What is intermediate accounting?

Bennet Tchaikovsky: Hello everybody and welcome to my preview of intermediate accounting. My name is Bennett Tchaikovsky. Bennet Tchaikovsky: My disclaimer and copyright notice the information and opinions in this presentation are those of the other only Bennet Tchaikovsky: And all the authors employers or affiliated organizations, including but not limited to Irvine Valley College, the South. Orange County Community College District or Chapman University. Bennet Tchaikovsky: The presentation is for educational purposes only and does not constitute any legal or accounting advice whatsoever. Bennet Tchaikovsky: This presentation is copyright 2008 to 2019 or 2020 now. Bye bye Tchaikovsky all rights reserved any distribution is strictly prohibited. Bennet Tchaikovsky: Okay. So a little bit about me. I am a full time faculty member at Irvine Valley College. My have been a licensed California CPA since 1993 and attorney since 1997 Bennet Tchaikovsky: I graduated from UC Santa Barbara as a business economics major, you do not need to be an accounting major to Bennet Tchaikovsky: Become a CPA. If you have a question about that. Send me an email and southwestern law school. Bennet Tchaikovsky: I've been teaching financial accounting since the fall of 2013 and intermediate accounting since the fall of 2016 I worked Bennet Tchaikovsky: As a chief financial officer for many different companies as well as a board member Bennet Tchaikovsky: If you type Tchaikovsky in the SEC website.

Hopefully you won't say anything on the securities side, but you'll find me signing my life away. Bennet Tchaikovsky: Okay, what is intermediate accounting well in your lower division classes, more than likely, you either had one of two setups. You could have had a two quarters of financial accounting Bennet Tchaikovsky: You could have had a semester of financial accounting and then you probably either had a quarter or a semester of managerial accounting so Bennet Tchaikovsky: With intermediate though, we take the financial accounting and we're expanding it to a full year of fun. Some schools do it in two quarters, which is insane. Bennet Tchaikovsky: It should be a full year or two full semesters. There is a lot of information to have intermediate accounting into two quarters. Bennet Tchaikovsky: That's not a good time. So intermediate accounting needs to be a full year. Okay. And you'll see why in a moment. And what we're doing is we're taking what we learned in financial and expanding it to that full year.

Bennet Tchaikovsky: If it's taught, right, it should be one of the most challenging courses that you have taken or that you will be taking I went, I went to law school. I thought that might intermediate accounting class top by Professor Henry Sander was harder than anything else I ever had. Bennet Tchaikovsky: And it's by far one of the most important components for the financial accounting and reporting part of the CPA exam. Bennet Tchaikovsky: The CPA exam as all of you know they've been announced a change for 2024 but at least for right now. This is kind of holding true. It's very important. So beyond intermediate accounting Bennet Tchaikovsky: It's really advanced accounting and that's why when someone tells me they're going to get a masters and accounting. I generally don't recommend it unless they got their degree from a foreign University. Bennet Tchaikovsky: And they want to work at a big for Firm, then you might get a masters in accounting because a big for might want to see a terminal degree from a Bennet Tchaikovsky: Us university. So, but in any event, there's really not a lot beyond intermediate accounting so Bennet Tchaikovsky: I in terms of your success and intermediate accounting and this is my second take on this video and I'm sure I'm doing a second take because I realized when I started listing these out.

It's like, oh wow yeah there's a lot Bennet Tchaikovsky: So if it's been a long time since you took financial accounting between financial and intermediate and you're worried about what do I need to have Bennet Tchaikovsky: Behind me or what what's going to give me the best success in terms of preparation. So every teacher teaches the class differently. Bennet Tchaikovsky: And for for me for the very first semester. It's really about. Can a student go through and create financial statements. Bennet Tchaikovsky: Can they do an income statement. Can they do a statement of retained earnings and then create a balance sheet classified Bennet Tchaikovsky: The income statement, you should be able to do a multi step income statement. Do you know how to do adjusting journal entries journal entries are extremely important.

I use T accounts heavily Bennet Tchaikovsky: In my classes and it's that's a lifesaver. So knowing how to use T accounts adjusting journal entries. Very, very important. Bennet Tchaikovsky: Going down in terms of other topics. Right. And this is you'll see how this works in a moment. Bennet Tchaikovsky: Accounts receivable. Do you know how to determine an ending allowance using the percentage of accounts receivable Bennet Tchaikovsky: Or an aging of accounts receivable. If you had an instructor who taught you the percentage of credit sales method that was worthless, because it's not, it's even though it might say it's gap. It's really not. Bennet Tchaikovsky: I asked the faz be examiner. A few years back. He said, no, it's not gap also here to writing off an account receivable collecting an account receivable previously written off.

