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ACCT 2110 > ACCT 2110 Final Exam Flash Cards > Flashcards

ACCT 2110 Final Exam Flash Cards

1
Q

Current Ratio

A

Current Assets / Current Liabilities

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2
Q

Earnings Per Share

A

(Net Income - Preferred Dividends) / Avg. Common Shares Outstanding

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3
Q

Accounts Receivable Turnover

A

Net Credit Sales / Avg. Net Accounts Receivable

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4
Q

Average Collection Period

A

365 / Accounts Receivable Turnover

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5
Q

Return on Assets

A

Profit Margin x Asset Turnover

or

Net Income / Average Total Assets

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6
Q

Asset Turnover

A

Net Sales / Average Total Assets

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7
Q

What do expenses NOT show up on?

A

Balance Sheet

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8
Q

What do Assets & Liabilities NOT show up on?

A

Income Statement

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9
Q

Two accounting issues with Receivables?

A
  1. Recognizing them (Accounts Rec., Notes Rec., or Other Rec.)
  2. Valuing them (what % do we actually get)
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10
Q

Service Organization records receivables…

A

When services are performed on account.

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11
Q

Merchandiser records receivables…

A

At the point of sale of merchandise on account.

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12
Q

2 methods of accounting Uncollectible Accounts?

A
  1. Direct Write-Off

2. Allowance Method

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13
Q

Contra Assets

A

Negative Assets (ex: Depreciation or Doubtful Accounts)

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14
Q

Promissory Note Uses (written promise to pay specified money on demand or at a definite amount of time)

A
  1. When individuals & companies lend or borrow money
  2. When amount of transaction and credit period exceed normal limits
  3. In settlement of Accounts Receivable
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15
Q

Plant Assets are resources that have what?

A
  • physical substance
  • not used in business operations
  • not intended for sale to customers
  • expected to provide service to company for a number of years (not land)
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16
Q

Historical Cost Principle

A

Requires companies to record plant assets at cost

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17
Q

Cost

A

Includes all necessary expenditures paid to acquire and make an asset ready for use

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18
Q

How are Costs Paid?

A
  1. Cash (in cash transactions)

2. Cash equivalent (in non cash transactions)

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19
Q

Cash Equivalent Price

A

Fair Value of the asset given up or received, whichever is more clearly determinable

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20
Q

Straight-Line Depreciation

A

Cost - Salvage Value = Depreciable Cost

Depreciable Cost / Useful Life = Depreciation Expense

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21
Q

Double-Declining Cost

A

Year 1 = Beginning Cost x Double Declining Balance Rate = Annual Exp. & Accumulated Depreciation

Beginning Cost - Annual Exp. = Book Value

Year 2+ = Book Value of Previous Year x Doub. Dec. Bal. = Annual Exp.

Annual Exp. of all years added together = Accumulated Depreciation

Book Value of previous year - current year annual expense = Book Value of current year

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22
Q

Units-of-Activity

A

Depreciable Cost / Total Units of Activity = Depreciable Cost Per Unit

Depreciable Cost Per Unit x Units of Activity during this year = Annual Depreciable Expense

23
Q

Intangible Assets

A

Patents, Trd

24
Q

Patents

A

Exclusive right to manufacture & sell invention for 20 years

25
Q

Calculating Amortization & Its journal entry

A

Cost / Useful Life = Annual Expense x

Annual Exp. x Amount of time amortizing / 12 = amortization

Example Journal Entry

Dr. Amortization Expense 1,000
Cr. Patent 1,000

26
Q

Copyrights

A

Gives owner exclusive right to reproduce and sell an artistic or published work. Granted for the life of the creator + 70 years

27
Q

Trademarks & Trade Names

A

Word, Catch Phrase, Jingle, or Logo

Legal Protection for indefinite number of 20 year renewal periods

No amortization

28
Q

Goodwill

A

Includes desirable location, skilled employees, high-quality products. Only recorded when an entire business is purchased.
CANNOT be claimed unilaterally & MUST be valued by society/ outside professionals

29
Q

Selling Plant Assets

A

Compare how much it’s worth with how much you made from selling it.

If you made more than what it’s worth, then a gain on disposal occurs
If you made less, then a loss on disposal occurs

30
Q

Plant Asset Book Value on Day of Disposal

A

Cost of Asset - Accumulated Depreciation = Book Value on Date of Disposal

31
Q

Recording Disposal of a Plant Asset

A

Dr. Cash (made from selling asset)
Dr. Accumulated Depreciation

  Cr. Original Cost of Asset
  Cr. Gain on Disposal of Plant Asset

(if it was a Loss on Disposal of the Plant Asset, it would be debited along with cash and A/D)

32
Q

Retirement of Plant Asset (Completely Used Up NOT Sold)

A

Dr. Accumulated Depreciation

Cr. Original Asset Cost

33
Q

Employee Tax

A
  • FICA tax
  • Federal Tax
  • State Tax
34
Q

Employer Tax

A
  • FICA Tax
  • Federal Unemployment Tax
  • State Unemployment Tax
35
Q

Types of Bonds

A
  • Secured
  • Unsecured
  • Convertible
  • Callable
36
Q

Bond Certificate

A
  • Issued to investor

- Provides name of the company issuing bond, face value, maturity date, and contractual interest rate

37
Q

Face Value

A

Principal due at maturity

38
Q

Maturity Date

A

Date final payment is due

39
Q

Contractual Interest Rate

A

Rate to determine cash interest paid, usually semiannually

40
Q

Bonds sold below market interest rate

A

Premium

41
Q

Bonds sold above market interest rate

A

Discount

42
Q

Journal Entry for Discount Bond

A

Dr. Cash
Dr. Discount on Bonds Payable

Cr. Bonds Payable

43
Q

Discount On Bonds Payable is What type of Asset?

A

Contra Asset

44
Q

Carrying Value

A

Face value of bonds less unamortized bond discount or plus unamortized bond premium at redemption rate.

45
Q

Gain or Loss on bonds redeemed before maturity is

A

Difference between cash paid and carrying value of the bonds

46
Q

Contingencies

A

Events with uncertain outcomes (ex: a lawsuit)

Ex Journal Entry

Legal Expense 75,000
Accrued Liabilities 75,000

47
Q

Charter

A

Amount of stock a corporation is authorized to sell

Reported in Stockholders’ Equity

48
Q

Par Value

A

Amount of money someone can take back out whenever they feel like it (usually if the company starts tanking)

49
Q

Legal Capital

A

Determined par value a company must retain in the business for the protection of corporate creditors

50
Q

2 sources of Primary Equity

A

Paid-in Capital –> Common or Preferred Stock

Retained Earnings

51
Q

Treasury Stock

A

Corporation’s own stock that it has bought back

52
Q

Why do corporations buy their own stock?

A
  1. Reissue shares to officers & employees for bonus or stock compensations
  2. Increase trading
  3. Have additional shares available for use in acquiring other companies
  4. Increase earnings per share
  5. Eliminate hostile shareholders
53
Q

Stock Dividend uses

A
  1. Satisfy shareholders’ dividend expectations without spending cash
  2. Increase marketability of corporations stock
  3. Emphasize that a portion of stockholders’ equity has been permanently reinvested in the business
54
Q

Stock Splits

A
  • Reduce market value of shares (helps less wealthy people afford stock)
  • No entry recorded
  • Decrease par value & increase number of shares

ACCT 2110 (2 decks)

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