Accounting Final

  1. Calculate Interet
    Interest (I) = Principal ℗ * Interest Rate ® * Time (T)
  2. Notes Receivable Journal Entry
    • dr notes receivable
    •   cr cash
  3. Journal Entry for receiving a cash interest payment
    • dr cash- getting money
    •   cr Interest Receivable
    •   cr Interest Revenue
  4. Adjust Journal entry to record interest receivable
    • dr Interest Receivable
    •   cr Interest Revenue
  5. Journal entry for receiving principal
    • dr cash
    •   note receivable
  6. Credit Purchase for rides and equipment journal entry
    • dr Rides and Equipment
    •   cr Cash
    •   cr Notes Payable
  7. Depreciation expense journal entry
    • dr depreciation expense
    •   cr accumulated depreciation
  8. Striaght Line Method
    Accumulated depreciation increases by an equal amount each year

    ( Cost - Residual value ) * 1/ useful life= Depreciation expense
  9. Unit Of Production Method
    When usage varies each period

    (Cost-Residual value) * Actual production this period/ Estimated total production= Depreciation expense
  10. Declining Balance Method
    When the asset is more efficient in early years but less so over time
  11. Double Declining Balance Formula
    ( Cost - Accumulated Depreciation ) * 2/useful life= Depreciation Expense

    Shows declining amounts of depreciation as the asset ages
  12. Impairment
    • dr Loss on impairment
    •   cr Rides and Equipment- (Ex)

    Occurs when events or changed circumstances cause the estimated future cash flows from a long-lived asset to fall below its book value.
  13. Original cost - Accumulated depreciation =
    Book Value
  14. Loss on Disposal is debited when
    The selling price is lower then the book value
  15. Loss on Disposal is credited when
    The selling price is higher than the book value
  16. Intangible Assets
    Have limited life, no value at the end of their lives.
  17. Trademarks
    Special name, image or slogan identified with a product or company. ( e.g, Mcdonalds)
  18. Patent
    A right to exclude others form making, using, selling, or importing an invention
  19. Licensing Right
    Limited permission to use property according to specific terms and conditions set out in a contract
  20. Goodwill
    The premium a company pays to obtain the favorable features association with another company
  21. Acquisition
    The cost of intangible assets are recorded as assets only if they have been purchased
  22. Net Assets =
    assets - liabilities
  23. Amortization
    Process by which allocating the cost of intangible assets over their limited useful life.  Trade marks and goodwill are not amortized
  24. Journal entry for amortization
    • dr Amortization expense
    •   cr Patents
  25. Fixed asset turnover ratio
    Net rev./ Ave. net fixed assest

    To find ave net fixed asset add be. and ending balances in fixed assists
  26. EBITDA
    earnings before interest, taxes, depreciation and amortization
  27. Depletion
    Allocating a natural resources cost over the period of its extraction or harvesting
  28. New depreciation using straight line method
    Book value- New residual value * 1/ remaining life = depreciation expense
  29. Accrued liabilities
    Unpaid expenses ex: income tax, electricity
  30. Employer payroll taxes journal entry
    • dr Payroll deductions
    •   cr FICA Payable
    •   cr Federal unemployment tax payable
    •   cr State unemployment tax payable
  31. Net Pay =
    Gross earnings- payroll deductions
  32. Interest =
    Principal℗ * Interest Rate ® * Time (T)
  33. Adjusting entry to record $ of interest expense that is payable at a certain date
    • dr interest expense
    •   cr interest payable
  34. Record interest paid
    • dr Interest Payable
    • dr Interest Expense
    •   cr Cash
  35. Record Principal Paid
    • dr Notes Payable
    •   cr Cash
  36. Sales Tax Payable
    • dr Cash
    •   cr Sales tax payable
    •   cr Salves Rev.
  37. Receive cash and create a liability- unearned rev
    • dr Cash
    •   cr Unearned Rev.
  38. Full fill part of the liability and earn revenue
    • dr Unearned Rev.
    •   cr Concert Rev. - ( Ex )
  39. Bonds
    Future payments a company promises to make in exchange for receiving a sum of money now
  40. Bonds from a company's perspective
    Bond is a long term liability
  41. Bond form bondholder's perspective
    Bond is an investment
  42. Maturity Date
    Date on which the bonds are due to be paid in full
  43. Stated interest rate
    The rate stated on the face of the bond, which is used to compute interest payments
  44. Interest Payment =
    Face value * stated interest rate
  45. Issue Price
    The amount of money a lender pays when a bond is issued
  46. Premium
    Amount by which a bonds issue price exceeds its face value
  47. Discount
    Amount by which a bonds issue price is less then its face value
  48. Bonds issued at face value journal entry
    • dr Cash
    •   cr Bonds Payable
  49. Bonds issued at a premium journal entry
    • dr Cash
    •   cr Bonds Payable
    •   cr Premium on bonds payable
  50. Bonds issued at a discount journal entry
    • dr Cash
    • dr Discount on bonds payable
    •   cr  Bonds Payable
  51. Market interest rate
    The rate of interest that investors demand from a bond
  52. Carrying value
    Amount of the bonds liability after taking into account any premium or discount
  53. If the market interest rate is low will the bondholder pay more or less then face value?
    More then
  54. Interest on bonds issued at face value
    • dr Interest expense
    •   cr Interest payable
  55. Bond amortization
    Makes the interest expense smaller than the actual interest payment, and causes premium on bonds payable to decline each period
  56. Retirement ( Paid Off ) at maturity journal entry
    • dr Bonds payable
    •   cr Cash
  57. Early retirement journal entry
    • dr Bonds Payable
    • dr Loss on Bond retirement
    •   cr Cash

