MDS F2 Flashcards
Add-subtract account for Accumulated Depr.
Beg. Accum. Depr. Add: Depreciation expense Subtotal Less: Accum. depr on retirements/ sales Ending Accum. Depr.
What is included in the cost of inventory or PPE?
The cost of buying the item
+ Getting it to where it needs to be
+ and getting it ready to use
Add-subtract formula for PPE
Beg. PPE Add: Purchases Subtotal Less: Retirements/ sales End. PPE
What are the criteria for a capital lease?
hint: TOBPO75PV90
a The lease transfers ownership of the property by the end of the lease term
b The lease contains a bargain purchase option
c The lease term is 75% or more of the estimated life of the leased property
d The present value of the minimum lease payments equal or exceeds 90% of the fair value of the leased property
Add-subtract formula for total asset
Beg. Total Assets Add: Net Income Add: Additional debt incurred Subtotal Subtract: Dividends declared Subtract: Other adjustments directly to Retained Earnings Ending Total Assets
Summarize a capital lease
Lessor Lessee
(Mortgage Co.) (Home Owner)
Balance Sheet Balance Sheet
Note Receivable Fixed Asset
Acc. Depreciation
Liab. - PV of Lease Paymt
Income Statement Income Statement
Interest Income Interest Expense
Depreciation Exp.
Summarize an operating lease
Lessor Lessee
(Landlord) (Tenant)
Balance Sheet Balance Sheet Fixed Asset Prepaid Rent Acc. Depreciation Rent Payable Mortgage Liability Rent Receivable Rent collected in advance
Income Statement Income Statement
Lease Revenue (Rent) Lease Expense (Rent)
Depreciation Exp.
Interest Exp.
What are the solvency ratios?
a Working Capital = Current Assets - Current Liabilities
b Current Ratio = Current Assets/ Current Liab.
c Quick Ratio = (Cash + Mkt Securities + A/R)/ Current Liab.
When are compensated absences accrued?
a The employee has performed the services to which the vacation or sick pay is attributable
b The liability is vested or accumulated
c Payment is probable; and
d The amount can be reasonably estimated
What are lives of various intangible assets?
Intangible Asset Maximum Useful or Legal Life
Patents 20 yrs
Copyrights Life of creator + 70 yrs
Trademarks/ Indefinite - requires
Tradenames renewal every 20 yrs
Organiz. Costs Indefinite
Franchise Fees Contract Life
Purchased Goodwill Indefinite
Add-subtract account for Accts. Payable
Beg. A/P Add: Credit Purchases Subtotal Less: Disbursements End. A/P
How are contingent items accounted for?
a Remote Likelihood - Ignore.
Exception: Guarantees of debt should always be disclosed even in likelihood of default is remote
b Reasonably Possible Likelihood: Disclose in Footnote
c Probable Likelihood: Accrued if estimable and disclosed in footnote at either likely amount or low end of range
Why do bond sell at a premium?
The face rate of interest is greater than the effective rate of interest
How is the price of a bond determined?
Bond Selling Price =
PV of Face + PV of interest payments using effective rate of interest
Why do bonds sell at a discount?
The face rate of interest is less than the effective rate of interest
