Course Intro Financial Accounting (AIM 2301)

Instructor Kenny Zheng

Term Fall 2008
Meetings Mon/Wed 12:30 PM – 1:45 PM (SOM 1.212)

Contact Information
Office Phone 972-883-4457
Office Location SOM 4.428
Email Address kenny.zheng@utdallas.edu
Office Hours Wednesdays 4:00 to 5:00 pm or by appointment

General Course Information

Pre-requisites Basic Algebra
An introduction to business financial reporting designed to create an awareness of
the accounting concepts and principles for preparing the three basic financial
Course
statements: the income statement, balance sheet, and statement of cash flows. The
Description
course is designed to benefit all business students who will be future users of
accounting information.
 Summarize the information provided by the balance sheet, income
statement and statement of cash flows and interpret individual amounts
Learning  Compute financial ratios and use computed financial ratios to compare
Objectives competing companies in an industry in terms of profitability and liquidity
 Identify ethical issues in financial reporting and assess the impact of those
issues on shareholders and other external users of such information
 Textbook: Financial Accounting. Jane L. Reimers. Prentice Hall ISBN:
0131492012.
Required Items
 I only accept typed assignments.
 WebCT access.

Course Policies
 Individual Homework 10 pts
 Quizzes 10 pts
Grading  Team Financial Statement Analysis Project 20 pts
(credit)  Examinations 60 pts
Criteria
The letter grade will reflect each student’s performance relative to the class and
standards expected of undergraduate students.
I suggest working all of the homework questions for each chapter. There is a direct
correlation between working problems and performing successfully on examinations. I
will collect assigned homework from you randomly throughout the semester. I may also
pick students to illustrate their answers during class. You should bring to class typed
answers for each assignment in case I collect it. A total of 5 assignments will be graded.
Individual I will not accept late or make-up assignments. Grading for each assignment is based on
Homework effort and the following formula.
 2.0 – There is evidence that you made a serious attempt on all parts of the assignment.
 1 – The work is incomplete.
 0 – No work (or less than a quarter of the work) is turned in.
Solution to the exercises will be provided on WebCT following the assignment due date.
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 There will be three quizzes. Your quiz with the lowest grade will be dropped, leaving
the other two accounting for 10 points together. Each quiz will consist of some multiple
Quizzes
choice questions and True/False questions. Please bring a Scantron 882 to class for each
quiz.
Team
Please read Group Financial Statement Analysis Project instructions. 20 points
project
There will be 3 closed book/closed notes exams in this course. Exams 1 and 2 are non-
cumulative and the final exam will be comprehensive. Each exam accounts for 20 points
and may be a combination of true/false, multiple choice, and short answer questions.
Each exam may include up to 2 questions from either the assigned homework (collected
or uncollected) or the quiz. You will need a Scantron 882 for each exam.
Exams
Anyone missing an exam will automatically receive an F for the course. Exceptions will
be granted with documented medical or family emergencies. When possible, I should be
contacted prior to the time of the exam. At my discretion, I may schedule a make-up
exam, or I may reallocate your points from assignments, quizzes and other exams.
The University of Texas System and The University of Texas at Dallas have rules and
regulations for the orderly and efficient conduct of their business. It is the responsibility
of each student and each student organization to be knowledgeable about the rules and
regulations which govern student conduct and activities. General information on student
conduct and discipline is contained in the UTD publication, A to Z Guide, which is
provided to all registered students each academic year.

The University of Texas at Dallas administers student discipline within the procedures of
recognized and established due process. Procedures are defined and described in the
Student
Rules and Regulations, Board of Regents, The University of Texas System, Part 1,
Conduct
Chapter VI, Section 3, and in Title V, Rules on Student Services and Activities of the
and
university’s Handbook of Operating Procedures. Copies of these rules and regulations
Discipline
are available to students in the Office of the Dean of Students, where staff members are
available to assist students in interpreting the rules and regulations (SU 1.602, 972/883-
6391).

A student at the university neither loses the rights nor escapes the responsibilities of
citizenship. He or she is expected to obey federal, state, and local laws as well as the
Regents’ Rules, university regulations, and administrative rules. Students are subject to
discipline for violating the standards of conduct whether such conduct takes place on or
off campus, or whether civil or criminal penalties are also imposed for such conduct.
The faculty expects from its students a high level of responsibility and academic
honesty. Because the value of an academic degree depends upon the absolute integrity
of the work done by the student for that degree, it is imperative that a student
demonstrate a high standard of individual honor in his or her scholastic work.
Scholastic dishonesty includes, but is not limited to, statements, acts or omissions related
to applications for enrollment or the award of a degree, and/or the submission as one’s
Academic own work or material that is not one’s own. As a general rule, scholastic dishonesty
Integrity involves one of the following acts: cheating, plagiarism, collusion and/or falsifying
academic records. Students suspected of academic dishonesty are subject to disciplinary
proceedings.
Plagiarism, especially from the web, from portions of papers for other classes, and from
any other source is unacceptable and will be dealt with under the university’s policy on
plagiarism (see general catalog for details). This course will use the resources of
turnitin.com, which searches the web for possible plagiarism and is over 90% effective.
The University of Texas at Dallas recognizes the value and efficiency of communication

