# Shared Flashcard Set

## Details

Financial Accounting Final
FAF
49
Aerospace Engineering
12/10/2013

Term
 Bank Reconciliation (Bank Statement)
Definition
 Bank Statement : Add: Deposits in Transit Deduct: Outstanding Checks Add/Subtract Bank Erros Corrected Bank Balance
Term
 Bank Reconciliation (Company Books)
Definition
 Add: Collection of Note Interest Revenue Deduct: NSF Check Bank Service Charges Company Books :Add/Subtract Company Errors Corrected Bank Book Balance
Term
 Balance sheet presentation of accounts receivable
Definition
 Balance Sheet: CashAccounts Receivable 3,000,000 Less: Allowances for Doubtful Accounts (300,000) Net Realizable Value of Accounts Receivable: 2,700,000
Term
 Journal Entry for Accounts Receivable
Definition
 DR Accounts Receivable CR Sales (or Service Revenue)
Term
 Journal Entry for Bad Debt Expense
Definition
 DR Bad Debt Expense CR Allowances for Doubtful Accounts
Term
Definition
 Bad debt expense is the amount not collected at the end of the year
Term
 What is the realizable value?
Definition
 The realizable value is the amount of cash expected to be collected at year end.
Term
 Barton Co. estimates \$3000 of its A/R will prove uncollectable. The total accounts receivable balance at December 31, 2013 is \$278,000
Definition
 Barton, Co. Partial Balance Sheet December 31, 2013 Cash Accounts Receivable \$278,000 Less : Allowances for D/A 3,000Net Realizable Value of Accounts Receivable \$275,000
Term
 Formula for Interest Revenue
Definition
 Total payment x interest % x n/360 n=number of months that have passed
Term
 Why are ratios computed?
Definition
 Ratios are computed to evaluate the liquidity (how quickly the asset can be converted to cash) of a company's accounts receivable
Term
 Formula for the Receivables Turnover Ratio
Definition
 Net Credit Sales -------------------- Average Net Receivables The turnover ratio is used to asses the liquidity of the ratio's. It shows how often the accounts receivable is converted to cash.
Term
 Formula for the average collection period
Definition
 365 Days ---------------------- Receivables Turnover Ratio The Average Collection Period is the average amount of time that a receivable is outstanding. It is useful is determining how efficient management has been in granting credit to produce sales.
Term
 How is Aquisition Computed
Definition
 Decline in Asset Value ------------------- Assets Useful Life
Term
 Aquisition Cost - What will be included in the cost of the asset?
Definition
 A) Aquisition - Compute cost B) Use - Assets useful life and subsequent expenditures C) Disposal - Record disposal
Term
 What is deprecation?
Definition
 Allocating cost of plant asset to expense (Moving from balance sheet to income statement). Deprecation requires three values: Cost, Salvage Value, Useful Life
Term
 Formula for Deprecation Rate
Definition
 100% x useful life
Term
 Formula for strait-line method
Definition
 (Cost- Salvage or Residual Value) ---------------------------- Useful Life Measured in Years The strait-line method maximizes net income and when using this method, deprecation is the same each year for the assets useful life.
Term
 Using the strait-line method, calculate and journalize: A delivery truck cost \$10,000 and has an estimated residual value of \$1,000 at the end of its estimated useful life in 5 years.
Definition
 (10,000 - 1000) -------------- = 1,800/year5 Years Journalizing to Record Anual Deprecation Dec. 31 DR Deprecation Expense 1800 CR Accumulated Deprecation 1800
Term
 Sale of Assets - Recording Journal Entries With Gains or Losses: On September 30, 2013 Evans Company sells a machine that originally cost %100,000 for %60,000. The machine was placed in service on January 1, 2010. Using the strait-line method, it was deprecated with an estimated salvage value of \$20,000 and a useful life of 10 years.
Definition
 A) Annual Deprecation (100,000 - 20,000) ---------------- = \$8000 10 Years B) Deprecation to September 30, 2013 9/12 x 8000 = \$6000 C) Determine Book Value of Assets: Cost 100,000 Accumulated Deprecation 30,000 (3 years x 8,000) + 6000 --------Book Value 70,000 Cash Received 60,000 -------Loss on Disposal of Asset (\$10,000) D) Recording the Sale of the Plant Asset: Sept. 30 Cash 60,000 Accumulated Deprecation - machine 30,000 Loss on Disposal of Asset 10,000 Machine 100,000
Term
 Balance Sheet Presentation of Property, Plant, and Equipment - LOSS
Definition
