Term
|
Definition
| term used by a company to describe its assets that are ready for sale, being produced for sale, ready for use in a production process |
|
|
Term
| perpetual inventory system |
|
Definition
| company uses to keep a continuous record of the cost of inventory on hand and the cost of inventory sold |
|
|
Term
| periodic inventory system |
|
Definition
| company uses this when it does not need to keep a continuous record of the inventory on hand and sold, instead it uses a physical count at the end of an accounting period |
|
|
Term
| specific identification method |
|
Definition
| company assigns a specific cost to each unit of inventory it sels and to each unit that it holds in its ending inventory |
|
|
Term
|
Definition
| a company records its transactions on the basis of the dollars exchanged in the transaction |
|
|
Term
|
Definition
| to determine its net in come for an accounting period, a company compute the total expenses involved in earning the revenues of the period and deducts them from the revenues earned in that period |
|
|
Term
|
Definition
| a freight company is in the process of delivering the inventory from the selling company to the buying company |
|
|
Term
|
Definition
| Free On Board, the selling company transfers ownership to the buyer at the place of sale (before the inventory is in transit) |
|
|
Term
|
Definition
| the selling company transfers ownership to the buyer at the place of delivery (after transit is completed) |
|
|
Term
|
Definition
| when a company includes the earliest cost it incurred in the cost of goods sold as it sells its products, leaving the latest costs in ending inventory |
|
|
Term
| moving average/average cost |
|
Definition
| company must compute an average cost per unit after each purchase and then assign this new average cost to items sold until the next purchase |
|
|
Term
|
Definition
| company includes the latest costs it incurred before a sale in its cost of goods sold and the earliest costs |
|
|
Term
| If costs are rising, cost of goods sold is lower under ________ |
|
Definition
|
|
Term
| if costs are falling, cost of goods sold is lower under _______ |
|
Definition
|
|
Term
|
Definition
| the cost that a company would have to pay at the balance sheet date to purchase (replace) an item of inventory |
|
|
Term
| why is the LIFO system considered not relevant? |
|
Definition
| because purchases and inventory from so long ago dont really have any more effect on current operations |
|
|
Term
| holding gain/inventory profit |
|
Definition
| artificial profit that results when a company records cost of goods sold at an historical cost that is lower than the replacement cost of the units sold |
|
|
Term
|
Definition
| current assets / current liabilities |
|
|
Term
|
Definition
| quick assets / current liabilities |
|
|
Term
|
Definition
| beginning inventory + cost of inventory acquired - ending inventory |
|
|
Term
|
Definition
| the difference between lifo and non lifo ending inventory amounts |
|
|
Term
|
Definition
| cost of goods sold / average inventory |
|
|
Term
|
Definition
| when a company using LIFO reduces the physical quantity of inventory from the beginning of the year to the end of the year |
|
|
Term
|
Definition
| the extra profit that results from reporting a lower COGS that it would have if it had not had a LIFO liquidation |
|
|
Term
| lower of cost or market (LCM) method |
|
Definition
| a company reports the inventory at the lower market value on its balance sheet and includes the corresponding loss on its income statement |
|
|
Term
|
Definition
| cost to replace an item in inventory |
|
|
Term
|
Definition
| a company should apply GAAP in such a way that there is little chance it overstates income...if given a choice of over or underestimating, choose underestimating |
|
|
Term
|
Definition
| taking an inventory count at retail price |
|
|
Term
|
Definition
| need to determine gross profit percentage (gross profit / net sales) and then figure out shit with periodic inventory methods |
|
|
Term
| capital expenditure decision |
|
Definition
| is a long term decision in which a company determines whether or not to make an investment |
|
|
Term
|
Definition
| expected cash payment to be made to put a proposal into place |
|
|
Term
|
Definition
| future cash flows that differ whether in amount or timing, as a result of accepting a capital expenditure proposal |
|
|
Term
|
Definition
| choosing not to accept the capital expenditure |
|
|
Term
| to be relevant a cash flow must... |
|
Definition
occur in the future
result from activities that are required by the proposal
cause a change in the company's existing cash flows |
|
|
Term
|
Definition
| is the weighted average cost (rate of return) it must pay to all sources of capital |
|
|
Term
|
Definition
| future net cash receipts and the difference between that amount and the initial investment |
|
|
Term
|
Definition
| the value today of a certain amount of dollars paid or received in the future |
|
|
Term
|
Definition
| interest that accrues on both the principal and the past (unpaid) interest |
|
|
Term
| net present value method steps |
|
Definition
1. determine the initial expected cash payment required to implement the capital expenditure proposal
2. determine the present value of the expected future net cash receipts from the capital expenditure proposal
3. determine the net present value by subtracting the amount from step 1 from amount in step 2 |
|
|
Term
| net present value definition |
|
Definition
| the present value of the expected future net cash receipts and payments minus the expected investment |
|
|
Term
| average rate of return on investment |
|
Definition
| average return on the investment per year per dollar invested, expressed as a percentage per year |