Can you do the journal entries for those. How do we go through and prepare a balance sheet. Bennet Tchaikovsky: For accounts receivable. Right. It's the accounts receivable less than allowance for doubtful accounts is going to give you, accounts receivable net Bennet Tchaikovsky: Then understanding with inventory topics lower costs or market five for life, a weighted average periodic and perpetual methods.

Bennet Tchaikovsky: Right. How can we determine cost of goods sold and ending inventory also to recording basic sales transactions right debating AR crediting sales deafening cost of goods sold and crediting inventory Bennet Tchaikovsky: Also here to property climbing equipment. Do you know how to record depreciation right straight line double declining balance units of production. Bennet Tchaikovsky: If you have an instructor that tries to teach you some of the years digits. Okay, what I want you to do is to ask that instructor is to show that have them show you Bennet Tchaikovsky: a publicly traded company that uses some of the years digits, just ask them to show you that. Bennet Tchaikovsky: And you'll get a good answer, which is, I don't know. Or let me. What's the SEC. Who knows what they'll say, also when you're dealing with property plant and equipment.

Bennet Tchaikovsky: How do you make, how do you record an asset sale. Right. How do I record an asset sale. What happens when there's a change in estimate for depreciation. Bennet Tchaikovsky: Within 10 intangibles basic things. What's goodwill. How do you amortize Bennet Tchaikovsky: Intellectual Property statement of cash flows very important. It's not as really as heavy as it is in the second part but chapter five, as we'll see in a moment. Bennet Tchaikovsky: Covers the statement of cash flows. So you actually may see instructors putting that on Bennet Tchaikovsky: In the second semester, you're going to be dealing with more and this is really coming from financial accounting like basic contingencies. Bennet Tchaikovsky: Probable possible, can we reasonably estimated can estimate it bonds payable. Do you know how to use a present value table and compute the discount or the premium. Bennet Tchaikovsky: Using a present value table. Very important or understanding the present value concept. Lastly stock transactions common stock issuance and treasury stock if you're watching this video. Bennet Tchaikovsky: And you're freaking out about what I just said.

I have a lot of different videos that are out there and the financial accounting that will walk you through problems on how to do each of the above. Bennet Tchaikovsky: Or to seven put a message in the in the bottom and I'll respond to you. So for your success and intermediate accounting. You want to be working. And this is an any class or backwards from the syllabus. What is determining my grade right Bennet Tchaikovsky: That's in any class you take that should be your approach is keep your eyes on the prize, which is passing the class. Bennet Tchaikovsky: If there's a lot of in class participation, you better be in class also too, it's when you're and I've heard this from many of my former students Bennet Tchaikovsky: They will have instructors that are PhDs and there may be also be some CPA that are out there as well.

The worst possible education, you could get in intermediate accounting Bennet Tchaikovsky: In my opinion, is an instructor who reads slides. And if you get a slide reader, meaning that they're not going through and and doing problems. Bennet Tchaikovsky: That's a problem. And if the way I would do it the way I teach now is what I do is I asked the students to read the textbook or better yet, I've made videos for them to watch those aren't public on YouTube. I have the students watch videos. Bennet Tchaikovsky: Explaining the various different concepts. They need to be able to come to class and ready to work on questions. Bennet Tchaikovsky: The way you learn accounting or the way that I do it is by writing out the solutions over and over again. Bennet Tchaikovsky: That to me is, by far, what is most important. And that's why I provide the answers to the homework problems I assign if I go over a question in class, the students have the ability to go through and watch that solution.

Okay so Chegg Bennet Tchaikovsky: I write my own exams I but if you have an instructor that's pulling stuff from, you know, and I get why instructors do it, although I think it's pretty shameful in the accounting profession, if they're pulling or not writing their own stuff. Bennet Tchaikovsky: If they're using Chegg you got to do it because that's somebody else in the class is doing it. I'm not telling you to cheat. Bennet Tchaikovsky: All I'm telling you is, is that pretty much everything's on check and all of you know this. Bennet Tchaikovsky: It's really unfortunate that that product exists, but I understand why it exists, it's because of lazy instructors and instructors that are not willing to go through and to change. Bennet Tchaikovsky: Their exams, because that exists. So that's I'm saying my piece. So again, my approach with any questions.

