Guided Readings for Financial Accounting, Lesson 3.3 – Expert Level
Here is a video that I made a few years ago for my students. Ace Donut Company has the following account balances at the end of Year Ten. Use the balances to create an income statement, a statement of retained earnings, and a balance sheet.
Accounts receivable - $90,000, buildings and equipment (net) - $600,000, capital stock - $200,000, cash - $20,000, cost of goods sold - $100,000, dividends distributed - $10,000, gain on sale of equipment - $30,000, income taxes - $20,000, inventory - $40,000, note payable (due in Year 15) - $120,000, rent expense - $40,000, rent payable - $10,000, retained earnings (12/31/Year 9) - $300,000, salary expense - $60,000, and salary payable - $20,000.
Watch the construction of these three statements on the following video:
SUGGESTION: A knowledge of financial statements is absolutely essential to anyone who wants to be a wise decision makers. This chapter sets the foundation for that knowledge as it introduces the basic statements. Pick out the five most important elements of this chapter and then go to the end of Chapter Three and watch the video titled, “The Most Important Elements of Chapter Three.” Do we agree as to the most important topics in this chapter? It is always a good idea to focus on the truly important stuff.
SUGGESTION: At the end of Chapter Three, you will find two video problems. The first concerns your roommate. The roommate’s parents own a small business. The roommate hears them talking but does not always understand the terms such as financial statements, inventory, assets, and the like. The roommate wants some explanations. You serve as the teacher here. What would you say? Determine your answer and then watch the video.
“Information . . .
We want information.”
from the 1960s television series