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Tangibles?
Has physical substance
Land- does NOT get depreciated
- Buildings and equiptment
- Furniture and fixtures
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Intangibles?
No Physical Substance..can't touch them
Patents and copyrights are subject to amortization.
Goodwill and trademarks are NOT amortized
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Recording costs at assets is called..?
capitalizing the costs
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Depreciation Expense is found on the..?
Income Statement
Depreciation for the current year
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Accumulated Depreciation is found on the..?
Balance Sheet
Total of depreciation to date for an asset
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Book Value=?
Original cost- Accumulated Depreciation
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Depreciation cost= ?
Original cost - salvage value
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Straight-Line Formula=?
(Cost- Residual Value) X 1/Useful Life = Depreciation Expense
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Units of Production Method= ?
(Cost-Residual Value) X Actual Production this period/ Estimated Total Production
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Declining-Balance Method= ?
(Cost-Accumulated Depreciation) X 2 / Useful Life
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Journal entry for depreciation?
- dr Depreciation Expense (+E, -SE)
- cr Accumlated Depreciation (+xA, -A)
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Payroll deductions?
- Income tax
- FICA tax
- Other deductions (donations, union dues, etc.)
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Employer Payroll Taxes..
- FICA tax (a "matching" contribution)
- Federal unemployment tax
- State unemployment tax
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General Mills receives $100,000 cash in exchange for issuing 100 bonds at their $1,000 face value, so the bonds are issued at total face value (1,000 × $1,000 = $100,000).
- dr Cash (+A) 100,000
- cr Bonds Payable (+L) 100,000
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General Mills issues 100 of its $1,000 bonds at a price of 107.26 percent of face value, the company will receive $107,260 (100 × $1,000 × 1.0726).
- dr Cash (+A) 107,260
- cr Bonds Payable (+L) 100,000
- cr Premium on bonds Payable (+L) 100,000
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General Mills receives $93,376 for bonds with a total face value of $100,000, the cash-equivalent amount is $93,376, which represents the liability on that date. These bonds are issued at a discount because the cash received is less than the face value of the bonds.
- dr Cash (+A) 93,376
- dr Discount on Bonds Payable (+xL, -L) 6,624
- cr Bonds Payable (+L) 100,000
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Assume that in 2000, General Mills issued $100,000 of bonds at face value. Ten years later, in 2010, the company retired the bonds early. At the time, the bond price was 103, so General Mills made a payment of $103,000.
- dr Bonds Payable (-L) 100,000
- dr Loss on Bond Retirement (+E, -SE) 3,000
- cr Cash (-A) 103,000
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Quick Ratio= ?
Want the ratio high
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Times Interest Earned Ratio=?
Want the ratio to be above 1
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Authorized Shares: the max number of shares of capital that can be issued to the public
Outstanding shares- shares that are owned by stockholders
Treasury Shares- Issued shares that have been reacquired by the corporation
Unissued shares- authorized but not yet issued
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Stock Issuance
Initial Public Offering (IPO)- the first time a corporation issues stock to the public
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National Beverage issued 100,000 shares of $0.01 par value common stock for $10 per share.
- dr Cash (+A) (100,000 X $10) 1,000,000
- cr Common stock (+SE) (100,000 x %0.01) 1,000
- cr Additional Paid-in-Capital (+SE) ($1,000,000- $1,000) 999,000
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Repurchase of stock
- 1. Send a signal that the company believe its stock is undervalued
- 2. Obtain shares to reisue for the purchase of other companies
- 3. Obtain shares to reissue to employees as part of stock purchase or stock option plans
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National Beverage reacquired 50,000 shares of its common stock at $25 per share.
- dr Treasury Stock (+xSE, -SE) 1,250,000
- cr Cash (-A) 1,250,000
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National Beverage reissued 5,000 shares of the Treasury Stock at $26 per share.
- dr Cash (+A) (5,000 X $26) 130,000
- cr Treasury Stock (-xSE, +SE) (5,000 x $25) 125,000
- cr Additional Paid-In-Capital (+SE) [5,000x($26-$25)] 5,000
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Dividends Dates
Declaration Date- Balance sheet effects= Increase current liabilities, decrease retained earnings
Date of Record- BS effects= No effect
Date of Payment- BS effects= Decrease current assets (cash), decrease current liabilities
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National Beverage declares an $0.80 dividend on each share of its 46,000,000 shares of common stock outstanding.
- dr Dividends Declared (+D, +SE) (46,000,000 x $0.80) 36,800,000
- cr Dividends Payable (+L) 36,800,000
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Current Dividend Prefence..
must be paid before paying any dividends to common stock
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Cumulative Dividend Preference..
Any unpaid dividends from previous years must be paid before common dividends are paid
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Earnings Per Share (EPS)
Net Income / Avg. # of Common shares outstanding
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Return on Equity (ROE)
Net Income / Avg. Stockholders' Equity
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Price/Earnings (P/E)
Current Stock Price (per share) / Earnings per share (annual)
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Operating
Cash received and paid for day-to-day activities with customers, suppliers, and employees
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Investing
Cash paid and received from buying and selling long-term assets
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Financing
Cash received and paid for exchanges with lenders and stockholders
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Operating Activities..
Inflow- Collecting from customers, receiving dividends, receiving interest
Outflow- Purchasing services and goods for resale, paying salaries and wages, paying income taxes, paying interest
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Investing Activities..
Inflows- Sale or disposal of property, plant, and equipment. Sale or maturitiy of investments in securities
Outflows- Purchase of property, plant and equipment. Purchase of investments and securities
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Financing Avtivities..
Inflows- Borrowing from lenders through formal debt contracts, Issuing stock to owners
Outflows- Repaying principal to lenders, repurchasing stock from owners, paying cash dividends to owners
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Indirect Method
Adjusts net income by eliminating noncash items
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Relationships to the Balance Sheet and the Income Statement
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