Assignment Type: Individual Project Points Possible: 125

Deliverable Length: 2-3 paragraphs

Due Date: 9/6/2009 11:59:59 PM CT

Benjamin O'Henry has owned and operated O'Henry's Data Services since its beginning ten years ago. From all appearances, the business has prospered. In the past few years, you have become friends with O'Henry and his wife. Recently, O'Henry mentioned that he has lost his zest for the business and would consider selling it for the right price. You are interested in buying this business, and you obtain its most recent monthly unadjusted trial balance which follows: O'Henry's Data Services Unadjusted Trial Balance November 30, 20XX Cash Accounts receivable Prepaid expenses Furniture, fixtures, & equipment Accumulated depreciation Accounts payable Salary payable Unearned service revenue Benjamin O'Henry, capital Benjamin O'Henry, withdrawals Service revenue Rent expense Salary expense Utilities expense Depreciation expense Supplies expense Total. $177,800 $177,800 3,400 900 2,000 14,300 6,700 137,400 $9,700 7,900 2,600 151,300 $15,600 3,800

Revenues and expenses vary little from month to month, and November is a typical month. Your investigation reveals that the unadjusted trial balance does not include the effects of monthly revenues of $2,100 and monthly expenses totaling $2,750. If you were to buy O'Henry's Data Services, you would hire a manager who would require a monthly salary of $3,000. The most you would pay for the business is 20 times the monthly net income you could expect to earn from it. Compute this possible price. The least O'Henry will take for the business is his ending capital. Compute this amount. Under these conditions, how much should you offer O'Henry? Give your reason. Please submit your assignment.

Instructor Comments:

In the OHenry assignment you must create an income statement and a statement of owners equity (do not create a balance sheet). Please use Chapter 5 page 270-271 of the text as a guide to help you build your income statement and statement of owners equity First, you need to create an income statement for the buyer. You need this for 2 reasons; (1) to determine the monthly net income you would pay (times 20) for the business, and (2) the net income figure needs to be "closed out" and "turned into" retained earnings which are part of the calculation for ending capital (a.k.a., owners equity). Look at the text, to determine what accounts go on the income statement (revenue and expenses only, please). Then take the net income figure multiplied by 20 to determine the amount the buyer is willing to pay for O'Henry's business. REMEMBER, the buyer needs a manager, so the cost of the manager needs to be included in the income statement as well as the monthly revenue and expense figures discussed in the narrative of the assignment. Next you need to determine how much O'Henry wants for the business. The least O'Henry will take is his ending capital. Capital (or owners equity) is calculated as follows: beginning capital (owners equity) plus retained earnings less any withdrawals or dividends = ending capital (or owners equity). REMEMBER that the net income figure you use to calculate how much O'Henry wants for the business should not include the cost of the manager, since OHenry does not need the manager. You must show your calculations. If you simply provide OHenrys asking price and the buyers offer figures without showing your calculations you will not receive any points for this assignment, even if your figures are correct! In any business transaction you can negotiate the price. Finally, make sure you remember to discuss how much should you offer O'Henry and give your reason. By the way, did you know that we specifically address issues in the IP and DB and discuss how concepts in the chapters tie into the assignments in our weekly live chats? Join us and see
Assignment Type: Discussion Board Points Possible: 70 Deliverable Length: 2-3 paragraphs Due Date: 9/6/2009 11:59:59 PM CT

The net income of Simon and Hobbs, a department store, decreased sharply during 2000. Carol Simon, owner of the store, anticipates the need for a bank loan in 2001. Late in 2000, Simon instructs the store's accountant to record a $10,000 sale of furniture to the Simon family, even though the goods will not be shipped from the manufacturer until January 2001. Simon also tells the accountant not to make the following December 31, 2000 adjusting entries:

Salaries owed to employees: $900 Prepaid insurance that has expired: $400 Why is Simon taking this action? Is her action ethical? Give your reason, identifying the parties helped and the parties harmed by Simon's action. In your own words, please post a response to the Discussion Board and comment on other

postings. You will be graded on the quality of your postings.

Instructor Comments:
Make sure you consider this situation from all angles; Simon's responsibility to the employees, Simon's responsibility to the bankers, etc. Then take this one step further and do a little investigation. What principle of GAAP is Carol violating, is she breaking any laws (look at Sarbanes-Oxley act of 2002)? In order to be awarded 50 points (a grade of C) students should answer the discussion board question fully and intelligently. To earn 70 points (a high A), the student must: provide additional information to the discussion that would be informative; elaborate and expand on previous comments from others; present explanations of concepts or methods to help fellow students; present reasons for or against a topic in a persuasive fashion; share your own personal experiences that relate to the topic; share a URL website with other students and explanation for an area you researched on the Internet. Through out the week I post additional, optional questions which give students another opportunity to demonstrate their knowledge. Answering the additional questions posted is not required. This time you may want to consider taking and defending a view contrary to the overall opinion of the other students. Remember that due to the interactive nature of the DB, late submission will not be accepted under any circumstance. Can you defend Carols actions? Remember that sometimes in these discussions there is no right or wrong answer, just how well you can defend your position!

