week 6

Question 1

if shares are sold for more than the par value, the stock is sold at…

Answer 1

premium

Question 2

participating in a new issue of shares of a company before it is offered to others is an example of which shareholder right

Answer 2

pre-emption

Question 3

what are the key financial statements

Answer 3

-balance sheet/statement of financial position
-income statement/statement of profit or loss
-statement of cash flows
statement of changes in equity

Question 4

what does par value mean

Answer 4

original price of stocks

Question 5

inventory (stocks)=

Answer 5

include goods which have been sold or have not

Question 6

equation to use to find the cost of goods (inventory)

Answer 6

cost of goods=(opening inventory+purchases)-closing inventory

Question 7

gross profit=

Answer 7

sales revenue- cost of goods sold

Question 8

info about depreciation:

Answer 8

• most non current assets have limited lives( they are eventually used up in the process of generating revenue)

Question 9

how to pay of a non current asset

Answer 9

• need to spread the cost of purchasing the noon current asset across its useful life
• it is treated as an expense in the income statement which affects a company’s profit

Question 10

what are the 4 factors to consider for depreciation:

Answer 10

• the cost(fair value) of the asset
• the useful life of the asset
  the residual value of the asset
  the depreciation method- straight line or reducing balance method

Question 11

straight line method equation

Answer 11

depreciation expense= (original cost of the asset- estimated residual value)/ estimated useful life

Question 12

what is a reducing balance method for?

Answer 12

a percentage depreciation rate is applied to the original cost of the asset after deducting any depreciation charged in the previous period

Question 13

reduced balance method=

Answer 13

depreciation expense=(original cost of the asset-previous depreciation expenses) depreciation rate

Question 14

what does reduced balance/net book value=

Answer 14

original cost of the asset- previous depreciation expenses

Question 15

revenues=

Answer 15

are recorded when they are earned not when the cash is received

Question 16

expenses=

Answer 16

are recorded when they are incurred not when the cash is paid

Question 17

accruals info

Answer 17

an amount owing for a service provided during an accounting period but still unpaid for at the end of it
- included in the amount charged to the statement of profit or loss for the period as part of the cost of the service provided

Question 18

accruals (delay of cash)

Answer 18

(amount paid during the year+ closing accruals)- opening accruals

Question 19

prepayments info

Answer 19

an amount pre paid in cash during an accounting period for a service that will be provided in a subsequent period
-deducted from the amount charged to the statement of profit or loss for he period as part of the cost of the service provided

Question 20

prepayment=

Answer 20

(amount paid during the year+opening payments)- closing prepayments
*closing prepayments are shown on the statement of financial position as part of the current asset

Question 21

bad debts=

Answer 21

refers to debt that is highly unlikely to be ever be paid