Chapter #7 Flashcards

1
Q

definition of current liabilities

A

obligations that are due within 1 year or less

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2
Q

long term liabilities

A

obligations that ared ue after 1 year

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3
Q

types of liabilities

A

estimate liabilities

definitely determinable liabilities

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4
Q

estimated liabilities

A

obligations that have some uncertainty in the amount to record for the obligations
e.g. warranty

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5
Q

definitely determinable liability

A

obligations that can be exactly measured

e.g. notes payable

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6
Q

what do companies provide warranties as

A

a sale or marketing tool

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7
Q

what kind of liability is created when a warranty expense is created

A

warranty payable

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8
Q

in which statement does warranty expense show up

A

income statement

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9
Q

as what kind of activity is the decrease in assets due to warranty payable recorded as

A

in the statement of cash flows as operating expense

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10
Q

long-term note payable

A

company borrows money from a bank for longer than a year

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11
Q

what does note payable include

A

principle
annual interest rate
due date or maturity date
term of the note -> how long is money borrowed for

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12
Q

steps of calculating mortgage rate

A

calculate interest for 1st year
subtract interest from annual cash payment = amount of mortgage reduction
subtract amount of mortgage reduction from original mortgage = mortgage for second year
same steps except use of mortgage of second year -> different interest…

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13
Q

what is a bond

A

interest bearing long-term note payable

issued by corporations, universities, governmental agencies

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14
Q

how are interests of bonds payable paid

A

semiannually

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15
Q

what does a bond certificate say

A

a promise to pay interest during the term of the bond and principle when bond is mature
bondholder receive those

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16
Q

what does a bond certificate include

A

principle
stated interest rate
maturity date

17
Q

what is capital structure

A

combination of debts (borrowing of money) and equity (contributions of stockholders) to finance a business

18
Q

what does the debt-to-equity ratio measure

A

company´s debt position and it´s ability to meet its interest

19
Q

debt-to-equity-ratio

A

total liabilities/total shareholder´s equity