Unit 3 - Statement of Financial Position Reading Assignment: Horngren chapter 4 Assignment Type: Group Project paragraph Points Possible: 150 Group Project Doug Maltbee formed a lawn service business as a summer job. To start the business on May 1, he deposited $1,000 in a new bank account in the name of the proprietorship. The $1,000 consisted of a $600 loan from his father and $400 of his own money. Doug rented lawn equipment, purchased supplies, and hired fellow students to mow and trim his customer's lawns. At the end of each month, Doug mailed bills to his customers. On August 31, he was ready to dissolve the business and return to Louisiana State University for the fall semester. Because he was so busy, he kept few records other than his checkbook and a list of amounts owed to him by customers. At August 31, Doug's checkbook shows a balance of $690, and his customers still owe him $500. During the summer, he collected $4,250 from customers. His checkbook lists payments for supplies totaling $400, and he still has gasoline, weedeater cord, and other supplies that cost a total of $50. He paid his employees $1,900, and he still owes them $200 for the final week of the summer. Doug rented some equipment from Scholes Machine Shop. On May 1, he signed a six-month lease on mowers and paid $600 for the full lease period. Scholes will refund the unused potion of the prepayment if the equipment is in good shape. To get the refund, Doug has kept the mower in excellent condition. In fact, he had to pay $300 to repair a mower. To transport employees and equipment to jobs, Doug used a trailer that he bought for $300. He figures that the summer's work used up one-third of the trailer's service potential. The business checkbook lists a payment of $460 for cash withdrawals by Doug during the summer. Doug paid his father back during August. As a team, prepare the income statement of Maltbee Lawn Service for the four months May through Deliverable Length: Income Statement, Balance Sheet, and

Due Date: 9/13/2009 11:59:59 PM CT

August. Prepare the classified balance sheet of Maltbee Lawn Service at August 31. Please add your file. Next, as a small group discuss the following. Was Maltbee's summer work successful? Give the reason for your answer. What are the steps in the accounting cycle? Please add your file.

Instructor Comments:

If you ever thought of joining a chat, this should be the week! We will talk at length about this assignment and you may find the discussion useful Specific hints for the assignment: Let's start with the income statement Take a look at salary expense and ask yourself 'has Doug's employees completed their service to Doug?' if so, what is the basic rule of accrual accounting with regards of when you can book revenue and expense? Same principle applies to the supply expense, how much of the supplies Doug purchased did he actually use? If all the supplies were not used the remaining supplies are an asset of the company to be liquidated later. What about rental expense, did Doug use 6 months of rent, if not, then isn't he owed a refund (wouldn't you want a refund?) and how do you record a refund on the books, what statement do you show amounts that are owed to the company? Next lets look at transactions that directly affect the balance sheet (review Chapter 3 pages 148-151 for same ideas on format and flow). With regard to the loan from dad, loans are never expensed, they are booked as a liability on the balance sheet and as they are paid off only the cash account and the loan liability account are affected. The only expense item that ever occurs in a loan is the interest charged (which Doug's dad does not charge him interest). Since loans HAVE TO be paid back they are considered a liability as opposed to an investment, which is not required to be paid back. Finally, the trailer raises the issue of depreciation. Depreciation has 2 purposes: (1) to show on the balance sheet the actual value of an asset (based on the estimated useful life of the asset), and (2) to record the amount of the fixed asset that is 'used up' each year by expensing that portion year after year until the asset is worth $0 or almost $0 on the books. The concept of depreciation is very similar to what happens to the value of your car when you drive it off the dealers lot. Each year, should you decide to sell the car, you would receive less and less until all you could get is salvage value. Let's look at the statement of owners equity. The $1,000 that Doug starts out with is $400 of his own money that he invests in the company and a $600 loan from his dad. The difference between a loan and an investment in owners equity is that a loan HAS to be paid back and the investment that owners make in a company they can only HOPE to get back one day :) Make sure you convene your group quickly so you can have enough time to complete the assignment. This is a challenging project, so individual submissions will not be accepted. Also remember that mere membership in the team does not guarantee you sharing in the group grade. Each group should put a cover sheet on their paper indicating the names of the members that participated and what their contribution was to this project. Points are awarded as follows:

Possible Points
75 points 25 points 25 points 25 points

Activity
The Income Statement (25 points), Statement of Owners Equity (25 points), Balance Sheet (25 points) Was Dougs summer work successful, why Description of the accounting cycle Team participation and contribution to final project

Assignment Type: Discussion Board Points Possible: 70

Deliverable Length: 1-2 paragraphs

Due Date: 9/13/2009 11:59:59 PM CT

Select a company you are familiar with. Explain each step of the accounting cycle. Describe at least one transaction that would occur at the company you selected in each of these steps. In your own words, please post a response to the Discussion Board and comment on other postings. You will be graded on the quality of your postings.

Instructor Comments:

Take the time to meet your accounting department and talk to them about the accounting cycle. Ask them how, or if, you and your duties within the company fit into the accounting cycle. You might find this to be very enlightening :) In order to be awarded 50 points (a grade of C) students should answer the discussion board question fully and intelligently. To earn 70 points (a high A), the student must: provide additional information to the discussion that would be informative; elaborate and expand on previous comments from others; present explanations of concepts or methods to help fellow students; present reasons for or against a topic in a persuasive fashion; share your own personal experiences that relate to the topic; share a URL website with other students and explanation for an area you researched on the Internet. Through out the week I post additional, optional questions which give students another opportunity to demonstrate their knowledge. Answering the additional questions posted is not required. Responses must be posted within the allotted timeframe and written at a college-level. Reponses to other students such as Good post, or I like the way you presented the material it really made sense are nice comments that foster the positive nature of our virtual team environment, but they are not sufficient alone to further the discussion. Remember that due to the interactive nature of the DB, late submission will not be accepted under any circumstance.

Unit 4 - Accounting for Merchandising Organizations