Accounting 620

Financial Accounting


SYLLABUS
SUMMER 2012

NOTE: This syllabus will be updated during the semester check the course webpage for updates (youll
be informed via email when updates occur)

Professor: Richard Lambert
1307 Steinberg Hall-Dietrich Hall
Telephone: 215-898-7782
Email: lambertr@wharton.upenn.edu
Office Hours: by appointment

Course objectives:

Financial statements are an important mechanism through which organizations communicate
information about their performance and financial strength to outsiders (such as investors and
creditors). In this course, you will learn to read, understand, and analyze financial statements.
The course is not intended to teach you to become an accountant or a preparer of financial
statements. Instead, the course is intended to help you become a more informed user of financial
statements. The course adopts a decision-maker perspective and emphasizes the relation between
accounting data and the underlying economic events that generated them. The course is intended
for students with little or no previous exposure to financial accounting.

The course focuses initially on how to record economic events in the accounting records
(bookkeeping and accrual accounting) and how to prepare and interpret the primary financial
statements that summarize a firm's economic transactions (the balance sheet, the income
statement, and the statement of cash flows). The course then examines in depth the major asset,
long-term liability, and shareholders' equity accounts.

Required Textbooks:

Stickney, C., Weil, R., Schipper, K. and J . Francis , Financial Accounting an Introduction to
Concepts, Methods, and Uses, Thomson - South Western Publishing, 2010 edition (13th edition)
(SWSF).

Required Course Material:

Bulk pack, 2012 edition. (BP). This is available through Study.net.
Accounting 620 Syllabus p. 2


Course website:

The course will have a room on the Whartons Canvas web site. Much of the course material will
also be available on the website. Check the site prior to each class for handouts or spreadsheets or
additional readings. Check the site afterwards for solutions to problems and cases discussed in
class.

Grading Policy:

Final grades will be determined as follows:

Class Participation 15%
First Midterm Exam 20%
Second Midterm Exam 30%
Final Exam 35%

Total 100%

If a students exam scores improve over time, I will count the later exams more.

Examinations:

All exams are open-book and open-notes. The final exam is cumulative, but will weight the
material covered since the second midterm exam more heavily.

Make-up examinations will not be provided except in extraordinary circumstances.

In the event that a student is unable to attend an examination, it is his/her responsibility to notify
the instructor prior to the exam (or as soon as possible). Only the instructor may grant a student
authorization to be absent from an examination; there are no exceptions to this rule. An
unauthorized absence from an examination will result in a grade of zero for that examination.

In the process of assigning grades to the exams, disagreements may arise. Thus, each student is
encouraged to "audit" each graded examination thoroughly. If the student feels that an exam has
been incorrectly graded, he/she should return the exam to me within two weeks of the return of
the examination. The student should submit the original copy of the completed examination
together with a written note that carefully explains the point of contention. A request for a re-
grade will not be considered if it is submitted more than two weeks after the return of the exam.
The entire exam will be re-graded.

Exams from prior years, along with their solutions, are posted on Canvas in the
corresponding Midterm or Final Exam folder.

Important note: In most prior years, the scheduling of classes was different, so the exams
from those years dont cover the exact same material as our exams will this year.
Accounting 620 Syllabus p. 3


Class Participation:

Class participation grades are based on what you add to the learning experience of the entire class.
No contribution or contributions that are obvious, confusing or peripheral will result in no points.
Students who consistently make contributions that facilitate discussions, help to clarify technical
points, or provide new insights will receive 10 points. Contributions between these two ranges will
receive 0-9 points, accordingly.

The remaining 5 points of the class participation grade are awarded for general class behavior.
Students will lose points in this category for: being absent without informing me ahead of time,
not bringing their name card to class, coming late to class or leaving class early, or exhibiting any
behavior that is obstructive.

Course Structure and Tips for Preparing for Class:

To achieve the objective of helping students become effective financial statement users, the course
strikes a balance between the teaching of accounting mechanics and the analysis of financial
statements. Be warned: a major challenge for many students is in trying to make the transition
from straightforward text problems to messier cases. Over time, you will get better at this.

In preparing for class, students should

Read the material assigned for the day. This will include portions of the required textbook,
and sometimes outside readings. The text material presents the basic mechanics that must be
mastered before one can become an effective user of financial statements. Outside readings
are intended to provide additional perspective on the topic and on why we should care.
Outside readings will be also be posted on the course page on the web. The bulk packet will
also include optional notes on each topic. Students who dont feel the need to work through
the examples in the textbook chapter may find the optional notes to be quicker. However,
students with weaker backgrounds or who are struggling with a topic are advised to work
through the material in the chapter. The notes should be a useful summary of the material for
later use (exams and life after Wharton).

