It’s A”ccrual” World
Obligations to others for amounts owed on purchases of goods and services. These are usually non-interest-bearing.
What is accounts payable?
This type of lease will recognize both amortization expense and interest expense on the income statement.
What is a finance lease?
This contra equity account is used to record a decrease in equity when stock is repurchased.
What is Treasury Stock?
There are two methods to report net cash flows from operating activities.
What are the direct method and indirect methods?
This category of stockholders equity often includes common stock, preferred stock, and additional paid in capital.
What is contributed capital?
When cash discounts are offered, inventory purchases should be recorded at its cost using this method.
What is the net-of-discount-method?
This type of plan is one in which the employer, employee or both make contributions on a regular basis.
What is a defined contribution plan?
This is when a company distributes one additional share for each share owned by a shareholder yet their percentage of ownership remains unchanged.
What is a stock split?
Net income + or - adjustments =
What is cash flow from operating activities?
Assuming market conditions are such that investors demand an 8% annual yield for a 6% coupon bond then the bond would be considered issued at a ______.
What is a discount?
If an obligation is probable, and the amount is estimable, then a company will recognize this obligation.
What is a contingent liability?
The book-tax difference in a period will lead to higher taxable income relative to book income in the future. As such, the accrual made in that period for the portion of taxes, not yet paid creates a _______.
What is a deferred tax liability?
For this type of stock dividend, retained earnings is reduced by the market value of shares distributed, common stock increases by par, and APIC increases for the remaining balance.
What is a small stock divided?
Gains and losses from the sale of property, plant, and equipment result from this type of activity.
What are investing activities?
This ratio measures how many times interest expense is covered by a company’s earnings.
What is times interest earned?
Companies amortize bond discounts and bond premiums using this method.
What is the effective interest method?
Pension plan assets, beginning balance
+ Actual returns on investments
+ Company contributions to pension plan
- _____________
= Pension plan assets, ending balance
What are benefits paid to retirees?
This preferred stock preference ensures preferred stock shareholders receive payment before common shareholders if a company fails and sells off its assets.
What is a liquidation preference?
Cash paid for interest and cash paid for income taxes are two examples of this.
What are supplemental disclosures?
This computation reflects the added shares that would’ve been issued if all “in the money” stock options, unvested restricted stock, and other convertible securities had been exercised at the beginning of the year.
What is diluted EPS?
This is one of the factors used in setting debt ratings. It has been companies provides security for debt in the form of mortgages on its assets.
What is collateral?
A projected benefit obligation can increase or a decrease when companies make changes to their pension plan assumptions, resulting in this.
What are actuarial gains and losses?
This is not an actual transfer of stock on the grant date, but rather a commitment to transfer stock once vesting conditions are met.
What is a restricted stock unit (RSU)?
Payments made on a financing lease consist of interest, which is a(n) ________ activity and principal, which is a(n) ________ activity.
What is an operating activity and a financing activity?
This was the US enacted tax reform passed in 2017 that reduced the US corporate tax rate to 21% and allowed for immediate, full expensing of some assets purchased for tax purposes.
What is the Tax Cuts and Jobs Act (TCJA)?