors waste their money on undeserving entities and usually suffer losses. Investors then file lawsuits in the hope of recovering their losses, but they are seldom able to recover much.


  1. Most credit card transactions are now handled electronically. When the customer’s credit card is “swiped” the amount of the sale (less the credit card company’s fee) is deposited directly into the company’s bank account.


Will those sales be considered as cash sales or credit sales? Give reasons for your answer.


  1. Accounts officers at Xerox Corporation discovered that significant errors have been made in the valuation of inventory and are worried that it might have significant impact on the Net Income and Earnings per share.


What are the possible top 3 effects of the errors on net income? What could have been the top 2 reasons behind incorrect valuation of the inventory?


  1. The net income of Reliable Provision Company decreased sharply during 2003. Clay Rollins, owner of the store, anticipates the need for a bank loan in 2004. Late in 2003, he instructed the accountant to record a $70,000 sale of recreational gear to the Smith family, even though the goods will not be shipped from the manufacturer until January 2004. Smith told the accountant not to make the following adjusting entries:


Salary owed to employees: $1,000

Expired Prepaid Insurance: $500


Is income overstated or understated? Why did Smith take these actions? Are they ethical? Give your reason. As a friend, what advice would you give the accountant?


  1. The CFO of PQR Inc. was advised by his Credit manager to give better credit terms to new customers to induce sales. The CFO was concerned about the effects of doing the same on the financial statements, such as total assets and return on total assets.


In your opinion, what could be the possible effects of following the advice of the Credit manager on the financial statement items?


Assignments:


  1. Refer to the document Assignment_II. You are provided with the month end trial balance and data needed for the month-end adjustments. Complete the adjusted trial balance for the month end and prepare the financial statements in report format. Also, journalize and post the adjusting and closing entries. You can use the templates referenced in the Assignment_II document.




  1. You are provided with the month-end trial balance and data needed for the month-end adjustments for a merchandising company. Complete the ledger accounts, the adjusted trial balance for the month-end, and prepare the financial statements. In addition, journalize and post the adjusting and closing entries. In addition, you are required to post the adjusting and closing entries, using dates.




  1. Read the attached article and write a synopsis about your analysis on the issues raised in the article.

You can refer to the executive summary which is a part of the article (at the bottom of page 2) to summarize the key issues in the article.




  1. Final Project

Assume that your business has been in operation for six months from the date of inception. Replicate the transactions entered into in Phase I six times so you have a minimum of thirty total transactions, with at least six transactions of each kind, such as six entries for sales, six entries for purchases of assets, or if you selected a merchandising company, then six transactions for purchase of inventory. For the transaction amounts, estimate the figures based on your analysis.


You should ensure that all the steps that are performed in the accounting cycle are being followed as required.













4

  • Temporary receivables

Warren, Reeve, and Duchac

Chapter 8

Discussion Questions:


  1. You own an automobile parts company and have been approached by a leading car manufacturer to supply parts to the company.

    1. How would you determine that the car manufacturer has a good record of servicing sales and paying its customers?

    2. What are the signs you would look out for in the financial statements for the possibility of bad debts? Give reasons for your answers.




  1. You are considering switching from a Value Payable Post (VPP) system to cash or credit sales system. Is this a good decision? Identify the possible risks that are related to cash and credit sales. In addition, give examples of controls that might prevent, detect, or correct the identified risks.


Assignments:


  1. On January 1, 2003, a company’s accounts receivable balance was $8,900 and the allowance for doubtful debts was $600. This information came from the December, 31 2002 balance sheet. During 2003, The company reported $77,000 of credit sales. During 2003, $400 worth of receivables were written off as uncollectible. Cash collections of receivables were $69,000 for the year. The company estimates that 3% of the year-end accounts receivable will be uncollectible. What is the bad debt expense for the year ending December 31, 2003? You can use Template_III for providing the answer.




  1. D-Mart has provided the following information about the company’s sales and accounts receivable for the fiscal year ending December 31, 2003.

  • Accounts receivable at Dec. 31, 2003, $42,500.

  • Allowance for collectible accounts at Dec. 31, 2003,
    $1,275.

  • Credit sales for the year ended Dec. 31, 2003 $135,750.

  • Cash collections on accounts receivable during 2003 $142,600.

  • Accounts written off during 2003, $1,050.




  1. Assume that D-Mart was using the accounts receivable balance to estimate the uncollectible accounts expense at the end of 2002. When 2003 is completed, can you estimate whether D-Mart has over or under-estimated the uncollectible accounts expense at the end of 2003? Explain your answer.

  2. If D-Mart used the sales method of estimating the allowance, can you tell what percentage of sales the company believes will not be collected? Give reasons for your answer.

  3. Assume that D-Mart uses the accounts receivable to estimate uncollectibles. The company estimates that 3% of ending accounts receivable will be uncollectible.

  1. Compute the uncollectible accounts expense for the year ended Dec. 31, 2003.

  2. Compute the net realizable of accounts receivable on the Dec. 31, 2003 balance sheet.

  1. You can use Template_IV for providing the answer.




  1. At this stage of your business,

  1. Identify the method that you would like to follow for estimating uncollectible accounts.

  2. Calculate the bad debt expense and record it in the books based on the correct accounting treatment
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