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 Email Use between faculty/staff and students through electronic mail. At the same time, email
raises some issues concerning security and the identity of each individual in an email
exchange. The university encourages all official student email correspondence be sent
only to a student’s U.T. Dallas email address and that faculty and staff consider email
from students official only if it originates from a UTD student account. This allows the
university to maintain a high degree of confidence in the identity of all individual
corresponding and the security of the transmitted information. UTD furnishes each
student with a free email account that is to be used in all communication with university
personnel. The Department of Information Resources at U.T. Dallas provides a method
for students to have their U.T. Dallas mail forwarded to other accounts.
The administration of this institution has set deadlines for withdrawal of any college-
level courses. These dates and times are published in that semester's course catalog.
Withdrawal Administration procedures must be followed. It is the student's responsibility to handle
from Class withdrawal requirements from any class. In other words, I cannot drop or withdraw any
student. You must do the proper paperwork to ensure that you will not receive a final
grade of "F" in a course if you choose not to attend the class once you are enrolled.
Procedures for student grievances are found in Title V, Rules on Student Services and
Activities, of the university’s Handbook of Operating Procedures.
In attempting to resolve any student grievance regarding grades, evaluations, or other
fulfillments of academic responsibility, it is the obligation of the student first to make a
serious effort to resolve the matter with the instructor, supervisor, administrator, or
committee with whom the grievance originates (hereafter called “the respondent”).
Individual faculty members retain primary responsibility for assigning grades and
evaluations. If the matter cannot be resolved at that level, the grievance must be
Student submitted in writing to the respondent with a copy of the respondent’s School Dean. If
Grievance the matter is not resolved by the written response provided by the respondent, the
Procedures student may submit a written appeal to the School Dean. If the grievance is not resolved
by the School Dean’s decision, the student may make a written appeal to the Dean of
Graduate or Undergraduate Education, and the deal will appoint and convene an
Academic Appeals Panel. The decision of the Academic Appeals Panel is final. The
results of the academic appeals process will be distributed to all involved parties.

Copies of these rules and regulations are available to students in the Office of the Dean
of Students, where staff members are available to assist students in interpreting the rules
and regulations.
As per university policy, incomplete grades will be granted only for work unavoidably
missed at the semester’s end and only if 70% of the course work has been completed.
Incomplete An incomplete grade must be resolved within eight (8) weeks from the first day of the
Grades subsequent long semester. If the required work to complete the course and to remove
the incomplete grade is not submitted by the specified deadline, the incomplete grade is
changed automatically to a grade of F.
The goal of Disability Services is to provide students with disabilities educational
opportunities equal to those of their non-disabled peers. Disability Services is located in
room 1.610 in the Student Union. Office hours are Monday and Thursday, 8:30 a.m. to
6:30 p.m.; Tuesday and Wednesday, 8:30 a.m. to 7:30 p.m.; and Friday, 8:30 a.m. to
5:30 p.m.

The contact information for the Office of Disability Services is:

The University of Texas at Dallas, SU 22
PO Box 830688
Richardson, Texas 75083-0688
(972) 883-2098 (voice or TTY)

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 Essentially, the law requires that colleges and universities make those reasonable
adjustments necessary to eliminate discrimination on the basis of disability. For
Disability example, it may be necessary to remove classroom prohibitions against tape recorders or
Services animals (in the case of dog guides) for students who are blind. Occasionally an
assignment requirement may be substituted (for example, a research paper versus an oral
presentation for a student who is hearing impaired). Classes enrolled students with
mobility impairments may have to be rescheduled in accessible facilities. The college or
university may need to provide special services such as registration, note-taking, or
mobility assistance.

It is the student’s responsibility to notify his or her professors of the need for such an
accommodation. Disability Services provides students with letters to present to faculty
members to verify that the student has a disability and needs accommodations.
Individuals requiring special accommodation should contact the professor after class or
during office hours.
The University of Texas at Dallas will excuse a student from class or other required
activities for the travel to and observance of a religious holy day for a religion whose
places of worship are exempt from property tax under Section 11.20, Tax Code, Texas
Code Annotated.

