Final Exam Flashcards
What has immaterial difference between present and maturity value, with short periods on financial statements?
current liabilities
Gain contingency occurs when
probable favorable outcome.
What is necessary to exclude short-term obligation from current liabilities?
contractual right to defer settlement for at least one year
Comparing income statement of one company to its previous periods is likely for _____.
evaluating past performance
Liquidation of a companies current liabilities is reasonably expected within the ________.
operating cycle
What is ARO?
Asset Retirement Obligation
How is a rebate expense recorded?
Expense is cost of anticipated redemptions. Liability is difference between anticipated amount and actual amount.
Are gain contingencies recorded?
no
Assurance warranty method should be used when warranty is _________.
integral and inseparable part of the sale
Losses related to receivable collections and related to warranties are _____.
accrued
Current ratio =
current assets / current liabilities, measures liquidity
Acid test =
(cash + AR) / current liabilities similar to current ratio, without inventory or prepaid expenses
Are after costs usually significant?
Yes
In accounting, litigation is litigation and the type is _____.
irrelevant
What are after costs?
costs incurred after sale, incident to correction of defects
Face value, length of term of bond and par value are needed for _____.
unamortized discount
Use the note’s interest rate or the market/similar interest rate to discount to PV?
market/similar risk
Reporting requirements for LT Debt
Fair value, sinking fund payments, maturity amounts for next 5 years, and assets securing debt
‘Discount on Bonds Payable’ is shown as what on the balance sheet?
deduction from Bonds Payable
JE for interest on bonds purchased between interest dates:
Cash
- - Bonds Payable - - Interest Expense
How do bond purchasers receive interest between interest dates?
They pay the seller the interest accrued from last date to present, then receive full payment at next period.
Debenture Bond
unsecured
Junk Bond
unsecured, like debenture, but very risky
Term bond
mature on single date
Serial bonds
mature in installments
Deep Discount bond
dont bear interest, aka zero-interest debenture
Income Bond
pays no interest unless company is profitable
Bond issued at ‘103’ means
103% of par value
Does carrying amount affect reacquisition price?
no
effective interest method
carrying value x effective interest rate
Refunding
replacement of a bond with a new one
If there is no market and no fair value of a debt instrument, how do we determine the PV?
Imputation
Is the stated interest rate needed to calculate loss on redemption?
No
Unamortized premium is ______ to face value to find net carrying amount.
added
Unamortized discount is ______ to face value to find net carrying amount.
subtracted
gain/loss is difference between __________.
Carrying amount and reacquisition price
Trading on the equity means:
using borrowed money or preferred stock to make gain
Issuing dividend ____ common stock and _____ paid-in-capital.
increase, increase
Cost method debits treasury stock for _______.
reacquisition price
If you are worried about a takeover event, you will _______ treasury stock.
buy back
Stockholders equity will grow with ______.
prrofitability
Callable preferred stock is a part of _____.
stockholders equity
Liquidating dividend
not based on RE; return on stockholder’s investment
Common stock Div’s distributable is what type of acct?
addition to capital stock
A stock Div only affects what account?
stockholder’s equity
What preferences should be disclosed in the balance sheet?
liquidation
