1-3
List 3 accounts with a debit balance
Assets, expenses, dividends
What is an operating asset?
Assets used to generate revenue over two or more periods (ex. PPE)
What is an intangible asset? Define and give an example
Something that adds value to the company but has no physical properties (copyright, patent, trademark, goodwill, franchise)
Cash flows from issuing/purchasing stock, or issuing/repaying debt, are classified as what type of activity?
Financing
What qualifies an asset as a current asset?
An asset that is expected to be converted into cash within one year or operating cycle (whichever is longer)
Which inventory method yields the lowest Cost of Goods Solds?
FIFO
Name the 3 things needed to calculate depreciation
Estimated useful life, estimated residual value, asset’s acquisition cost
How much additional paid-in capital will be recorded if a company issues 20,000 shares of $1 par common stock at $6 per share?
$100,000
What is the difference between cash-basis and accrual accounting?
Following cash basis, revenue is recorded when cash is received regardless of when the service was provided
Accrual accounting follows revenue and expense recognition
Give 2 examples of bank reconciliation items and 2 examples of book reconciliation items
Bank: outstanding checks, deposits in transit, deposits/withdrawals for the wrong account
Books: service fees, interest earned, NSF checks, miswritten check amounts
What 2 factors must be present in order to list a contingent liability (like a lawsuit) as a current liability?
Must be probable and the amount can be reasonably estimated
Where do we recognize a gain from the sale of LT investment on the Statement of Cash Flows?
Operating activities
What is the major difference between accounts receivable and notes receivable?
Notes receivable generally specify an interest rate and maturity date at which principal and interest must be repaid.
Which allowance method takes into account the existing balance in Allowance for Doubtful Accounts?
Aging method
What do we consider when calculating a bond's issue price?
Present value of the stream of interest payments and present value of the maturity amount
What does cumulative, participating preferred stockholder mean? Must define all terms to get points
Cumulative- if they have not received dividends in previous years, they are entitled to the previously owed dividends before common stockholders can receive any
Participating- once common stockholders receive equal dividends/ when dividends exceed a specific amount, they will share the remaining dividends
Preferred stockholders- get dividends first and at a set amount