    - Company pays cash which eliminates bond liability
  58. Contingent Liabilities
    Potential liabilities that have arisen as a result of a past transaction or event
  59. If the liability is probable journal entry
    • dr Product Litigation expense
    •   cr Product Litigation liability
  60. Quick ratio
    Whether liquid assets are sufficient to pay current liabilities.  The higher the number the better able to quickly pay.
  61. Times interest earned ratio
    Whether sufficient resources are generated to cover interest costs.  It is not good when the ratio is less then 1.0
  62. Straight line method of amortization
    Reduces the premium or discount by an equal amount each period
  63. Bond Premiums journal entry
    • dr Interest expense          $ 4,290
    • dr Premium on bonds payable  $ 1,710
    •   cr Cash                                     $ 6,000
  64. Bonds discount journal entry
    • dr Interest expense               $ 7,470
    • dr Discount on bonds payable  $ 1,470
    •   cr Cash                                      $ 6,000
  65. Effective interest method of amortization
    Calculates interest expense by multiplying the true cost of borrowing * the amount of money actually owned ( carrying value ) by investors
  66. Interest expense =
    Carrying value * Market interest rate * n/12
  67. Shortcut
    Combine discount or premium with the bonds face value into a single account called bonds payable, net

    • dr Cash
    •   cr Bonds payable, net
  68. What benefits do owners of common stock have
    • 1. Vote on major issues
    • 2. Receive share of the corporations profits when distributed as dividends
    • 3. If the company ceases operation the stockholders share in any assets remaining after credits have been paid
    • 4. Given the first chance to buy newly issued stock
  69. Advantages of equity financing
    • 1. Equity does not have to be repaid
    • 2. Dividends are optional
  70. Advantages of debt financing
    • 1. Interest on debt is tax deductible
    • 2. Debt does not change stockholders control
  71. Stockholders equity section in the balance sheet
    Contributed capital, retained earnings, treasury stock, accumulated other comprehensive income
  72. Authorized Shares
    Maximum number of shares of capital stock of a corporation that can be issued
  73. Issued stock
    Shares of stock that have been distributed by the corporation
  74. Treasury stock
    Issued shares that have been required by the company
  75. Outstanding stock
    Shares that are currently held by stockholders

    = Issued stock - Treasury stock
  76. Par Value
    Insignificant value per share of capital stock specified in the charter
  77. NO par value stock
    Capital stock that has no par value specified in the charter
  78. Stock issuance journal entry
    • dr Cash                      $1,000,000
    •   cr Common stock          $1,000
    •   cr Additional paid- in - capital   $ 999,000
  79. Repurchase of stock journal entry 50,000 at $25
    • dr Treasury stock
    •   cr Cash
  80. Reissuance of treasury stock journal entry

    The company repurchased stock at $25 per share.  Reissued 5,000 shares of this treasury stock at $28.
    • dr Cash                       140,000
    •   cr Treasury stock            125,000
    •   cr Additional paid in capital   15,000
  81. If the treasury stock were reissued at a price below its repurchase price, the journal entry is

    reisuance at $23
    • dr Cash                             115,000
    • dr Additional paid in capital      10,000
    •   cr Treasury stock                  125,000
  82. Declaration date
    The date on which  the board of directors officially approves the dividend
  83. Dividends declared journal entry
    • dr Dividends declared
    •   cr Dividends payable
  84. Dividends payable journal entry
    • dr Dividends payable
    •   cr Cash
  85. Stock dividend
    • dr Retained earning
    •   cr Common stock

    It reduces market price per share of stock and it reduces retained earnings
  86. Stock split
    Increase in the total number of authorized shares by a specified ratio.  Does not effect RE or cash.  ( ex: 0.001 to 0.005 )
  87. Preferred stock
    Dividends must be paid art a fixed rate.  Carries priority over common stock
  88. Preferred stock issuance journal entry
    • dr Cash                           50,000
    •   cr Preferred stock               10,000
    •   cr Additional paid - in capital - preferred  40,000
  89. Earnings per share
    Amount of income generated for each share of common stock owned by stock holders.  A higher ratio means greater profitability.
  90. Return on equity
    Amount of income earned for each dollar.  A higher ratio means stockholders are likely to enjoy greater returns
  91. Price. earnings ratio
    How many times more than the current years earnings  investors are willing to pay for a company's common stock.  A higher number means investors anticipate an improvement in the companies future results
Card Set
Accounting Final
Accounting Final