The assigned problems consist of three types: cases, problems from the textbook, and web
additional practice problems. Ultimately, your preparation must enable you to analyze the
case before class and be ready to discuss it during class. The problems from the textbook and
web caf additional packet practice problems are designed to get you up to speed to be able to
do the case. You are not required, NOR ARE YOU EXPECTED, to work through each of the
text book and website additional practice problems. They are there to help you check (or
double check) your mastery of the material.

The assigned problems from the text generally cover basic mechanics and relatively
straightforward analysis. If you feel comfortable with the more advanced problems (described
below), these textbook problems can be skipped. However, if you want to be sure youve
mastered the basics, these are good problems to work through. The solutions to the textbook
problems are included in the bulk packet, so you can check how youre doing as you go along.
Accounting 620 Syllabus p. 4


We will generally not spend much class time on these textbook problems (other than during
the first six sessions).

The web caf additional practice problems require more involved analysis. These materials
also include examples and problems extracted directly from published financial statements to
allow students to familiarize themselves with using real statements rather than simplified
textbook examples. In many instances, these problems are from prior exams. The web caf
additional packet practice problems also provide a great way to review for the exams. The
solutions to these practice problems are available on web cafe.

If there is a case assigned for a class session, this is what you need to be most ready to discuss
in class. You do not need to hand in solutions to the cases; instead you should prepare the case
and be prepared to discuss it.

Remember, accounting is a subject you can only truly learn by working problems. The
material in the course is cumulative and it takes some time to soak in. You cannot wait until
the night before the exams and expect to successfully cram and memorize. This wont help
you on the exams, and it certainly wont help you retain anything after the course is over.


PREPARATION FOR THE FIRST DAY OF CLASS

The more work you can do PRIOR TO THE FIRST DAY OF CLASS on mastering the basic
accounting mechanics (T accounts, journal entries, debits and credits), the easier a time you will
have in the course. This will also allow us to spend our class time on more interesting and
substantive topics.

To help you prepare in advance, there is a workbook (by Anthony and Breitner) that weve sent
you that covers the basic mechanics. I strongly urge you to work through as much as you can
before the first day of class.

In addition, the more of the homework problems from Chapters 2 and 3 of the Stickney, Weil
Schipper, and Francis (SWSF) textbook that you can do before the first day of class, the better off
youll be. The answers to selected problems from these chapters are included in the bulk packet
material.

Accounting 620 Syllabus p. 5


Class Schedule: In numbering the sessions, I have broken each of our three-hour sessions into two
halves. Therefore, the sessions numbered 1 and 2 will take place on Monday May 21, the sessions
numbered 3 and 4 will be on Tuesday, May 22, etc.

The reading assignments from the textbook are indicated by the page numbers in SWSF and also
by the name of the section within the appropriate chapter. The latter is to facilitate finding the
correct pages when using the e-reader or Kindle versions of the book.


Class 1 Monday 05/21 Introduction

Readings Textbook
Chapter 1
Chapter 2 (pp. 43-51; from beginning of chapter through Problem 2.1 for Self Study)

Readings Coursepack
Introduction Notes
The FASB and the Capital Markets
SEC: Fair Values Savior (SKIM ONLY)

Textbook Problems (the notation SWSF 1-21 means problem 21 from Chapter 1)
SWSF: 1-21, 1-24, 1-26, 2-11

Web Problems
None

Cases:
None

Class 2 Monday 05/21 Balance Sheet and Accounting Mechanics

Readings Textbook
Chapter 2 (pp. 51-61; from Problem 2.1 for Self Study through the Relation Between the
Balance Sheet and the Income Statement)
Chapter 3 (pp. 105122) (through Shareholders Equity Measurement and Disclosure)

Readings Coursepack
Balance Sheet Notes
How Lehman Brothers Hid Its Woes (skim)

Textbook Problems
SWSF: 2-27, 2-29, 3-15, 3-22

Web Problems:
None

Cases:
Acme, Inc

Accounting 620 Syllabus p. 6


Class 3 Tuesday 05/22 Income Statement and More Accounting
Mechanics

Readings Textbook
Chapter 2 (pp. 61- 73 from Accounting Process for Revenues, Expenses, and Dividends
through end of chapter)
Chapter 4 (pp. 145-158 beginning of Chapter through Problem 4.1 for Self Study)

Readings Coursepack
Income Statement Notes

Textbook Problems
SWSF: 3-11, 3-15, 3-17

Web Problems:
#3-1

Cases:
Arthur Animatronics Inc (Spend most of your class preparation time on this case)