And, you know, if I give an intermediate accounting exam. It's all problem based I don't use multiple choice questions. Bennet Tchaikovsky: To me, multiple choice is a cop out because of Chegg. And so for me, I like going having problems. I like having students do problems and even in this time of coven Bennet Tchaikovsky: What I have my students do is they look at the canvas screen.

They write out the solutions and their hands are about to fall off. I haven't gotten the carpal tunnel syndrome lawsuits yet. Bennet Tchaikovsky: Their hands are about to fall off because of how much writing, they're doing but that's really what you need to do in my opinion to teach accounting. It is writing it out repeatedly. It's a skill. Bennet Tchaikovsky: That's how you learn it. If you didn't do that and and this is somebody who important to if you had a really easy financial accounting instructor, you're screwed.

Bennet Tchaikovsky: And the reason why I say that is I've had students once they transfer to a four year school they're sitting next to somebody Bennet Tchaikovsky: And they don't know how to do debits and credits. They don't don't know what a t account is. And so you if you are taking an intermediate accounting class and you Bennet Tchaikovsky: Use multiple choice you use connect or one of those other crazy programs that are out there. Bennet Tchaikovsky: In my opinion, that's not going to prepare you for success in this class, you have to go through and repeat the questions over and over again.

Bennet Tchaikovsky: And even when you study for the CPA exam. It's no different. It's how many times can you use Becker Wiley climb. Roger. Bennet Tchaikovsky: And how many times can you go through those questions. So again, if you the most important thing you can do in business is like knowledge when you don't know something or if it's been so long. Bennet Tchaikovsky: That I need to go back and basically review. The first step is acknowledgement. The second step is going to go back and relearn a lot of this different stuff. And trust me, you will feel better. Bennet Tchaikovsky: Because if you've already taken the class. If you're reviewing and again for the second time. Bennet Tchaikovsky: It's going to help you out every time you're doing a question and accounting, you're getting yourself closer to becoming a CPA. Bennet Tchaikovsky: Okay, now let's look more specifically about, you know, when you walk into intermediate accounting. It's like, well, they're 24 chapters and this is the key. So, and Bennet Tchaikovsky: I was indoctrinated on the sixth edition. So that tells you how old I am.

I'm old man Bennett. Yeah, I was taking intermediate accounting me see if I can get this right. Bennet Tchaikovsky: It was in the spring of 19 spring quarter of 1989 that's how long ago it was in a galaxy far, far away at UC Santa Barbara. Bennet Tchaikovsky: So what are the differences or what's new in intermediate accounting. Now the one thing is, you'll see some schools that will take chapters one through 12 Bennet Tchaikovsky: And then they'll take 13 through 24 that is insanity. Okay, it's not Lin sanity, like a next it'll insanity, but it is insanity. Why is it insanity. Bennet Tchaikovsky: Because there is way too much new stuff everything back here is very, very new and these are very hard questions. Bennet Tchaikovsky: So one of the things that I've done in my class is I've kind of broken it up a little bit differently.

Bennet Tchaikovsky: The very first exam I give. And this is that the suggestion of Alessi Willis, who's a full time professor at Chapman University is awesome. Bennet Tchaikovsky: Is that she's had been at give your students an exam to make sure that they know how to do the basics, meaning that Bennet Tchaikovsky: If I give you an adjusted trial balance. Can you make adjustments, can you do journal entries.

Can you prepare adjusting journal entries Bennet Tchaikovsky: Can you prepare a multi step income statement. Can you prepare a statement of retained earnings. Can you prepare a classified balance sheet can, are you able to go through and do that. Bennet Tchaikovsky: That is the first exam I make it worth like 10% of the grade. If a student is unable to go through. And to do that, though, it just means I get a lot of I do get some students that drop Bennet Tchaikovsky: But that's just because it's they realize, oh, this class is actually going to be taking some work. Bennet Tchaikovsky: So the that's pretty much exam one my next exam that I usually give covers the income statement. Right. And what are the new topics. Bennet Tchaikovsky: You're going to learn about discontinued operations and how those have to be shown that have tax. Bennet Tchaikovsky: What happens if you have a prior period error and you have to restate retained earnings Bennet Tchaikovsky: What happens when you have a change of estimate error correction non operating items.

And these are all different components of the income statement. Bennet Tchaikovsky: For the balance sheet. There's really not going to be a lot new here and again Bennet Tchaikovsky: All depends on your education if you never learned how to do a classified balance sheet, right, that does not mean top secret that means current and non current assets and liabilities. Bennet Tchaikovsky: It's going to be a nightmare. And that's why going back over to here. Bennet Tchaikovsky: That's why you would need to really go through and brush up if you've gone through and done this, you're going to be pretty good though for all these different chapters here.

