Chapter 13 Flashcards
3 characteristics of Liabilities
1) economic benefit
2)Provide service to other entities
3) result of a prior transaction
committed Line of Credit
More formal agreement yo pay a particular amount
Non committed line of credit
borrow up to a prearranged limit without formal loan procedures and paper work
Commercial Paper
-Unsecured notes sold in minimum denominations of $250,000
-maturities range from 1-270 days
-often purchased by other companies as an investment
Accrued Liabilities
expenses that are incurred randomly but not yet paid for
Non current Liabilitis
-Long term Borrowings
-Secured/ Unsecured Loans
-Long term Lease Obligations
Loss contingency
Set of circumstances pointing to a potential loss in the future
Interest Formula
Face Amount X Annual rate X time to maturity
non interest bearing note
interest is deducted (discounted) from face amounts to determine cash proceeds made available
factoring receivables
receivables that are sold out right
Accrued Expense and related liabilities for employees’ compensation for future absences
4 Conditions
1) the obligation is attributes to employees’ services already performed
2)paid absences can be taken in a later year
3) payment is probable
4) the amount is reasonable estimated
Deferred Revenue
advances received from customers that will be applied to purchase price when goods or services are provided
Subsequent Event
a significant development that takes place after year end but before the financial statements are issued
Assets most commonly used to use to secure loans
Accounts receivable
inventory
commonly used nonfinancial performance measures for annual bonuses
- customer satisfaction
-sales revenue
Unearned revenue represents a liability until the
related product or service is provided
If a liability is classified as current, rather than noncurrent, the company’s working capital will ______.
decrease
financially based performance measures commonly used to determine employee bonuses
-earnings per share
-operating income
-net income
The following are classified as current liabilities?
Long-term loans with violated debt covenants
Debt is callable in the upcoming year, even when not expected to be called
Current portion of long-term debt
What practical reason may motivate companies to rarely accrue losses for ongoing litigation?
Multiple choice question.