Class 4 Tuesday 05/22 Revenue and Expense Recognition: Part 1

Readings Textbook
Chapter 7 (pp. 311-315 through Problem 7.1 for Self Study)
Chapter 7,( pp. 330-331; Income Recognition After the Sale through Problem 7.3 for Self
Study
Chapter 7 (SKIM pp. 332-341 - rest of chapter 7 through Chapter Summary)

Readings Coursepack
Revenue Recognition Notes
Chairman Levitt's Remarks
Zynga Explains Its Methods for Recording Real Revenues From Virtual Good
Is That Revenue Real?
FASB In Focus Revenue Recognition

Textbook Problems
SWSF: 4-11, 4-17, 7-19

Web Problems:
#4-1

Cases:
McAfee Inc


Accounting 620 Syllabus p. 7


Class 5 Thursday 05/24 Revenue and Expense Recognition: Part 2

Readings Textbook
Chapter 8 (pp. 383-391 From Principal Current Liability Accounts through Chapter
Summary)

Readings Coursepack
Expense Recognition Notes
Motorola Has A Special Streak
Creative Accounting.Com

Textbook Problems
SWSF: 4-13, 8-10, 8-34.

Web Problems:
#5-1 and 5-2

Cases:
United Airlines Frequent Flyer Programs


Class 6 Thursday 05/24 Statement of Cash Flows: Part 1

Readings Textbook
Chapter 5

Readings Coursepack
Statement of Cash Flow Notes

Textbook Problems
SWSF: 5-9, 5-11, 5-13, 5-26, 5-30, 5-31

Web Problems:
#6-1 and 6-2

Cases:
Acme Cash Flow
Vulcan Applied Materials (begin)


Accounting 620 Syllabus p. 8


Class 7 Friday 05/25 Statement of Cash Flows: Part 2

Readings Textbook
Chapter 5

Readings Coursepack
The Top 10 Limitations of EBITDA
World Com Causes Analysts To Evaluate Role of EBITDA

Textbook Problems
SWSF: 5-42, 5-43, 5-44

Web Problems:
#7-1, 7-2, and 7-3

Cases:
Animaltronics - Cash Flow
Vulcan Applied Material (finish)


Class 8 Friday 05/25 Financial Statement Analysis

Readings Textbook
Chapter 3 (pp. 122-124 Analysis of the Balance Sheet),
Chapter 4 (pp. 160-165 Interpreting and Analyzing the Income Statement)
Chapter 6 (Do NOT do Appendix 6.1)

Readings Coursepack
Financial Statement Analysis Notes
Irrational Ratios

Textbook Problems
SWSF: 3-32, 4-30, 6-11, 6-13, 6-16, 6-21, 6-25

Web Problems:
None

Cases:
Who Am I? (The data is also on spreadsheet on Canvas to make it easier to calculate
ratios)




Accounting 620 Syllabus p. 9


Class 9 Friday 06/08 Midterm Exam

Open Book, Open Notes, Covers Material Through Session 8




Class 10 Friday 06/08 Accounts Receivable

Readings Textbook
Chapter 7 p. 311-328) (Beginning of Chapter through Problem 7.2 for Self Study)
Chapter 7 - skim Appendix 7.1

Readings Coursepack
Accounts Receivable Notes
Accounting Issues at Worldcom Speak Volumes About Disclosure

Textbook Problems
SWSF: 7-3, 7-5, 7-23, 7-24, 7-31, 7-43

Web Problems:
#10-1 and 10-2

Cases:
Adams Golf





Accounting 620 Syllabus p. 10


Class 11 Thursday 06/21 Inventory

Readings Textbook
Chapter 8 (pp. 365-383) (Beginning of Chapter through Problem 8.3 for Self Study)
Chapter 8 - Appendix 8.1

Readings Coursepack
Inventory Notes
Who Uses LIFO?
Converting from LIFO to FIFO
Inventory Ins and Outs
Big Oils Accounting Methods Fuel Criticism

Textbook Problems
SWSF: 8-4, 8-7, 8-27, 8-31, 8-39, 8-44

Web Problems:
#11-1 and 11-2

Cases:
Exxon Mobil



Class 12 Thursday 06/21 Long-Term Assets Part 1

Readings Textbook
Chapter 9 (pp. 417-436) (beginning of Chapter through Example 21)
Chapter 9 (pp. 443-447) (Financial Statement Presentation)

Readings Coursepack
Long-Lived Assets - Part 1 Notes

Textbook Problems
SWSF: 9-19, 9-21, 9-25, 9-26

Web Problems:
#12-1 and 12-2

Cases:
Depreciation at Delta and Singapore Airlines (A)