Bennet Tchaikovsky: The one other part of the balance sheet chapter is doing a statement of cash flows. Now, if you haven't done if you didn't get to that and financial it's something that troubles. A lot of students. Bennet Tchaikovsky: It's pretty easy to do and I have several different videos that you can go through and watch for free. Bennet Tchaikovsky: Yeah, at least as of right now, I'm just going to their free videos you can go on to YouTube and watch those videos on terms of how to do a cash flow. Bennet Tchaikovsky: The next concept here is present value. Now you should have seen present value twice. Bennet Tchaikovsky: You should have seen it and financial if you went through and did bonds. If you didn't get it, then Bennet Tchaikovsky: The second time. You should have seen it is when you were taking managerial accounting and we're doing a net present value computation. If you've never seen present value watch one of my videos. That's what I would go through and do Bennet Tchaikovsky: Chapter 18 now this is where I've moved things around and I did this in consultation with one of my co faculties Don Bradshaw at IDC Bennet Tchaikovsky: We looked at intermediate and we said, There's no way, given this that we need.

We have to move things around. Bennet Tchaikovsky: So chapter 18 is revenue recognition. Okay. And this is where you're introduced I generally don't teach the five steps for revenue recognition and financial Bennet Tchaikovsky: It's something that I do in intermediate. So you're going to learn about those five steps of revenue recognition. Bennet Tchaikovsky: You're going to learn about the percentage of completion method completed contract method. How do you do various allocations. Those are going to be the new topics, you're going to be learning Bennet Tchaikovsky: With cash and receivables accounts receivable, factoring. This is something that, again, if you're going through and how do you sell a receivable, how do you Bennet Tchaikovsky: Basically pleasure receivables as collateral for alone. That's something that's new, or at least I don't teach and financial bank reconciliations Bennet Tchaikovsky: What's funny is that I didn't listed here. I should have Bennet Tchaikovsky: But knowing how to do a bank reconciliation is important.

I started teaching it again and financial laughter, one of my former students said hey dude union. You didn't teach this, you need to teach. It's like okay Bennet Tchaikovsky: So if you haven't had bank RECs that's something that you need to know how to do. Bennet Tchaikovsky: Inventory evaluation. Now I talked previously about five alive a weighted average periodic and perpetual Bennet Tchaikovsky: There's also going to be dollar value life. Oh, it's not used that frequently, but it had can come up on the CPA exam. Bennet Tchaikovsky: Inventory errors. How do we record purchases net of that discount which is a complete waste of time. But I'm looking at here, because it is new. Bennet Tchaikovsky: Inventory and additional evaluation issues which is Chapter nine Bennet Tchaikovsky: lower of cost or market. And the key here is what's different is like in my one a class, I'll say okay cost is this mark as this go through and do it. But here we're looking at, well, how do we determine market. Bennet Tchaikovsky: And it's the middle of basically three different values will also look at the gross profit of retail method of estimating inventory, right, like the Human Torch came in burn down the warehouse and then before Iceman could come and blow it all out and stop the fire.

Bennet Tchaikovsky: Yeah, that's, that's what we go through and learn how to do. We don't do it with fantastic for people. Okay. Hopefully they'll remake that into something good. Bennet Tchaikovsky: Acquisition and disposal property plant equipment, we're gonna talk about interest capitalization why we're doing a long term construction project. What does that look like Bennet Tchaikovsky: Non monetary exchanges asset for asset. What happens depreciation and impairments. Now again, if you've gone through and done all this here. It's going to be not as bad. Bennet Tchaikovsky: If you're asked to do some of the years digits.

Remember, as the instructor, show me a publicly traded company that does it. Bennet Tchaikovsky: It's not going to work out. And in fact, the reason why I can ask you that, as I met an SEC examiner at a conference that was put on by Haskell and white local Orange County firm great firm, ask them, Hey, have you ever seen some of the years digits. And he looked at me and he said, Bennet Tchaikovsky: Well, and the thousands of filings reviewed I maybe sought us five times. But they didn't call it that. So it's a purely theoretical accounting deal Bennet Tchaikovsky: If it's if the CPA Review course is give it to you learn it there don't learn it now. Bennet Tchaikovsky: For intangible assets, we're gonna learn a lot more about recording Goodwill.

