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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
Calculating Amortization & Its journal entry
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
Copyrights
Gives owner exclusive right to reproduce and sell an artistic or published work. Granted for the life of the creator + 70 years
27
Trademarks & Trade Names
Word, Catch Phrase, Jingle, or Logo Legal Protection for indefinite number of 20 year renewal periods No amortization
28
Goodwill
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
Selling Plant Assets
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
Plant Asset Book Value on Day of Disposal
Cost of Asset - Accumulated Depreciation = Book Value on Date of Disposal
31
Recording Disposal of a Plant Asset
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
Retirement of Plant Asset (Completely Used Up NOT Sold)
Dr. Accumulated Depreciation | Cr. Original Asset Cost
33
Employee Tax
- FICA tax - Federal Tax - State Tax
34
Employer Tax
- FICA Tax - Federal Unemployment Tax - State Unemployment Tax
35
Types of Bonds
- Secured - Unsecured - Convertible - Callable
36
Bond Certificate
- Issued to investor | - Provides name of the company issuing bond, face value, maturity date, and contractual interest rate
37
Face Value
Principal due at maturity
38
Maturity Date
Date final payment is due
39
Contractual Interest Rate
Rate to determine cash interest paid, usually semiannually
40
Bonds sold below market interest rate
Premium
41
Bonds sold above market interest rate
Discount
42
Journal Entry for Discount Bond
Dr. Cash Dr. Discount on Bonds Payable Cr. Bonds Payable
43
Discount On Bonds Payable is What type of Asset?
Contra Asset
44
Carrying Value
Face value of bonds less unamortized bond discount or plus unamortized bond premium at redemption rate.
45
Gain or Loss on bonds redeemed before maturity is
Difference between cash paid and carrying value of the bonds
46
Contingencies
Events with uncertain outcomes (ex: a lawsuit) Ex Journal Entry Legal Expense 75,000 Accrued Liabilities 75,000
47
Charter
Amount of stock a corporation is authorized to sell | Reported in Stockholders' Equity
48
Par Value
Amount of money someone can take back out whenever they feel like it (usually if the company starts tanking)
49
Legal Capital
Determined par value a company must retain in the business for the protection of corporate creditors
50
2 sources of Primary Equity
Paid-in Capital --> Common or Preferred Stock Retained Earnings
51
Treasury Stock
Corporation's own stock that it has bought back
52
Why do corporations buy their own stock?
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
Stock Dividend uses
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
Stock Splits
- 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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