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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
Coupon Rate
rate of interest on the bond
26
Market Rate
rate of interest on other bonds in the market
27
Bond Interest Paid definition
Cash paid to bond holder
28
Bond Interest Paid formula
I = PRT P = Par Value R = Coupon Rate T = Time
29
Bond Interest Expense formula
I = PRT P = Book Value R = Market Rate T = Time
30
Bond amortization formula
ABS(Bond Interest Paid - Bond Interest Expense)
31
Book Value of Bond formula
BV of prior period +- Bond Amortization. *(+-) change by which way you are going back to par
32
Bond Issuance
Compare stated rate to market rate
33
Premium
Market Rate < Stated Rate *Able to get more money
34
Par
Market Rate = Stated Rate
35
Discount
Market Rate > Stated Rate *Able to get less money
36
Bond Issuance/Proceeds Formula
Principal PV of 1 + Interest of annuity *Both use the market rate of interest
37
PV of Principal Formula
PV(I,N,FV) I = Market Rate N = # of payments FV = Future Value
38
PV of Interest
PV(I,N,PMT) I = Market Rate N = # of payments PMT = (Par Value * Stated Rate * Time)
39
What happens to I and N in the PV of Principal Formula when it is semi annual
PV(I,N,FV) I = Market Rate / 2 N = # of payments * 2 FV = Future Value
40
What happens to I and N in the PV of Interest Formula when it is semi annual
PV(I,N,PMT) I = Market Rate / 2 N = # of payments * 2 PMT = (Par Value * Stated Rate * Time (6/12))
41
Finance Leases
Are accounted for like asset purchases, where a lease asset and lease liability are recorded over the lease period on the balance sheet
42
Operating Leases
Are accounted for like normal operating expenses, where a lease expense is recorded over a lease period on the income statement
43
Retained Earnings Definition
Cumulative earnings not contributed by owners
44
Retained Earnings Equation
REbb + Net Income - Dividends
45
Contributed Capital is made up of 3 types of stock:
1.Common Stock 2.Preferred Stock 3.Treasury Stock
46
Authorized Shares
Maximum number of shares a company is allowed to issue in the market
47
Outstanding Shares
Total number of shares currently owned by Stockholders
48
Treasury Shares
Total number of shares that were re purchased and currently owned by their own company
49
Issued Shares Equation
Outstanding Shares + Treasury Shares
50
What is the cash a company will receive when they issue a stock: Formula
Market Rate x # of shares sold
51
If the stock has a par value, the common stock account increases by:
Par Value x # of shares sold
52
Additional-Paid in Capital(APIC) Formula
(Market Rate x # of shares sold) - (Par Value x # of shares sold)
53
Common Stock are issued with...
1. Voting Rights 2. Ultimate Risk/Reward 3. Par Value
54
When issuing common stock what accounts are affected?
Cash(+A) Common Stock(+SE) APIC:Common Stock (+SE)
55
Common stock is what kind of account, and what regular balance
SE Credit
56
Preferred Stock is issued with...
1. No voting rights 2. Fixed dividends with a fixed rate, and paid out before common stock 3. Par Value
57
When issuing Preferred Stock, what accounts are affected?
Cash(+A) Preferred Stock(+SE) APIC: Preferred Stock(+SE)
58
Treasury Stock Definition
Common Stock that the company repurchases
59
When issued what does Treasury Stock include..
No Voting Rights
60
Treasury Stock is what kind of account, and has what kind of regular balance?
XSE Debit
61
What accounts are affected from Buying Treasury Stock
Treasury Stock(+XSE, -SE) Cash(-A)
62
What accounts are affected when a treasury stock is re issued?
Cash(+A) Treasury Stock(-XSE,+SE) APIC: Treasury Stock (+SE)
63
When buying treasury stock how do you calculate the $amount?
Market Value x # of shares sold
64
When re issuing treasury stock, what is the $ amount of the cash received?
Market Value x # of shares sold
65
When re issuing treasury stock, what is the $ amount of the Treasury stock being deducted?
number of shares x the previous MR cost of originally buying the stock
66
What are the 3 current Liabilties?
1.Accounts Payable 2.Accrued Liabilities 3.Unearned Revenue
67
What are the 3 non current Liabilities?
1.Notes Payable 2.Contingent Liabilities 3.Leases
68
A/P Turnover measures..
how efficiently a company pays off their outstanding payables
69
What is the name of the rates that are on the bond indentures(3) Effective, Coupon, Nominal, Yield, Stated, Market
Nominal, Coupon, Stated Rate
70
What are other names for the market rate?(2) Effective, Coupon, Nominal, Yield, Stated
Effective, Market, Yield Rate
71
Premium on Bonds Payable is what kind of account?
Liability
72
Discount on Bonds Payable is what kind of account?
Contra Liability (XL)
73
What accounts are affected when a premium bond is issued?
Cash(+A) Premium on BP(+L) Bonds Payable (+L)
74
What accounts are affected when a discount bond is issued?
Cash(+A) Discount on BP(+XL) Bonds Payable(+L)
75
What accounts are affected when recording interest expense for a bond at par?
Interest Expense(+E) Cash(-A)
76
What accounts are affected when recording interest expense for a bond at premium?
Interest Expense(+E) Premium on BP(-L) Cash(-A)
77
What accounts are affected when recording interest expense for a bond at discount?
Interest Expense(+E) Discount on BP(-XL) Cash(-A)
78
What accounts are affected when recording the maturity of a bond at par?
Bonds Payable(-L) Interest Expense(+E) Cash(-A)
79
What accounts are affected when recording the maturity of bond at premium?
Bonds Payable(-L) Interest Expense(+E) Premium on BP(-L) Cash(-A)
80
What accounts are affected when recording the maturity of a bond at a discount
Bonds Payable(-L) Interest Expense(+E) Discount on BP(-XL) Cash(-A)
81
On the date of decleration of dividends what accounts are affected?
Dividends(-RE) Dividends Payable(+L)
82
On the date of payment of dividends what accounts are affected?
Dividends Payable(-L) Cash(-A)

Accounting (6 decks)

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