Goodwill impairment research and development costs. Bennet Tchaikovsky: Now for this last one here for investments. This is a much more of a specialized area of accounting, if you were ever to go do accounting for say like a hedge fund. Bennet Tchaikovsky: Or for an investment bank or for a securities house like a Goldman Sachs, you would be learning all about this, but it's definitely one of those things where Bennet Tchaikovsky: How do you do the accounting for call options put options. What's the equity method of accounting. What is the fair value method of accounting Bennet Tchaikovsky: Cash Flow hedges and fair value hedges, right. That's not the movie. Over The Hedge. Bennet Tchaikovsky: But rather what this is is how we're going to, you know, if I'm Southwest Airlines, I think fuel is going to go up. I'm going to enter into a contract where I'm going to buy fuel at a certain price. Bennet Tchaikovsky: So that's semester one. Now you may have revenue recognition and investments. Push the semester do but you just have to remember that's going to be a lot of fun to learn and but then semester.

One is like that much more doable. Okay. Bennet Tchaikovsky: Semester two and I have not taught semester to I've looked through the materials and this is kind of what I saw over here. So this is kind of like what I would consider to be new. Bennet Tchaikovsky: For current liabilities. If you're doing a there's some new topics about warranties or refinancing dead. Bennet Tchaikovsky: Non current liabilities long term liabilities. We always call it non current Bennet Tchaikovsky: Effective interest computations bond redemptions zero interest bearing notes trouble debt restructuring, those are all going to be new types of topics. Bennet Tchaikovsky: Again, if you know how to value bonds from one A or from financial accounting that's going to be very helpful for stockholders equity. It could be seeing liquidating dividends stock dividends treasury stock. Bennet Tchaikovsky: dilutive securities and earnings per share. Now this is where we're kind of this is like the break off point like right over here.

Bennet Tchaikovsky: Because once you kind of get through chapter 15. This is when you're getting into new territory. Bennet Tchaikovsky: Convertible bonds. Bonds with warrants stock options restricted stock weighted average shares outstanding. Bennet Tchaikovsky: Stock appreciation rights basic and fully diluted earnings per share. This is generally going to be new for most all of you. So this will take a little bit longer to do Bennet Tchaikovsky: Accounting for income taxes, you can have a permanent permanent temporary tax asset liability. Bennet Tchaikovsky: Temporary differences permanent differences net operating losses. Okay, so those are going to be newer topics for you, pensions and other post retirement obligations, everything is going to be new.

Bennet Tchaikovsky: Just because again that's generally typically not something you cover in financial accounting. If you did send me a message at the bottom of this that this Bennet Tchaikovsky: I would love to hear from you. And here's some more information about it. Bennet Tchaikovsky: Lisa's pretty much everything now is a capital lease, meaning that we're going to record a lease asset and liability, including property rental Bennet Tchaikovsky: Over long periods of time which is insane. Not Lin sanity, but it's insanity. Bennet Tchaikovsky: Accounting changes and errors, right. So if there's a change and accounting principle or errors. We're going to learn about how that works, statement of cash flows. Bennet Tchaikovsky: You probably learn be indirect method and undergraduate or in the lower division. Bennet Tchaikovsky: We're going to be learning the direct method, although not a lot of companies use it. But it was kind of funny when I was teaching a Chapman and I've taught some other places.

And I said, hey, Bennet Tchaikovsky: I don't think anybody uses that direct method. And then I get like two or three students who like send me Bennet Tchaikovsky: Like emails like was Katie and she said, hey, Tchaikovsky. Check this out. It was like Walmart or CVS. That was even direct math. And I'm like, wow. OK. Bennet Tchaikovsky: And then lastly, full disclosure in financial reporting going through and doing segment reporting. So if you have like multiple segments of operations and then subsequent events. So that's kind of a, an overview of intermediate accounting it again. You want to do your research on the instructor Bennet Tchaikovsky: I I've had so many Bennet Tchaikovsky: So many different Bennet Tchaikovsky: People like you know just with you just want to figure out who you're taking the class with talk to former students of that instructor Bennet Tchaikovsky: Know, do your diligence know what you need to do to be successful.

Bennet Tchaikovsky: And again, just remember this class takes a ton of time. It's a lot of work, it's going to be harder than if it's taught right it's going to be harder than a lot of other classes, you'll ever take Bennet Tchaikovsky: But that's the reason why we love accounting because we get a J. O. B. And we're going to pass that CPA exam. And then we're going to be Bennet Tchaikovsky: Ready to go on to amazing things as we are starting our accounting careers. So, in any event, thank you for Bennet Tchaikovsky: Joining me here today on this brief overview of intermediate accounting and if there are any other kind of videos you'd like to see, please feel free to leave a comment.

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