NORTHEASTERN UNIVERSITY
GRADUATE SCHOOL OF BUSINESS ADMINISTRATION
EXECUTIVE MBA PROGRAM
DAILY ASSIGNMENTS
Focus of the first 4 classes (including residency):
In observing, measuring, and reporting on economic events, accountants use a set of concepts and a structure which have changed little over several centuries. The accounting framework provides a way of structuring information about the financial position of a company and is important to understand in order to evaluate the effects of economic events on a company's financial statements.
First Residency Session
Case: CHEMALITE, INC. 9-177-078
Assignment:
1. Prepare a summary of cash transactions for the first six months for Chemalite.
Is the companylosing money?
2. Prepare an income statement and balance sheet for Chemalite for the first year.
Do not worry about debits and credits yet.
Second Residency Session
Group Exercise in Understanding Financial Statements - Materials given out in first session.
Saturday, January 13, 2001 10:40 am
Reading: LLS, Chaps. 1, 2 and 3
Text Problems: E2-2, E3-2, E3-3
Other: Try to work Parts 1 and 2 in the Alatech exercise. I will use this exercise to illustrate the accounting cycle in class.
Journal Task: Get acquainted with a senior financial officer in your company. Get a copy of the financial statements. If you are self-employed or have other problems with using your own company, search the Internet for detailed financial information on a company that interests you. Also please see me.
Friday, January 19, 2001 7:45 am
Reading: LLS, Read Chapter 4(Read Chapter 5 sometime soon. No problems assigned there.)
Problems: E4-6, E4-12
Other: Work Alatech Parts 3,4,5,6
Journal Task: Find out the following about your company. Bring answers to class.
1. Who owns the company? Is it large or small in revenues and assets?
What is the nature of the business?
2. What has been the trend in profits in the last 5 years?
3. Are there any account titles you do not understand or that are unusual?
Bring examples for class discussion.
4. What is the format of the income statement? Is it just revenues minus
expenses or are there more sub-categories?
Saturday, January 27, 2001 10:40 am
Reading: LLS, Read Chapter 6
Problems: E6-13, E6-17, P6-1, CP6-7
Journal task: Answer the following questions.
5. Are there particular ratios that are valuable for understanding your business?
If so, calculate them for the past three years.
6. Identify 3 websites that might provide useful information for investing
in publicly traded companies. Bring examples to class.
7. How does your company recognize revenue? Is credit a significant part of
your business?
8. What is your company's policy on recognition of bad debts? Are bad debts
a material amount for your company?
Focus: The matching principle demands that revenues be recognized when earned and expenses be recognized in the time period in which they are incurred, or in the time period of the revenues that are associated with them. In practice, it is frequently hard to do this, particularly when uncertainties make quantifying the expenses difficult. This chapter looks at revenue recognition and the associated bad debts that arise when credit sales are offered.
Friday, February 2, 2001 2:15 pm
Quiz: Study for 45 minute quiz on accounting basics and receivables
Reading: LLS, Read Chapter 7
Problems: E7-2, E7-6, E7-8, E7-10
Journal task: Answer the following questions.
9. Does your company have merchandise inventory? If so, what method do
they use to value ending inventory?
10. If possible, calculate the following ratios for the last three years:
- a) inventory turnover
- b) gross margin percentage
11. Point out any other information you can find about inventories in the footnotes or management's discussion
Focus: The assumed flow of costs through inventory and cost of goods sold accounts need not match the physical flow of goods. The choice of an inventory accounting method almost always involves many considerations because consistency demands that changes be made infrequently, if at all. Inventory is the location of many accounting irregularities and the magnitude of inventory "errors" or even outright fraud is a serious problem in the US today.
Saturday, February 10, 2001 10:40 am
Reading: LLS, Read Chapter 8
Problems: E8-8, E8-14, E8-17, E8-18
Journal task: Answer the following questions:
12. Are fixed assets a material amount of total assets at your company?
What measures are you using to answer this question?
13. What is the depreciation policy at your company?
Focus: The amount of asset cost matched with periodic revenues is determined by accounting policies for asset capitalization and depreciation. Estimates of useful lives and estimated patterns of asset usefulness are management responsibilities that have a direct effect on reported financial condition and performance.
Friday, February 16, 2001 2:15 pm
Reading: LLS, Read Chapters 9 and 10
Focus Chapter 10 on Advantages and Disadvantages of Bonds and the General Concepts rather than Accounting Details
Problems: Time Value of Money Problems Handout, P9-5, P9-7, E10-7
Journal Task: Please answer the following questions.
1. What percentage of your company's assets are financed by debt? Is it
primarily long-term debt or current liabilities? Is this in line with other companies
in your industry?
2.Does your company have many estimated liabilities? If so, describe them.
3.Calculate a current ratio for your company. Comment on it.
Focus: Liabilities are estimated in order to properly match future expenses against the present revenues that generate them. Estimations are frequently difficult to do successfully and can lead to difficulties in analysis of the actual claims on a business. Bonds provide a means for both for-profit and not-for-profit institutions to raise money from the public through borrowings. How much an entity is able to raise is a function of the interest rate offered, the market interest rate and other environmental factors.
Saturday, February 24, 2001 10:40 am
Reading: LLS, Read Chapter 11
Problems:: E11-4, E11-6, E11-8, P11-1
Journal Task: Please answer the following questions:
1. What kinds of stock (if any) does your company have? Can you determine
the average amount paid for each class of stock?
2. Has the market value of these stocks changed in the past year?
3. Identify any other stockholders' equity accounts that seem unusual and bring examples
of them to class for discussion.
Focus: Stockholders’ equity represents the investments of owners into the company and subsequent transactions between the company and its owners.
Friday, March 2, 2001 2:15 pm
Study for hour and a half exam.
Phar-More Pharmaceuticals Fraud Film
Saturday, March 10, 2001 7:45 am
Reading: LLS. Read Chapter 13
Read Solving the Puzzle of the Cash Flow Statement. Focus on understanding, not preparing a cash flow statement
Case for class discussion: Use the approach in the article to analyze the cash flow statements handed out in the previous class.
Journal Task: Please answer the following questions.
1.What are the major sources of cash in your company?
2.What are the major uses of cash in your company?
3.How have the trends in sources and uses of cash changed in the last three years?
4.What are the major reasons that net income is different from cash flow from operations in the last three years?
5.Does your company have goodwill? If so, how did it arise?
6.Use any of the ratios in Chapter 14 that seem relevant to assess
the overall health of your company. (Keep this brief.)
Focus: The information revealed by a cash flow statement is often essential for creating a complete picture of the results of operations and financial position. Valuable insights can be gained by a systematic evaluation of key factors in the statement
Friday, March 16, 2001 10:40 am
Readings: None assigned.
Assignment: Complete your group annual report project. Come to class prepared to give a brief summary of the most interesting things you found or learned about your industry. You may show a couple of pertinent slides if you like, but you will be limited to a maximum of 10 minutes per group. Your efforts should be focused on the paper.
After we discuss your industries, you will participate in a group exercise to identify industries, which will be similar to problems E14-12 through E14-15.
OVERVIEW OF FINANCIAL ACCOUNTING CLASSES
Class No. Topic Covered
1 Accounting Cycle
2 Accounting Cycle
3 Accounting Cycle
4 Accounting Cycle
5 Revenues, receivables, cash
6 Quiz/Inventories
7 Property, plant, and equipment
8 Liabilities, bonds, and the Time Value of Money
9 Stockholders' Equity
10 Second Exam/Film
11 Cash Flows
12 AR project/In-class exercise