Cumulative Chapters
What is DEAD and CLER?
DEAD: Debts increase expenses, assets, and dividends
CLER: Credits increase liabilities, equity, and revenue
List the conditions in which a premium, discount, and face value occur.
Discount: Stated < market
Face value: Stated = market
What is a callable bond?
subject to retirement prior to maturity at option of issuer
What is Corporate Management?
Separation of ownership and management prevents owners from actively managing the corporation
What is Sarbanes Oxley Act?
Enacted as a result of several corporate accounting scandals (Enron, WorldCom, etc). Goal is to prevent more corp. accounting scandals. Applies to public companies & requires that they have internal controls that executives & board take responsibility for. Also must have indep. outside auditor attest to adequacy of internal controls
What is the adjusting entry for a purchase of prepaid insurance and what happens if you fail to make this AJE?
Dr. Insurance Expense, Cr. Prepaid Insurance
Expenses understated, assets overstated
George made a deposit of $10,000 at 6% annual interest. After 8 years, he decided to withdraw the accumulated interest and principal. Which table would you use to solve this?
Future Value of 1, Table 1
When would you record or disclose a contingency?
Record if: Outcome is probable AND amount is reasonably estimated
Disclose in notes if: Outcome is probable OR the amount is reasonably estimated
What rights do those with preferred stock have over those with common stock? If you can't name all of them, you get 50 points per answer
1) First to claim dividends
2) Dividends in arrears
3) Preference to corporate assets in event of liquidation
Bobby is concerned with internal controls over checks received from customers at Your Mom's Pizzeria & Day Spa. All checks received in the mail are sent to the accounting department, where they are stamped "For Deposit Only." The accounting department records the checks and also deposits the checks weekly. What principle of control is being violated: segregation of duties or establishment of responsibility?
Segregation of Duties
How do you calculate ending inventory and COGS for FIFO?
Multiply the newest units by the corresponding prices until the total units = units on hand; add those up to find your ending inventory
Subtract ending inventory from GAFS to find COGS
Mikayla has an investment that pays $30,000 every year for 15 years. She wants to liquidate the investment today to start a business. The current market interest rate is 8%. Which table would you use to solve this?
Present Value of Annuity, Table 4
What is the journal entry associated with sales tax?
Dr. Cash
Cr. Sales Revenue
Cr. Sales tax Payable
There are 5 reasons to issue a treasury stock. Name 3. If you name all 5, you get an extra 100 points.
1) To obtain shares to reissue to officers/employees under bonus & stock comp.
2) To increase trading of the company's stock
3) To have additional shares to use in acquiring other companies
4) To increase earnings per share (by decreasing shares outstanding)
5) To eliminate hostile shareholders
SPEED ROUND:
Set up the merchandising journal entries on the BUYER SIDE for purchase, return, and payment
Purchase: Dr. Inventory; Cr. A/P
Return: Dr. A/P; Cr. Inventory
Payment: Dr. A/P; Cr. Cash, Cr. Inventory
Describe how you would solve for the PV of a bond with interest paid annually. State which tables you use and when.
Interest payment = Bond value x stated rate
PV of interest payments = interest X factor (from table 4)
PV of principal = bond value X factor (from table 3)
PV of bond = PV of interest + PV of principal
What is the journal entry for paying a note?
Dr. Note Payable
Dr. Interest Payable
Dr. Interest Expense
Cr. Cash
What happens when there is a 2:1 stock split?
Par value per share is halved
New market value per share is halved
# of outstanding shares is doubled
How is this error reflected in a bank reconciliation and on which side can you find it: Company check No. 6969 issued to Dill Doe, a creditor, for $465 cleared the bank in July but was incorrectly recorded by the company for $546.
Company error, add $81 on the book side
SPEED ROUND:
- 01/1/15: AFDA has credit balance of $20,000
- During 2015, $30,000 of uncollectible A/R were written off
- 12/31/15: A/R Balance = $180,000
- CFO estimates that 6% of A/R will be uncollectible
What is the required adjustment to AFDA at 12/31/15
Adjustment needed: 30,800 credit
Describe how you would solve for the PV of a bond with interest paid semi-annually. State which tables you use and when.
Interest payment = Bond value x stated rate x 6/12 months
% for table = market rate/2; Period for table = years x 2
PV of interest payments = interest X factor (from table 4)
PV of principal = bond value X factor (from table 3)
PV of bond = PV of interest + PV of principal
What is the journal entry for accruing interest expense on a discounted bond payable and how do you find each section?
Dr. Interest expense (Preceding carrying value x market rate x months)
Cr. Discount on Bonds Payable (IE-IP)
Cr. Interest Payable (Face value x stated rate x months)
How do stock dividends impact the SE section?
Change to CS: increase
Change to APIC-C/S: increase
Change to RE: decrease
Change to # of shares: increase
Change to total SE: no change
What are the components of a financing cash inflow and cash outflow?
Inflow: From sale of stock, issuance of debt (bonds/notes)
Outflow: To SH's as dividends paid, redeem LT debt, reacquire stock (treasury stock)