Financial Statements
Which financial statement summarizes the basic accounting equation (assets = liabilities + stockholders' equity)?
The Balance Sheet
True or False: An increase in cash is reflected as a debit in a journal entry.
True! Asset (cash is a type of asset) increases are reflected as a debit and decreases are reflected as a credit.
When a bond is issued at a stated rate that equals the market rate, the bond is issued at _____?
Face Value
Assets = 14,000; Stockholders Equity = 10,000; Revenue = 13,000; Expenses = 2,000; What is the amount of liabilities?
4,000
Accounts Payable is what type of account?
Liability
Revenue - Expenses = ?
Net Income (Loss)
A contingent liability is determined to be reasonably possible and reasonably estimable. How does the company report this situation?
Disclosure in financial statements only.
Name 3 examples of accounts that are Assets
Possible answers: Cash, AR, Inventory, Note Receivable, Goodwill, Prepaid Rent, Supplies, Patent, Building, Land, Equipment...
True or False: Debits always reflect increases of accounts and credits always reflect decreases.
FALSE! It depends on which account. Debits are not inherently increases and credits are not inherently decreases.
This is a written promise to repay the amount borrowed back at a later date plus interest.
Notes Payable
On Jan 1 a company buys a car for $15,000. The estimated useful life is 5 years and the residual value is $5,000. What is the depreciation expense for Year 1 of having this car?
2,000
A company collects cash from a customer, but will not provide the product or service to the customer until a later date. Which financial account is this describing (ie the other side of the JE when the company collects this cash)
Deferred Revenue
The formula to calculate Straight-Line depreciation is: (Cost - Residual Value) / ?
Useful Life
On the statement of cash flows, is the issuance of common stock a cash inflow or cash outflow?
Cash Inflow
Name the four basic financial statements.
Balance Sheet, Income Statement, Statement of Cash Flows, Statement of Stockholders' Equity
If a company purchases a building with cash, in the journal entry would cash be debited or credited?
Credit, by making a payment for a building, the company is decreasing its cash. Cash is an asset so a decrease is a credit.
Checks written by the company but not yet recorded by the bank. (Hint: related to bank reconciliations)
Checks Outstanding
A company issues 2,000 shares of $10 par value preferred stock at $15 per share. How much would we record as preferred stock in our journal entry?
$20,000
______ is a contra asset that reduces the balance of Property & Equipment on the balance sheet
Accumulated Depreciation
Beginning Inventory = 5,000; COGS = $20,000; Ending Inventory = 9,000. How much inventory was purchased during the year?
$24,000
An ice cream truck company takes its truck to get a regular oil change that costs $50. Would the company expense or capitalize this expenditure?
Expense
What are the 3 main sections of the Statement of Cash Flows that we categorize activity as?
Operating, Investing, and Financing
If a company makes a sale and receives cash from the customer, when we record the JE, do we debit or credit revenue?
Credit! Revenue increases are recorded as a credit. Decreases are recorded as a debit.
At what date is a company obligated to pay dividends to stockholders and they are required to record the liability, dividends payable?
The declaration date
On September 1, a company loans a business partner $10,000 and accepts a 6-month, 6% note receivable. How much interest revenue will the company record on the note receivable at 12/31?
$200
If a company purchases land by issuing debt, which section of the Statement of Cash Flows would this transaction be labeled as?
Non-Cash
We determine the amount of gain or loss on the sale of equipment as: Selling price - (Cost of asset - ?)
Accumulated Depreciation
If a company identifies a NSF check during a bank reconciliation, is it included as a reconciling item to the bank balance or company balance?
On the Statement of Cash Flows, which type of activity is the purchase of equipment with cash? (Operating, Investing, Financing)
Investing
Beginning RE + Net Income - Dividends = Ending RE
Name the 4 methods for inventory costing.
FIFO, LIFO, Weighted Average, Specific Identification
If I put 5,000 into my savings account today, and interest compounds annually at 4%, how much money will I have in my account in 5 years?
$6,083.26
Sales tax collected from customers is recorded as what type of account?
Liability
For bonds with a semiannual payment, to determine the semiannual cash payment we calculate:
Cash Payment = Face Value of Bond x ? x 1/2
Stated Interest Rate
On Dec 15, a company sells a customer a hot chocolate, the customer takes the hot chocolate and says they will pay the $5 on December 31. When does the company record the revenue from the sale?
December 15 since the company performed their obligation of delivering the product to the customer. Does not matter when the cash is paid. Its when the revenue is EARNED because the company did their part.
If Net Income = 13,000; Issuance of common stock = 12,000; Dividends = 5,000; and Ending Stockholders' Equity = $25,000, what is Beginning Stockholders' Equity?
$5,000
Which of the following are debits when increased, and credits when decreased? (Assets, Liabilities, Common Stock, Dividends, Retained Earnings, Revenue, Expenses)
Assets, Dividends, Expenses
When is a bond issued at a premium?
When the stated rate > the market rate
I will deposit 10,000 at the end of the year for 4 years into a savings accounts that compounds interest annually at 5%. How much money will I have in 4 years?
$43,101.25
At year-end, a company estimates that they expect 5% of AR to not be collectible. What are the 2 accounts used in the journal entry to record this estimate?
Bad Debt Expense; Allowance for Uncollectible Accounts
A company issues a 10 year, $40 million bond, at 8% that makes interest payments semiannually. Identify the inputs to determine the bond issue price if the market rate is 10%?
FV = $40 million
n = 10 x 2 = 20
I/Y = 10% / 2 = 5%
PMT = $40m x 8% x 1/2 = $1,600,000
An ice cream truck company installs a new advanced freezer system in the truck for $7,000 that will allow them to store even more inventory and enhance the quality of their products. Would the company expense or capitalize this expenditure?
Capitalize