Chapter 7
The equation we use to find interest on a note at an annual rate.
Interest= Principal x Rate x Time (# of days/360)
The cost of land would not include:
Purchase price
Cost of parking lot lighting
Costs of removing existing structures
Fees for insuring the title
Cost of parking lot lighting
What taxes do both employees and employers pay?
a) Social Security and Medicare taxes
b) Charitable giving
c) Employee state income tax
d) Federal and state unemployment taxes
e) Employee federal income tax
Social Security and Medicare taxes
What P.V.I.F (table B.1) stands for.
What is Present Value Interest Factor?
When is Additional Paid in Capital used?
When selling stock at a higher amount per share than original par value.
Is reducing Long Term Debt a source of cash or use of cash?
Use of Cash, paying it off therefore using cash.
Equation used to find average anything (inventory, assets, A/R)
(Beg. item + End. item)/2
What are the four allowance methods?
% of credit sales, % of Total sales, % of A/R, A/R Aging.
Examples of intangible assets
Patents, trademarks, copyrights, franchises, and goodwill.
Estimated cost a company expects to incur to repair or replace products under warranty during a specific accounting period. (definition lol)
What is warranty expense?
When a bond sells at a premium:
a. the contract rate is above the market rate
b. the contract rate is equal to the market rate
c. the contract rate is below the market rate
d. it means that the bond is a zero coupon bond
e. the bond pays no interest
a. the contract rate is above the market rate
Distribution of dividends to its stockholders', WITHOUT being paid back in cash.
What is a Stock Dividend?
What adds to operating activities (other than Net Income and depreciation expense) and what subtracts to operating activities? No numbers, just the description.
Adds: Dec. in Curr. Assets,
Inc. in Curr. Liabs.,
loss on disposal.
Subtracts: Inc. in Curr. Assets,
Dec in Curr. Liabs.,
gain on disposal.
What the Debt Ratio and the Equity Ratio always equal.
1
What does the journal entry look like when we write off an accounts receivable assuming the Allowance Method?
Debit: Allowance to BD. Credit: A/R- Customer
You purchased equipment for $500,000, at a salvage value of $20,000, at a useful life of 12 years. What is the depreciation expense?
(500,000-20,000)/12= 40,000.
You receive a note of $200,000, 8%, to be paid in 90 days. What is the interest expense of this note?
$4,000 (200,000 x 8% x 90/360)
The journal entry for the issuance of a bond at a discount.
Debit: Cash
and discount.
Credit: Bonds Payable.
Journal entry for distributing a stock dividend.
Debit: Retained Earnings
Credit: Dividends Payable
A company settles a long term notes payable by paying $68,000, reducing the note from $100,000 to $32,000. The amount reported as a use of Cash under financing activities would be:
$68,000, use of Cash.
Inventory Turnover Ratio
COGS/ Average Inventory
The journal entry to record the replacement of an accounts receivable to a notes receivable.
Debit: N/R-customer. Credit: A/R- Customer
Equation for Net Book Value.
Original cost of asset - accumulated depreciation.
_____ expense is matched to SSI payable, Medicare payable, FUTA payable, SUTA payable. This is the _____'s responsibility.
Payroll. Employer's
Equation for installments.
What is PV/ PVIFA ?
Stockholder's Equity after issuing common stock, with additional paid in capital.
What is Common Stock, APIC Common Stock, Retained Earnings.
A machine with a cost of $175,000 and accumulated depriciation of $94,000 is sold for $87,000 cash. The amount reported as a source of cash under cash flows form investing activities is
$87,000, based on the cash we got from the sale.
Ratio that compares our current assets to our current liabilities to see the company's ability to pay its short-term obligations (due within one year) using its short-term assets.
What is Current Ratio = Current assets/ Current Liabilities
You estimate bad debts expense will be 4% of your credit sales. If your credit sales are $400,000, what do we estimate the Bad Debts Expense to be?
$16,000
You purchased equipment for $500,000, at a salvage value of $20,000, at a useful life of 12 years. If the salvage value is changed to $30,000 at the end of year 3, what would be the new depreciation expense?
$50,000.
An employee has earned $5,000 for their first month's of work. Assuming SSI is 6.2%, and Medicare is 1.45%, what is the employee's take home pay?
What is $4,617.50? (5,000 x 6.2%=310; 5,000 x 1.45%=72.5; Those add to 382.5, so 5,000-382.50= 4,617.50 :3
The company issues 8%, 20-year semiannual bonds with a par value of $500,000. The amount of interest owed to the bondholders for each semi-annual interest payment is
$500,000 x 0.08 x 1/2 year = $20,000
If Gaby has 10,000 shares outstanding, and they currently have a par value of $10, what happens if they issue a 2 for 1 split? Not journal entry, just what happens to the number of shares and price per share.
Shares double (20,000 shares), par value cuts in half ($5/share).
What does not belong under operating activities ?
Net income: $15,200
Depreciation expense: 10,000
Cash payment on note payable: 8,000
Gain on sale of land: 3,000
Increase in inventory: 1,500
Increase in accounts payable: 2,850
Cash payment on note payable: 8,000
If the total Liabilities for a year= $400,000, and Total Owner's Equity is $250,000, what is the Debt to Equity Ratio for that year (round to nearest tenth, not as a %.)
1.6