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Intro To Accounting > Test 4 > Flashcards

Test 4 Flashcards

1
Q

Book value straightline method

A

Year 1= cost - depreciation expense
Normal = previous book value - depreciation expense
Last year= pug in residual value

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2
Q

Causes of depreciation

A

Physical deterioration

Obsolescence

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3
Q

Accumulated Depreciation straight line method

A

Year 1= cost- residual value / year
Normal- year 1+ previous line
Last year= cost- residual

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4
Q

When creating a depreciation table using the straight line method what two thing will be the same thought the whole table

A

Cost

Depreciation expense

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5
Q

For 200% or double declining method what stays the same in the depreciation table

A

Cost

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6
Q

Book value for 200% and 150% methods

A

Year 1= Cost- depreciation expense
Normal = previous book value- current depreciation expense
Last year= residual value

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7
Q

Depreciation expense for 200% and 150% methods

A

Year 1 = cost x .4 or .3
Normal= book value x .4 or .3
Last year = previous book value - residual

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8
Q

Record selling equipment

A 
Debit 
-cash 
-accumulated depreciation 
Credit 
- machinery

Gain or loss on sale of machinery
Gain - credit
Loss- debit

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9
Q

Accumulated depreciation for 200% or 150% methods

A

Year 1 = cost x .4 or .3
Normal = previous + current expense
Last year = previous + current expense

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10
Q

When recording selling equipment how do you find the numbers

A

Cash= what it sold for
Accumulated depreciation= plugged in
Machinery= original cost
Gain or loss = all debit - all credit

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11
Q

Record trading of equipment

A 
Credit 
-vehicle : new truck 
- accumulated depreciation 
Debit 
- cash 
- vehicle : old truck

Gain or loss on trade/ exchange of asset

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12
Q

When recording a trade of equipment how to find the numbers

A

Vehicle:new = price of new truck
Accumulated depreciation -vehicle :old truck = plug in
Cash = price of new- trade in allowance
Vehicle: old= original cost

Gain or loss on trade/ exchange of asset = all debit- all credit

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13
Q

Equity vs debt financing

A

Equity - issuing additional share of common stock to an investor, previous stockholders percentage of ownership decreases

Debt financing- borrowing money and not giving up ownership

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14
Q

Amortization table (mortgage) interest expense

A

Unpaid balance x monthly interest

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15
Q

Amoization table principle reduction is found how?

A

Monthly payment- interest expense

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16
Q

Amortization table unpaid balance is found how?

A

Last unpaid balance - principle reduction

17
Q

How to get monthly interest for on bonds

A

Face value x % / 12

18
Q

What does it mean for a bond to be issued at a discount or premium

A

?

19
Q

Debt ratio

A

Total liabilities / total assets

How well a company is making use of outside capital

20
Q

Interest coverage ratio

Times interest earned

A

Operating income / interest expense

Higher the better
Indicated margin of protection for creditors

21
Q

How to compute the first semi annual payment

A

Monthly interest rate x 6

22
Q

How to record the first semi animal payment of a bond

A

Debit
-bond interest expense
Credit
-cash

23
Q

How to record issuance of bonds

A

Debit
-cash
Credit
- bonds payable

Numbers are the face value

24
Q

How to adjust an entry for a bond

A

Interest per month x how many months

Debit
-bond interest expense
Credit
- bond payable

25
Q

Record interest payment after adjustment

A

Debit
-bond interest expense : same as adjusted entry
-bond interest payable : cash - bond interest expense
Credit
-cash : same as previous cash on first payment

26
Q

How to retire a bond

A

Debit
-bonds payable
Credit
- cash

are face value

27
Q

What is constant in an amortization table

A

Monthly payment

28
Q

Record issuance of bonds common/preferred

A 
Debit
-cash
Credit
-common/preferred stock 
- additional paid-in capital common/preferred stock
29
Q

When recording issuance of bonds how to find the numbers

A

Cash= share x $
Common/ preferred stock = share x par value
Additional paid - in= cash - common / preferred stock

30
Q

Record cash decided sufficient to meet the current dividend preference on preferred stock and pay common stockholder $ per share

A 
Debit 
-dividend- preferred stock 
Credit 
-dividend payable 
Debit 
- dividend- common stock 
Credit
- dividend payable
31
Q

Operating statement of cash flows

A 
Cash from customers 
Payments for inventory 
Payments of interest on a note 
Payments for insurance premiums 
Cash collections from customers 
Payments to employees
32
Q

Investing statements of cash flows

A

Cash paid for purchase of PP&E

Cash received from sale of PP&E

33
Q

Financing statements of cash flow

A

Cash received from issuance of stock
Payment of principal on a mortgage
Payment of dividends to stock holders
Cash received from issuing bonds

34
Q

Indirect and direct method of statement of cash flows apply to

A

Operating activities section of the statement

35
Q

Advantage for corporations

A 
Existence is separated from owners
Has rights and privileges 
Ownership can be public or private
Transferability of ownership 
Professional management
36
Q

Disadvantage of corporations

A

Heavy taxation
Greater regulation
Core of formation
Separation of ownership and management

37
Q

How to record payment from an amortization table

A 
Debit 
-interest expense
-installment note payable= principle reduction 
Credit 
- cash = monthly payment
38
Q

Depreciation expense straight line method formula

A

Cost - residual value / year

38
Q

When recording cash dividend to meet current dividend preference on preferred stock and pay common stock $ per share how to find the numbers

A

Dividend -preferred stock = % x par value = # per share x share
Dividend payable in the same

Dividend - common stock = #per share x share

Intro To Accounting (5 decks)

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