2 - Select Balance Sheet Accounts Flashcards
Matching
recording expenses and expired costs necessary to generate revenue in the same period as the revenue
Secured Borrowing and Pledging
Both involve using receivables as collateral for a loan, with the company retaining ownership and control over collection
Factoring
Involves selling the receivables outright, often transferring the risk to the factor
Assignment
Is a more specific form of secured borrowing where particular receivables are earmarked for a specific debt.
Lower of Cost or Market (LCM)
-If Cost > Market Value: Write down the inventory to its
market value.
● If Cost ≤ Market Value: No adjustment is needed.
Perpetual Inventory
Periodic Inventory
Weighted-average method
Avg cost=Total cost of units purchased/units available
Avg cost X units sold = COGS
Straight line depreciation
consider salvage value
Double declining balance
do not consider salvage value
Sum-of-years-digits depreciation
When to use Equity method
When a company acquires 20% or more of the outstanding stock of another company.
Debt-to-Equity Ratio
Total Debt/Total Equity
Interest Coverage Ratio
Operating Income/Interest Expense
Interest payable on a bond
Face value (principal) of the bonds X coupon (contractual interest rate)
Serial bonds
Mature in installments-part of the total principal is paid back each year
Debenture bonds
Unsecured debt to pay a specified amount on a specified date
Sinking fund
money regularly set aside for a specific purpose, usually to redeem outstanding bonds or preferred stock or to replace capital assets