Accounting 620 Syllabus p. 11


Class 13 Friday 07/06 Long-Term Assets Part 2

Readings Textbook
Chapter 9 (esp. pp. 434-442) (From Problem 9.4 for Self Study through Disposal of
Assets)

Readings Coursepack
Intangible Assets Notes
Intangible Ignorance

Textbook Problems
SWSF 9-6, 9-29, 9-32, 9-34

Web Problems:
#13-1

Cases:
AOL


Class 14 Friday 07/06 Long-Term Liabilities and Present Values

Readings Textbook
Appendix at end of book: Time Value of Cash Flows
Chapter 10 (pp. 461-468) (Beginning of chapter through Problem 10.1 for Self Study)

Readings Coursepack
Notes on Long Term Liabilities
Notes on Present Value

Textbook Problems
SWSF: A-14, A-15, A-19, A-27, A-28, A-43
SWSF Ch 10-16

Web Problems:
#14-1 and 14-2

Cases:
None


Accounting 620 Syllabus p. 12


Class 15 Saturday 07/07 Long-Term Debt Mortgages and Bonds

Readings Textbook
Chapter 10 (esp. pp. 468-481) (Accounting for Bonds through Fair Value Option)

Readings Coursepack
Notes on Mortgages and Bonds

Textbook Problems
SWSF:10-17, 10-18, 10-30, 10-31, 10-32

Web Problems:
#15-1, 15-2 and 15-3

Cases:
Intel Corporation


Class 16 Saturday 07/07 Leases

Readings Textbook
Chapter 10 - pp. 482-493) (Accounting for Leases)

Readings Coursepack
Notes on Leases
Open Secrets How Leases Play a Shadowy Role
Hidden in Plain Sight
FASB In Focus: Leases

Textbook Problems
SWSF: 10-25, 10-26, 10-28, 10-34

Web Problems:
#17-1, 17-2 and 17-3

Cases:
CVS Pharmacies






Accounting 620 Syllabus p. 13


Class 17 Friday 07/20 Midterm Exam #2

Open-Book, Open Notes, Covers Material Since First Midterm




Class 18 Friday 07/20 Accounting for Income Taxes

Readings Textbook
Chapter 11 (pp. 536-545) (Income Taxes through the end of the Chapter)

Readings Coursepack
Deferred Income Taxes Notes
Lifting the Veil on Tax Risk

Textbook Problems
SWSF: 11-24, 11-26, 11-27, 11-34

Web Problems:
#18-1, 18-2 and 18-3

Cases:
Vulcan Applied Materials




Accounting 620 Syllabus p. 14


Class 19 Saturday 07/21 Mark to Market and Other
Comprehensive Income

Readings Textbook
Chapter 12

Readings Coursepack
Marketable Securities and Investments Notes
Mark-to-Market Isnt to Blame
Who has More Level 3 Asssets Than Capital?

Textbook Problems
SWSF: 12-12, 12-13, 12-15, 12-25, 12-27

Web Problems:
#19-1, 19-2 and 19-3

Cases:
Berkshire Hathaway


Class 20 Saturday 07/21 Consolidated Financial Statements

Readings Textbook
Chapter 13 (pp. 615-635) (beginning of chapter through J oint Venture Investments)

Readings Coursepack
Equity Method and Consolidations
Goodwill and Noncontrolling Interests Examples

Textbook Problems
SWSF: 13-16, 13-17, 13-19, 13-29

Web Problems:
None

Cases:
Coca-Cola



Accounting 620 Syllabus p. 15


Class 21 Saturday 08/17 Stockholders Equity

Readings Textbook
Chapter 14

Readings Coursepack
Stockholders' Equity Notes
Focus in Apples Option Scandal Shifts to its Board
Googles Optional Windfall

Textbook Problems
SWSF: 14-15, 14-23, 14-24, 14-35

Web Problems:
None

Cases:
Google


Class 22 Saturday 08/17 Conclusion

Readings Textbook
Chapter 16
Chapter 11 (pp. 517535 skim this only) (skim from beginning of chapter through
Problem 11.2 for Self Study)
Chapter 13 (pp. 635-639) (J oint Ventures through the end of the chapter)

Readings Coursepack
A Tower of Babel in Accounting

Textbook Problems
SWSF: None

Web Problems:
None

Cases:
Corbomax



Accounting 620 Syllabus p. 16


Clasess 23 and 24 Saturday 08/18 Final Exam

Open book, Open Notes, covers the entire course but concentrates on material since the second
midterm