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
FICA taxes include:
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.
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
Which methods are income statement methods, and which are balance sheet methods? (4 Total)
Income statement: % of credit sales, % of Total sales. Balance sheet: % 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.
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 additional shares of its own stock to its stockholders' without any payment in return.
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., and loss on disposal. Subtracts: Inc. in Curr. Assets, Dec in Curr. Liabs., and gain on disposal.
What the Debt Ratio and the Equity Ratio always equal.
1
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 revised depreciation expense.
(Net Book Value - revised salvage value)/(revised useful life)
_____ expense is matched to SSI payable, Medicare payable, FUTA payable, SUTA payable. This is the _____'s responsibility.
Payroll. Employer's
Equation for installments.
PV/ PVIFA
The elements of Stockholder’s Equity after issuing common stock, with additional paid in capital.
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.
Current Ratio = Current assets/ Current Liabilities
What does the journal entry look like when we write off an account assuming the Allowance Method? (hint: it is not the journal entry with Bad Debts Expense. That's the direct write off method. Think of what is going away when we remove an account.)
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. Find the Dep. expense and 2.) Net Book Value of the equipment after 3 years of owning the equipment.
(500,000-20,000)/12= 40,000 ; 480,000-120,000= $380,000.
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.
The journal entries for establishing a dividend and for paying it off. The two entries have an account in common.
Establishing: Debit: Retained Earnings, Credit: Dividends Payable. Paying: Debit: Dividends Payable, Credit: Cash
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
You expect about 4% of your A/R will be uncollectible. If your A/R is $400,000, and you already had a $6,000 credit to the allowance for Bad Debt T-account, what do we estimate the Bad Debts Expense to be?
$10,000.
Using the same information from the last problem, if the salvage value is changed to 10,000 at the end of year 3, what would be the new depreciation expense?
$41,111
An employee has a to date gross pay of $168,000. If a month's worth of work is $1,000, and the limit for Social Security tax is $168,600 at 6.2%, what is the taxed amount for that month?
$37.20 (Only $600 is taxed because of the limit.)
The company issues 8%, 20-year bonds with a par value of $500,000. The current market rate for the bonds is 8%. 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).
Find net cash provided or used by 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
$23,550 (N/P not a part of operating activity.)
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