Accounting exam 3
What is an operating cycle?
The time required for the company to produce revenue
What is an accounts payable?
A short term liability that occurs when a company purchases goods and does not immediately pay with cash
True or false: current liabilities are always payable within one year
False
When is interest expense recorded?
In the Period in which we incur it, no the period we pay it
A corporation is owned by ?
It's shareholders (equity holders)
given a choice, most companies will prefer classifying liabilities as
noncurrent
Declaration of cash dividends reduces what?
retained earnings
capital lease
lessee buys an asset and borrows the money through a lease to pay for the asset
How should deferred revenue be classified on the balance sheet?
liability
What kind of account is a deferred revenue account?
liability
how does management prefer to classify debt liabilities?
long term liabilities
capital structure
mixture of
capital structure
mixture of liabilities and stockholders equity that the business uses
3 primary sources of long-term debt financing
notes, leases, bonds
common characteristics of bonds
secured or unsecure callable convertible
Essential characteristics of a liability
- Future sacrifice arises from a present obligation - Future sacrifice of an economic benefit is probable - The obligation results from a past event
line of credit
amount of credit extended to a borrower ex. signed agreement that they may borrow 100,000 at %6 annual interest rate whenever the company needs cash
financial statement where the deferred revenue account is found
balance sheet
current maturities of long term debt should be classifies as what?
current liabilities
Tax collected on sales is classified on what as what?
balance sheet as a liability
debt financing
borrowing money from creditors (liabilities)
equity financing
investments from stockholders
when should you credit notes payable when negotiating a line of credit
when receiving cash under the line of credit