|
|
Term
| mutually exclusive capital expenditure proposals |
|
Definition
| proposals that accomplish the same thing, so that when one proposal is selected the others are not |
|
|
Term
|
Definition
| occurs when a company cannot obtain sufficient cash to make all of the investments that it would like to make |
|
|
Term
| property, plant, and equipment |
|
Definition
| term used by companies to describe all the physical (tangible) long term assets it uses in its operations |
|
|
Term
| property, plant, and equipment |
|
Definition
| term used by companies to describe all the physical (tangible) long term assets it uses in its operations |
|
|
Term
|
Definition
| a company records its transactions on the basis of dollars it exchanged in the transaction and keeps that value on the books forever |
|
|
Term
|
Definition
| the cost of property plant and equipment that a company allocates as an expense to each accounting period n which the company uses that asset |
|
|
Term
|
Definition
| the total depreciation recorded on an asset to date |
|
|
Term
| book value of an asset (net asset value) |
|
Definition
| is the cost of the asset less its accumulated depreciation |
|
|
Term
| physical causes of depreciation |
|
Definition
| include wear and tear due to use, deterioration and decay caused by the passage of time, and damage and destruction |
|
|
Term
| functional causes of depreciation |
|
Definition
| limit the live of an asset even though the physical life of said asset is not exhausted |
|
|
Term
| systematic allocation of costs |
|
Definition
| the calculation follows a formula not determined in an arbitrary manner (strait line method, etc) |
|
|
Term
| rational allocation of costs |
|
Definition
| the amount of the depreciation relates to the benefits that the assets produces in any period |
|
|
Term
| accelerated depreciation method |
|
Definition
| records the highest amount of depreciation in the first year of the assets life and lesser amounts in each subsequent year |
|
|
Term
| double declining balance method of depreciation |
|
Definition
| computes depreciation expense by multiplying the book value of an asset at the beginning of the period by twice the strait line rate |
|
|
Term
|
Definition
| a cost that increases the benefits the company will obtain from an asset |
|
|
Term
|
Definition
| a cost that only maintains benefits that the company originally expected from the asset |
|
|
Term
|
Definition
| when the expected future net operating cash flows are less that the book value of an asset |
|
|
Term
|
Definition
| is a companies ability to maintain its level of physical output |
|
|
Term
|
Definition
| refers to how well a company uses all of its assets to generate revenue |
|
|
Term
|
Definition
| are a company's long term assets that do not have physical substance that provide legal rights or economic benefits for the company |
|
|
Term
|
Definition
| right granted by US government giving the owner control of an invention's manufacturing and sales for 20 years |
|
|
Term
|
Definition
| an exclusive right granted by government to publish or sell literary or artistic products for the life of an author plus an additional 70 years |
|
|
Term
|
Definition
| an exclusive right from government to use a name or symbol for product identification |
|
|
Term
|
Definition
| intangible asset at the difference between the purchase price the company paid and the market value of the identifiable net assets it acquired |
|
|
Term
|
Definition
| is the allocation of a portion of the acquisition cost of an intangible asset as an expense |
|
|
Term
|
Definition
| the cost to a company of borrowing money for a period |
|
|
Term
|
Definition
| type of note in which a company agrees to pay the holder of the bond its face value at teh maturity date and to pay interest on the face value periodically at a specified rate |
|
|
Term
|
Definition
| amount of money that the issuer promises to pay on the maturity date |
|
|
Term
|
Definition
| date which issuer of boond agrees to pay the face value to the holder |
|
|
Term
|
Definition
| serially numbered legal document that specifies the face value, annual interest rate, and maturity rate of a bond |
|
|
Term
| leverage (trading on equity) |
|
Definition
| is the use of borrowing by a corporation to increase the return to common stock holders |
|
|
Term
|
Definition
| is the rate that a borrower would pay and a lender would recieve, when there is no risk of default by the borrower and when no inflation is expected |
|
|
Term
|
Definition
| when a bond sells below its face value |
|
|
Term
|
Definition
| when a bond sells above its face value |
|
|
Term
|
Definition
| bonds that dont pay a coupon |
|
|
Term
| effective interest method |
|
Definition
| company finds annual interest expense by multiplying the annual yield by the book value of the bonds at the beginning of the year |
|
|
Term
|
Definition
| allows issuer to purchase bond back |
|
|
Term
|
Definition
| allowance for a bond to be converted into common stock |
|
|
Term
|
Definition
| a companies ability to change |
|
|
Term
|
Definition
| lease that does not transfer the risks an benefits of ownership (like leasing an apartment) |
|
|
Term
|
Definition
| lease transfers the risks and benefits of ownership from lessor to lessee |
|
|
Term
|
Definition
| an agreement by a company to provide income to its employees after they retire |
|
|
Term
| defined contribution plan |
|
Definition
| specifies the amount that the company must contribute to the plan each year while employees work |
|
|
Term
|
Definition
| specifies the amount that the company must pay to its employees each year during their retirement |
|
|
Term
|
Definition
| obligation of the company to its employees for the work they have done to date |
|
|