 DR Cash xDR Accumulated Deprecation - machine xDR Loss on Disposal of Asset x CR Machine x
Term
 Balance Sheet Presentation of Property, Plant, and Equipment - GAIN
Definition
 DR Cash xDR Accumulated Deprecation - machine x CR Gain on Sale x CR Machine x
Term
 Formula for ASSET Turnover Ratio
Definition
 Net Sales --------- Average Total Assets
Term
 Formula for Return on Assets
Definition
 Net Income -----------Average Total Assets
Term
 Notes Payable are classified as __?
Definition
 Notes Payable are classified as current liabilities
Term
 Formula for Interest Expense :
Definition
 Note Payable x Interest % x m/12 m = # of months that have passed
Term
 Prepare the Journal Entry for Issuing the Note Payable
Definition
 To record note to bank: DR Cash x CR Notes Payable x
Term
 Record Repayment of Note and Interest:
Definition
 To record payment of note: DR Notes Payable x DR Interest Expense x CR Cash x
Term
 Current Liabilities - Short-term Notes Payable Burrow Inc. borrowed \$100,000 Sept. 1, 2009, by signing a 12%, 6 month note payable.
Definition
 A) Sept. 1 Cash 100,000 Notes Payable 100,000 Dec. 31 Interest Expense 4000 (100,000 x .12 x 4/12 months) Interest Payable 4000 B) Journal March 1 DR CR Notes Payable 100,000 Interest Payable 4,000 Interest Expense 2,000 (Record Jan. and Feb. Interest) Cash 106,000
Term
 Formula for the Times Interest Earned Ratio
Definition
 (Net Income + Interest Expense +Income Tax Expense) ---------------------------------------------- Interest Expense The Times Interest Earned Ratio shows the amount of resources generated for each dollar of interest expense. (Higher the Better)
Term
 Formula for Times Interest Earned
Definition
 Income before interest and income taxes ----------------------------------- Interest Expense
Term
 Bonds are what kind of securities?
Definition
 Bonds are Debt Securities
Term
Definition
 1) Do not affect stockholder control2) Interest on bonds is tax deductible 3) Bonds can increase return on equity
Term
 Issuing Bonds at Face Value. Journalize: "Devor Corporation 100, five year, %10, \$1000 bonds dated January 1, 2010 at 100."
Definition
 Jan. 1 DR Cash 100,000 CR Bonds Payable 100,000
Term
 What kind of account is a discount account?
Definition
 A discount account is a contra-liability account.
Term
 Bonds Discounts and Premiums. Journalize: "On Jan. 1, 2005, Candlestick, Inc., sells 100,000, 5 year, %10 bonds, at 98 with interest payable on Jan.1."
Definition
 Jan. 1 DR Cash 98,000 DR Discount on Bonds Payable 98,000 CR Bonds Payable 100,000
Term
 What kind of account is a premium account?
Definition
 A premium account is an Adjunct account and is added to bonds payable on the balance sheet.
Term
 Journalize a bond sold at premium:
Definition
 DR CashCR Premium on Bonds PayableCR Bonds Payable
Term
 Formula for Interest payment:
Definition
 Interest Payment = Bond face value x Stated interest rate
Term
 Recording Interest Payments With Amortization of Premium or Discount. Journalize: "Devor Corporation issues 100, 5 year, \$1000 bonds dated Jan. 1, 2010, at 100."
Definition
 Jan. 1 DR Cash 100,000 CR Bonds Payable 100,000 (1000 x 100) Dec. 31 DR Bond Interest Expense 10,000 CR Cash 10,000 (100,000 x 10%)
Term
 Show the balance sheet presentation for bonds
Definition
 Long-term Liabilities -Bonds Payable --------------- 1,000,000 -Less: Discount on bonds payable (80,000) ___920,000------------------------------------ ---------
Term
 Formula for Bonds Discount Amortization:
Definition
 Bonds Discount Amortization Bonds Discount -------------- Number of Interest Periods
Term
 What happens to the payments throughout the payment of a long-term notes payable?
Definition
 With each payment, the interest portions get smaller and the principle portions get larger.
Term
 Stockholders EquityHow do you find the number of shares of common stock issued?
Definition
 Common stocks par value x # of shares issued
Term
 Stockholders EquityHow do you find the number of shares of common stock issued?
Definition
 # of total shares - preferred stock - treasury stock
Term
 Stockholders EquityHow do you find the total amount of Paid-In Capital?
Definition
 Total (Common + Preferred) stock + Paid-In Capital
Term
 Stockholders EquityHow do you find the Treasury cost per year?
Definition
 Total Treasury Stock ------------------ Shares of common stock owned by treasury
Term
 Stockholders EquityHow do you find the total amount of stockholders' equity?
Definition