The student is encouraged to notify the instructor or activity sponsor as soon as possible
regarding the absence, preferably in advance of the assignment. The student, so
excused, will be allowed to take the exam or complete the assignment within a
reasonable time after the absence: a period equal to the length of the absence, up to a
maximum of one week. A student who notifies the instructor and completes any missed
Religious exam or assignment may not be penalized for the absence. A student who fails to
Holy Days complete the exam or assignment within the prescribed period may receive a failing
grade for that exam or assignment.

If a student or an instructor disagrees about the nature of the absence [i.e., for the
purpose of observing a religious holy day] or if there is similar disagreement about
whether the student has been given a reasonable time to complete any missed
assignments or examinations, either the student or the instructor may request a ruling
from the chief executive officer of the institution, or his or her designee. The chief
executive officer or designee must take into account the legislative intent of TEC
51.911(b), and the student and instructor will abide by the decision of the chief executive
officer or designee.
Off-campus, out-of-state, and foreign instruction and activities are subject to state law
Off-Campus
and University policies and procedures regarding travel and risk-related activities.
Instruction
Information regarding these rules and regulations may be found at
and Course
http://www.utdallas.edu/BusinessAffairs/Travel_Risk_Activities.htm. Additional
Activities
information is available from the office of the school dean.

These descriptions and timelines are subject to change at the discretion of the Instructor.

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 Group Financial Statement Analysis Project Instructions
AIM 2301 Fall 2008

The following project description is intended to be self-explanatory, so read it carefully. The objective
of the project is to increase your financial statement analysis skills. You will assume the role of a
financial analyst and prepare a research report for a client (e.g. an individual investor or a portfolio
manager).

Formation of Teams
Each team should consist of 4 members. You will have until the beginning of week 3 to voluntarily
form the teams. Any student not in a team by then should let me know at the beginning of week 3, and I
will assign her/him to a group.

Selection of Industry and Firms

Each team must select an industry, and each team member must select one firm from this industry. A
list of industries, firms comprising each industry and their financial statements (10-Ks) are available on
the internet. Follow these steps to get there: (i) go to http://www.secinfo.com, (ii) click on “Standard
Industrial Classification,” (iii) click on an industry name and through several sub-industry levels until
you see a list of companies, (iv) click on a company name, and (v) click on Annual Reports – Form 10-
K and you will see a list of archived 10-Ks. You will be prompted to sign up during this process. The
registration is free if you agree to the terms. You may want to select firms for which two most recent
10-Ks are available. This will make it easy for you to obtain financial information for your company.
However, you will not have to provide me with the financial reports of your company. Your team’s
selection of an industry and your selection of a firm are to be done by week 4. Each team should give
me a typed memo with information on the team members as well as the industry and firms selected at
the beginning of the class in week 4. Indicate “AIM 2301 Project” as the subject of the memo.

Obtaining Financial Information

Information needed: Three consecutive years of Income Statements and four years of Balance Sheets
with accompanying notes from two most recent 10-Ks or annual reports.

To obtain articles about your company in the popular press, a good source is under Business/
Management Databases. Find Articles database (http://www.utdallas.edu/library/collections/dbases.htm)
which can be accessed by logging into the UTD Library system.

Analysis
Your analysis should include:

1. preparing common-size financial statements (refer to the textbook pp. 624-625)

2. computing financial ratios (include all the ratios on pp. 626-627)
3. performing time-series and cross-sectional analyses of

a) overall profitability
b) components of profitability
c) risk ratios (liquidity and solvency)
d) market indicators

4. discussion of risk factors from the notes to the financial statements

5. discussion of the quality of accounting disclosure

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 6. discussion of business opportunities and threats faced by your firm and industry
7. suggestions as to which of the four firms in your industry is likely to be most successful in the
future and discuss the reasons for it.

Format
The final report should be six pages maximum, typed, double-spaced, with one-inch margins all around,
and standard type-size (i.e. 12 point Times New Roman). Your report should include supporting
analyses, tables, and figures as appendices to the six pages. However, the six pages should stand on their
own. In addition,

 Charts and exhibits should be numbered and appropriately referenced in the body of the
document.
 Citations properly formatted.
 The names of team participants should be on the first page.

Due Dates
1. Prepare common-size Income Statements (3 years) and Balance Sheets (4 years) and a table of
ratios (3 years) for each company. Compute these numbers yourself; do not just download them
from the internet (they may have used somewhat different definitions). No interpretation of data
is required at this stage. A hard copy of Part I is due in week 8 before your class starts (2 points
– 10% penalty for each day late).

2. A hard copy of your completed analysis (per group) as well as peer evaluations (per individual)
is due in week 16 by 5:00 pm on December 8th. (4 points – 20% penalty for each day late).

Grading
Work will be evaluated for content and format. Content criteria include relevance and depth of analyses,
and the degree to which the assigned task was accomplished. Format criteria include clarity, accuracy,
neatness, organization, and structure of appendices.

