Exam 3 Financial Accounting Review Flashcards
International Accounting
Use their own currencies
What are 2 characteristics of the Available for Sale Method?
Initially recorded at cost
Reported at market value on balance sheet
Long Term Investments are recorded where?
On the balance sheet
What is another name for Long Term Bond Investments?
Held To Maturity Investments
Issued
Number of shares sold to shareholders
Principal
Amount borrowed and usually in $1000 units
Hedging
Insurance and limits or qualifies by exceptions
Term Bond
All bonds mature at the same date
Stockholder elect who?
Board of Directors
Cumulative (in terms of preferred dividends)
Any unpaid dividends are carried forward until paid
How are Long Term Bond Investments reported?
Reported at amortized cost
What is 1 characteristics of a contra equity account in terms of Treasury Stock?
Reduces shareholders equity and assets
If the contingent liability is probable what happens when recording it?
Record if amount can be estimated
Authorized
Maximum number of shares a company can issue
What 3 things increase debits (ADE)
Assets
Dividends
Expenses
What 2 things is the Preferred Dividends rate expressed as?
Percent of par value
Dollar amount per share
What are the 2 parts of stockholders equity?
Paid In Capital
Retained Earnings
What are 6 examples of known amounts?
Accounts payable Salaries tax payable Short Term Notes Payable Payroll Liabilities Accrued Liabilities Unearned Revenues
What are 2 characteristics of Treasury Stock?
Company buys stock back
Contra-equity account
Outstanding
Number of shares currently in shareholders possession
Carrying Amount =
Face Value - Discount Balance
Maturity Date (Bond Terms)
Date bond is due
Serial Bond
Mature in installments
If the contingent liability is reasonably probable what happens when recording it?
Include in Notes
Why would a parent company and a subsidiary consolidate as if they were one company? (Consolidated Subsidiaries)
Want to eliminate reciprocal accounts
What are the 2 classes of stock?
Common Stock
Preferred Stock
What accounting method do you use when the investor owns up to 20%?
Available For Sale
Consolidated Subsidiaries
Financial statements of a parent and its subsidiary are combined and consolidated as if they were one company
What accounting method do you use when the investor owns 20%-50%?
Equity Method
In terms of Consolidated Subsidiaries the investor is called what?
Parent Company
Secured Bond
Claim on assets if bond not paid
In terms of Consolidated Subsidiaries the investee is called what?
Subsidiary
Date of Declaration
When the board of directors announce the dividend
What are 2 characteristics of Small Stock Dividends?
Less than 25% of outstanding shares
Recorded at market value
Preferred Stock
Claim on assets
What are 2 examples of unknown amounts?
Estimated Warranty Payable
Contingent Liabilities
If the contingent liability is unlikely what happens when recording it?
Do not report
What 3 things increase with credit (LCR)
Liabilities
Common Stock
Revenue
What are 2 characteristics of the Equity Method?
Investor has significant influence over investee
Investment is recorded at cost
What are 2 characteristics of Large Stock Dividends?
Greater than 25% of outstanding shares
Recorded at par value
What are the 4 types of bonds?
Term
Serial
Secured
Unsecured
Current Liabilities
Obligations due within one year
What accounting method do you use when the investor owns more than 50%?
Consolidation
Treasury Stock
Difference between issued and outstanding
When something is reported at amortized cost what happens to the bond? ( In Terms of Long Term Bond Investments)
Bonds carrying amount is amortized to face value at maturity value
In terms of Consolidated Subsidiaries the investor owns how much of the stock?
Owns more than 50%
What is the difference between short term investments and long term investments?
Short Term Investments
Must be liquid
Held for 1 year or less
Long Term Investments
Expected to be held longer than 1 year
In terms of Consolidated Subsidiaries the investor controls the —–.
Investee
Board of directors elect who?
CEO
What are 2 differences between Premium and Discount?
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
What 4 rights do the stockholders have?
Vote
Dividends
Liquidation
Preemption
What is 1 example of a Long Term Liability?
Bonds
Interest (Bond Terms)
Company must pay bondholders interest in regular intervals over the term of the bond
Preemption
The right to maintain ownership
Unsecured Bond
No claim on assets
Dividends
Distributions to shareholders
