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Accounting > Exam 3 > Flashcards

Exam 3 Flashcards

1
Q

Accounts Payable Turnover Equation

A

COGS / Average AP

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2
Q

Average Days To Pay AP Equation

A

365 / AP Turnover

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3
Q

Notes Payable

A

Amounts borrowed that are not guaranteed by a promissory note and usually involve interest

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4
Q

Contingent Liabilities

A

Potential liabilities that may or may not become a liability
Ex: Lawsuit

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5
Q

If the probability is “probable” then the books are…

A

Accrued and put into footnotes

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6
Q

If the probability is “reasonably possible” then the books are…

A

In the footnotes

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7
Q

If the probability is “remote” then the books are…

A

You ignore it

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8
Q

Time Value of Money

A

The value of a dollar is dependent of when it’s received

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9
Q

Compound Interest

A

Interest is charged on both the principal and unpaid interest of an investment

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10
Q

Present Value

A

Solves for how much money you need to invest today to generate a certain value in the future

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11
Q

Future Value

A

Solves for how much money you will have in the future, based on how much you invest today

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12
Q

What happens to I and N when it’s semi annual

A

I / 2
N * 2

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13
Q

Equation to solve for PV/FV of 1

A

Investment amount * factor found

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14
Q

Annuities

A

Consecutive payments that are characterized by equal:
1. $ amount
2. length between each payment
3. interest rate each period

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15
Q

Steps To Solve for TVM problems:

A
  1. Determine if solving for PV/FV of 1 or annuity
  2. Calculate I and N (if they’re semi annual or not)
  3. Find appropriate PV or FV factor from tables, or use excel
  4. Solve either using excel or (Investment amount * factor)
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16
Q

TVM in Excel: PV equation

A

=PV(i,n,PMT,FV)

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17
Q

TVM in Excel: FV equation

A

=FV(i,n,PMT,PV)

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18
Q

Do you use PMT in the TVM equation when it is PV/FV of 1 or an annuity

A

Annuity

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19
Q

Bond

A

Debt instrument issued by companies as a way to raise money:
-in exchange for cash, repayments include interest
-long term liability

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20
Q

Bond Issuer

A

Company selling/issuing the bond

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21
Q

Bondholder

A

Person purchasing the bond

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22
Q

Bond Indenture

A

Legal document with details about the bond

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23
Q

Maturity Date

A

Date bond matures, needs to be paid back to bondholder

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24
Q

Face/Par Value

A

$ amount of bond

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25
Q

Coupon Rate

A

rate of interest on the bond

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26
Q

Market Rate

A

rate of interest on other bonds in the market

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27
Q

Bond Interest Paid definition

A

Cash paid to bond holder

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28
Q

Bond Interest Paid formula

A

I = PRT
P = Par Value
R = Coupon Rate
T = Time

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29
Q

Bond Interest Expense formula

A

I = PRT
P = Book Value
R = Market Rate
T = Time

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30
Q

Bond amortization formula

A

ABS(Bond Interest Paid - Bond Interest Expense)

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31
Q

Book Value of Bond formula

A

BV of prior period +- Bond Amortization.
*(+-) change by which way you are going back to par

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32
Q

Bond Issuance

A

Compare stated rate to market rate

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33
Q

Premium

A

Market Rate < Stated Rate
*Able to get more money

34
Q

Par

A

Market Rate = Stated Rate

35
Q

Discount

A

Market Rate > Stated Rate
*Able to get less money

36
Q

Bond Issuance/Proceeds Formula

A

Principal PV of 1 + Interest of annuity
*Both use the market rate of interest

37
Q

PV of Principal Formula

A

PV(I,N,FV)
I = Market Rate
N = # of payments
FV = Future Value

38
Q

PV of Interest

A

PV(I,N,PMT)
I = Market Rate
N = # of payments
PMT = (Par Value * Stated Rate * Time)

39
Q

What happens to I and N in the PV of Principal Formula when it is semi annual

A

PV(I,N,FV)
I = Market Rate / 2
N = # of payments * 2
FV = Future Value

40
Q

What happens to I and N in the PV of Interest Formula when it is semi annual

A

PV(I,N,PMT)
I = Market Rate / 2
N = # of payments * 2
PMT = (Par Value * Stated Rate * Time (6/12))

41
Q

Finance Leases

A

Are accounted for like asset purchases, where a lease asset and lease liability are recorded over the lease period on the balance sheet

42
Q

Operating Leases

A

Are accounted for like normal operating expenses, where a lease expense is recorded over a lease period on the income statement

43
Q

Retained Earnings Definition

A

Cumulative earnings not contributed by owners

44
Q

Retained Earnings Equation

A

REbb + Net Income - Dividends

45
Q

Contributed Capital is made up of 3 types of stock:

A

1.Common Stock
2.Preferred Stock
3.Treasury Stock

46
Q

Authorized Shares

A

Maximum number of shares a company is allowed to issue in the market

47
Q

Outstanding Shares

A

Total number of shares currently owned by Stockholders

48
Q

Treasury Shares

A

Total number of shares that were re purchased and currently owned by their own company

49
Q

Issued Shares Equation

A

Outstanding Shares + Treasury Shares

50
Q

What is the cash a company will receive when they issue a stock: Formula

A

Market Rate x # of shares sold

51
Q

If the stock has a par value, the common stock account increases by:

A

Par Value x # of shares sold

52
Q

Additional-Paid in Capital(APIC) Formula

A

(Market Rate x # of shares sold) - (Par Value x # of shares sold)

53
Q

Common Stock are issued with…

A
  1. Voting Rights
  2. Ultimate Risk/Reward
  3. Par Value
54
Q

When issuing common stock what accounts are affected?

A

Cash(+A)
Common Stock(+SE)
APIC:Common Stock (+SE)

55
Q

Common stock is what kind of account, and what regular balance

A

SE
Credit

56
Q

Preferred Stock is issued with…

A
  1. No voting rights
  2. Fixed dividends with a fixed rate, and paid out before common stock
  3. Par Value
57
Q

When issuing Preferred Stock, what accounts are affected?

A

Cash(+A)
Preferred Stock(+SE)
APIC: Preferred Stock(+SE)

58
Q

Treasury Stock Definition

A

Common Stock that the company repurchases

59
Q

When issued what does Treasury Stock include..

A

No Voting Rights

60
Q

Treasury Stock is what kind of account, and has what kind of regular balance?

A

XSE
Debit

61
Q

What accounts are affected from Buying Treasury Stock

A

Treasury Stock(+XSE, -SE)
Cash(-A)

62
Q

What accounts are affected when a treasury stock is re issued?

A

Cash(+A)
Treasury Stock(-XSE,+SE)
APIC: Treasury Stock (+SE)

63
Q

When buying treasury stock how do you calculate the $amount?

A

Market Value x # of shares sold

64
Q

When re issuing treasury stock, what is the $ amount of the cash received?

A

Market Value x # of shares sold

65
Q

When re issuing treasury stock, what is the $ amount of the Treasury stock being deducted?

A

number of shares x the previous MR cost of originally buying the stock

66
Q

What are the 3 current Liabilties?

A

1.Accounts Payable
2.Accrued Liabilities
3.Unearned Revenue

67
Q

What are the 3 non current Liabilities?

A

1.Notes Payable
2.Contingent Liabilities
3.Leases

68
Q

A/P Turnover measures..

A

how efficiently a company pays off their outstanding payables

69
Q

What is the name of the rates that are on the bond indentures(3)
Effective, Coupon, Nominal, Yield, Stated, Market

A

Nominal, Coupon, Stated Rate

70
Q

What are other names for the market rate?(2)
Effective, Coupon, Nominal, Yield, Stated

A

Effective, Market, Yield Rate

71
Q

Premium on Bonds Payable is what kind of account?

A

Liability

72
Q

Discount on Bonds Payable is what kind of account?

A

Contra Liability (XL)

73
Q

What accounts are affected when a premium bond is issued?

A

Cash(+A)
Premium on BP(+L)
Bonds Payable (+L)

74
Q

What accounts are affected when a discount bond is issued?

A

Cash(+A)
Discount on BP(+XL)
Bonds Payable(+L)

75
Q

What accounts are affected when recording interest expense for a bond at par?

A

Interest Expense(+E)
Cash(-A)

76
Q

What accounts are affected when recording interest expense for a bond at premium?

A

Interest Expense(+E)
Premium on BP(-L)
Cash(-A)

77
Q

What accounts are affected when recording interest expense for a bond at discount?

A

Interest Expense(+E)
Discount on BP(-XL)
Cash(-A)

78
Q

What accounts are affected when recording the maturity of a bond at par?

A

Bonds Payable(-L)
Interest Expense(+E)
Cash(-A)

79
Q

What accounts are affected when recording the maturity of bond at premium?

A

Bonds Payable(-L)
Interest Expense(+E)
Premium on BP(-L)
Cash(-A)

80
Q

What accounts are affected when recording the maturity of a bond at a discount

A

Bonds Payable(-L)
Interest Expense(+E)
Discount on BP(-XL)
Cash(-A)

81
Q

On the date of decleration of dividends what accounts are affected?

A

Dividends(-RE)
Dividends Payable(+L)

82
Q

On the date of payment of dividends what accounts are affected?

A

Dividends Payable(-L)
Cash(-A)

Accounting (6 decks)

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