At the end of the semester, each team member will evaluate the contribution of the other team members
as well of him- or herself. I will determine each student’s personal score for the project taking into
consideration the peer evaluations.

Note:
Often companies restate their prior years’ data for several reasons. A common reason is acquisition of
other companies or selling of subsidiaries. Let us say company A makes an acquisition of company B in
2007. In the 2007 10-K, the 2007 financial statements will be for the combined company (A+B) and the
2006 financial statements will also be presented for the combined company (A+B); this is done for ease
of comparison. The end result of this will be that the 2006 financial statements in the 2006 10-K and
2007 10-K will be different.

The best way to handle this issue is to make sure that you use the numbers from the same 10-K when
computing a ratio. This will make the ratios for a given year internally consistent (that is, they will
represent either company A or company A+B). When you do a time series comparison, however, you
will end up comparing company A with company A+B, but that cannot be avoided and it would be fine
with me.

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 COURSE OUTLINE

W DAT C
TOPIC Reading Before Class Homework Due
K E H
Course introduction
8/25 1 Reading: pp. 4-22
Valuation principles
1
8/27 Accounting as information Reading: pp. 44-57
9/1 Labor day (NO CLASS)
2
2 Business transactions analysis
Chap 1: MC 1, 2, 4, 10; SE 2, 6, 12;
9/3 (Balance sheet equation approach) Reading: pp. 58-64
E-A 1, 2; P-A 1
Review select exercises & problems (Ch. 1-2)
Quiz 1 (Ch. 1-2)
9/8 Debits and credits Reading: pp. 98-105 Chap 2: MC 1-4; SE 1, 2, 4, 5; E-A 1
3 3 T-accounts
Accounting Cycle
9/10 Readings: pp. 105-127 Chap 3: MC 1, 4-7, 9; E-A 4
Business transactions analysis with debits and credits
9/15 4 Adjusting entries under accrual-based accounting Reading: pp. 156-183
4 Chap 4: MC 1, 5, 7, 8; E-A 2, 4, 9; P-
9/17 Exam 1 Review Reading: pp. 151-153
A7
9/22 Exam 1 (Ch. 1-4)
5
9/24 12 Financial statement analysis I Reading: pp. 618-639
Chap 12: MC 1, 10; SE 1, 5, 7, 10,
9/29 5 Accounting for merchandising operations Reading: pp. 224-251
14; E-A 7
6
Readings: pp. 273-275,
10/1 Accounting for inventory Chap 5: MC 1-4; SE 11, 12; E-A 14
276-284
6 Effects of inventory cost flow assumptions on financial
Readings: pp. 285-299,
10/6 statements
321-323
7 Review select exercises & problems (Ch. 5, 6 &12)
Receivables and bad debt expense Chap 6: MC 1-10; SE 3-5, 8, 11; E-A
10/8 Reading: pp. 328-342
Quiz 2 (Ch. 5, 6 &12) 3, 4
7
Cash and Cash equivalents Readings: pp. 343-359,
10/13
8 Analyzing accounts receivable 406-408 (Ch. 8)
10/15 Group work on project Part I (NO CLASS)
Group project Part I due
10/20 Accounting for tangible long-lived assets - Reading: pp. 380-396 Chap 7: MC 1-3; E-A 2, 3, 8
9 8 Depreciation and Depletion
Accounting for intangible assets - amortization
10/22 Reading: pp. 396-416
Changes in asset life
Feedback on group project Part I Chap 8: MC All odd #s;
10/27
10 Financial statement analysis II SE 1, 5-7, 18; E-A 17; P-A 7
10/29 Exam 2 Review
11/3 Exam 2 (Ch. 5, 6, 7, 8 & 12)
11
11/5 Accounting for liabilities Reading: pp. 440-452
Time value of money Readings: pp. 492-499,
11/10 9 Chap 9: SE 1, 3, 6, 12; E-A 4; P-A 1
12 Leases 509-511
11/12 Bonds Reading: pp. 453-472
Quiz 3 (Ch. 9) Chap 9: MC 1, 8; E-A 1, 3, 4, 8; P-A
11/17 Reading: pp. 512-523
13 10 Shareholders' equity I 7
11/19 Shareholders' equity II Reading: pp. 524-537
Chap 10: MC All even numbered; E-
11/24 11 Statement of cash flows Reading: pp. 558-589
14 A 16
11/26 Thanksgiving Eve (NO CLASS)
12/1 13 Earnings management and corporate governance Reading: pp. 670-691 Chap 11: MC 1-7; E-A 11; P-A 1
15
12/3 Exam 3 Review Chap 13: MC 1-5; SE 5, 6, 9
12/8 Complete group project due by 5:00pm (NO CLASS)
16
12/10 Reading day (NO CLASS)
17 12/15 Exam 3 (Ch. 9, 10, 11 & 13) Room and time to be announced