Exam 3 Financial Accounting Review

Question 1

International Accounting

Answer 1

Use their own currencies

Question 2

What are 2 characteristics of the Available for Sale Method?

Answer 2

Initially recorded at cost

Reported at market value on balance sheet

Question 3

Long Term Investments are recorded where?

Answer 3

On the balance sheet

Question 4

What is another name for Long Term Bond Investments?

Answer 4

Held To Maturity Investments

Question 5

Issued

Answer 5

Number of shares sold to shareholders

Question 6

Principal

Answer 6

Amount borrowed and usually in $1000 units

Question 7

Hedging

Answer 7

Insurance and limits or qualifies by exceptions

Question 8

Term Bond

Answer 8

All bonds mature at the same date

Question 9

Stockholder elect who?

Answer 9

Board of Directors

Question 10

Cumulative (in terms of preferred dividends)

Answer 10

Any unpaid dividends are carried forward until paid

Question 11

How are Long Term Bond Investments reported?

Answer 11

Reported at amortized cost

Question 12

What is 1 characteristics of a contra equity account in terms of Treasury Stock?

Answer 12

Reduces shareholders equity and assets

Question 13

If the contingent liability is probable what happens when recording it?

Answer 13

Record if amount can be estimated

Question 14

Authorized

Answer 14

Maximum number of shares a company can issue

Question 15

What 3 things increase debits (ADE)

Answer 15

Assets
Dividends
Expenses

Question 16

What 2 things is the Preferred Dividends rate expressed as?

Answer 16

Percent of par value

Dollar amount per share

Question 17

What are the 2 parts of stockholders equity?

Answer 17

Paid In Capital

Retained Earnings

Question 18

What are 6 examples of known amounts?

Answer 18

Accounts payable 
Salaries tax payable
Short Term Notes Payable 
Payroll Liabilities 
Accrued Liabilities 
Unearned Revenues

Question 19

What are 2 characteristics of Treasury Stock?

Answer 19

Company buys stock back

Contra-equity account

Question 20

Outstanding

Answer 20

Number of shares currently in shareholders possession

Question 21

Carrying Amount =

Answer 21

Face Value - Discount Balance

Question 22

Maturity Date (Bond Terms)

Answer 22

Date bond is due

Question 23

Serial Bond

Answer 23

Mature in installments

Question 24

If the contingent liability is reasonably probable what happens when recording it?

Answer 24

Include in Notes

Question 25

Why would a parent company and a subsidiary consolidate as if they were one company? (Consolidated Subsidiaries)

Answer 25

Want to eliminate reciprocal accounts

Question 26

What are the 2 classes of stock?

Answer 26

Common Stock | Preferred Stock

Question 27

What accounting method do you use when the investor owns up to 20%?

Answer 27

Available For Sale

Question 28

Consolidated Subsidiaries

Answer 28

Financial statements of a parent and its subsidiary are combined and consolidated as if they were one company

Question 29

What accounting method do you use when the investor owns 20%-50%?

Answer 29

Equity Method

Question 30

In terms of Consolidated Subsidiaries the investor is called what?

Answer 30

Parent Company

Question 31

Secured Bond

Answer 31

Claim on assets if bond not paid

Question 32

In terms of Consolidated Subsidiaries the investee is called what?

Answer 32

Subsidiary

Question 33

Date of Declaration

Answer 33

When the board of directors announce the dividend

Question 34

What are 2 characteristics of Small Stock Dividends?

Answer 34

Less than 25% of outstanding shares | Recorded at market value

Question 35

Preferred Stock

Answer 35

Claim on assets

Question 36

What are 2 examples of unknown amounts?

Answer 36

Estimated Warranty Payable | Contingent Liabilities

Question 37

If the contingent liability is unlikely what happens when recording it?

Answer 37

Do not report

Question 38

What 3 things increase with credit (LCR)

Answer 38

Liabilities Common Stock Revenue

Question 39

What are 2 characteristics of the Equity Method?

Answer 39

Investor has significant influence over investee | Investment is recorded at cost

Question 40

What are 2 characteristics of Large Stock Dividends?

Answer 40

Greater than 25% of outstanding shares | Recorded at par value

Question 41

What are the 4 types of bonds?

Answer 41

Term Serial Secured Unsecured

Question 42

Current Liabilities

Answer 42

Obligations due within one year

Question 43

What accounting method do you use when the investor owns more than 50%?

Answer 43

Consolidation

Question 44

Treasury Stock

Answer 44

Difference between issued and outstanding

Question 45

When something is reported at amortized cost what happens to the bond? ( In Terms of Long Term Bond Investments)

Answer 45

Bonds carrying amount is amortized to face value at maturity value

Question 46

In terms of Consolidated Subsidiaries the investor owns how much of the stock?

Answer 46

Owns more than 50%

Question 47

What is the difference between short term investments and long term investments?

Answer 47

Short Term Investments Must be liquid Held for 1 year or less Long Term Investments Expected to be held longer than 1 year

Question 48

In terms of Consolidated Subsidiaries the investor controls the -----.

Answer 48

Investee

Question 49

Board of directors elect who?

Answer 49

CEO

Question 50

What are 2 differences between Premium and Discount?

Answer 50

Premium - issue price above face value - stated rate of interest greater than market Discount - Issue price below face value - stated rate of interest less than market

Question 51

What 4 rights do the stockholders have?

Answer 51

Vote Dividends Liquidation Preemption

Question 52

What is 1 example of a Long Term Liability?

Answer 52

Bonds

Question 53

Interest (Bond Terms)

Answer 53

Company must pay bondholders interest in regular intervals over the term of the bond

Question 54

Preemption

Answer 54

The right to maintain ownership

Question 55

Unsecured Bond

Answer 55

No claim on assets

Question 56

Dividends

Answer 56

Distributions to shareholders