Chameleon Toots

On January 1, Year 1, the Starshina Company paid $25,000 for a photocopier with an estimated useful life of 4 years, and an estimated residual value of $5,000. The company uses the double-declining-balance method. What is the amount of depreciation expense for Year 3?

$1,250

Silver Company purchased a machine for use in the business. The purchase price was $55,000 and the related sales tax totaled $500. Silver paid $1,000 to have the machine delivered to its factory and $2,000 to have it assembled. Over the five-year life of the machine, maintenance cost of $800 will be incurred annually. What is the capitalized cost of this asset?

$58,500

price earnings (P/E) ratio =

current stock price / earnings per share

maturity date

date on which bond is paid in full

On January 1, Year 1, Duffy Enterprises issued $100,000 in bonds that mature in 10 years. The bonds were issue at face value. The bonds have a stated interest rate of 8% and pay interest once per year on December 31. What is the amount of interest expense recorded on December 31, Year 1?

$8,000 100,000 x 0.08 x 12/12 = 8,000

what is the future value of $12,000 after eight years, assuming 9% interest?

12,000 x 1.993 = 23,916

what is the present value of $4,000 received 2 years from now, assuming 16% interest, compounded quarterly?

2 x 4 = 8 years 16 / 4 = 4% 4,000 x 0.731 = 2,924

what is the present value of $3,000 received 4 years from now, assuming 14% interest, compounded semi-annually?

4 x 2 = 8 years 14 / 2 = 7% 3,000 x 0.582 = 1,746

On January 1, Year 1, the Starshina Company paid $25,000 for a photocopier. The company estimates that the photocopies will produce 1,000,000 copies and will have an estimated residual value of $5,000. The company used to photocopier to make 220,000 copies during Year 1. The company uses the units-of-production method. What is the amount of depreciation expense for Year 1?

4,400 25,000 - 5000 = 20,000 20,000 x 220,000 / 1,000,000 = 4,400

On October 1, a truck costing $12,700, on which $9,070 of accumulated depreciation has been recorded (through that date) was sold for $4,070 cash. What is the gain on disposal?

440 12,700 - 9,070 = 3,630 (book value) 4,070 - 3,630 = 440

average stockholder's equity =

beginning common stockholder's equity + ending common stockholder's equity / 2

Cost - accumulated depreciation =

book value

debt financing

borrowing from lenders

ASSET IMPAIRMENT JOURNAL: Masterworks Company has equipment with a cost of $200,000 and accumulated depreciation of $150,000. As a result of changed circumstances, Masterworks' management has determined the fair value of its production equipment is $35,000.

A. Debit: accumulated depreciation for $150,000 Credit: equipment for $150,000 B. Debit: impairment loss for $15,000 Credit: equipment for $15,000

SHORT-TERM NOTES PAYABLE JOURNAL: A. establish the note B. accruing interest incurred but not paid C. recording interest paid D. recording principal paid

A. Debit: cash Credit: note payables B. Debit: interest expense Credit: interest payable C. Debit: interest expense interest payable Credit: cash D. Debit: note payable Credit: cash

A. Straight line method - B. units of production method - C. Declining method -

A. when usage is the same each period B. when usage varies each period C. when asset is more efficient early on but less over time

contributed capital

Amount of capital the company received from investors' contributions

retained earnings

Cumulative amount of net income earned less cumulative amount of dividends declared

JOURNAL: On October 1, equipment costing $10,700, on which $7,070 of accumulated depreciation has been recorded (through that date) was sold for $2,070 cash.

Debit: Cash for $2070 Accumulated Depreciation for $7070 Loss on Disposal for $1560 Credit: Equipment for $10,700

AMORTIZATION JOURNAL: Aplington Company purchased a copyright for $25,000 and intends to use it for 25 years

Debit: amortization expense for $1000 Credit: accumulated amortization for $1000

AMORTIZATION OF LIMITED LIFE INTANGIBLE ASSET JOURNAL: assume cedar fair purchased a patent for an uphill water coaster for $800,000 and intends to use it for 20 years. each year the company would record $40,000 in amortization expense (800,000 / 20)

Debit: amortization expense for $40,000 Credit: accumulated amortization for $40,000

BOND RETIREMENT JOURNAL: general mills bonds were retired with a payment equal to their $100,000 face value. lets analyze and record this transaction

Debit: bonds payable for $100,000 Credit: cash for $100,000

BOND RETIREMENT JOURNAL: assume that in 2005, General Mills issued $100,000 of bonds at face value. ten years later, in 2015, the company retired the bonds early. at the time, the bond price was 102, so General Mills made a payment of $102,000

Debit: bonds payable for $100,000 loss on bond retirement for $2,000 Credit: cash for $102,000

DISPOSAL OF TANGIBLE ASSETS JOURNAL: (gain)

Debit: cash accumulated depreciation Credit: equipment gain on disposal

DISPOSAL OF TANGIBLE ASSETS JOURNAL: (loss)

Debit: cash accumulated depreciation loss on disposal Credit: equipment

SALES TAX JOURNAL: Best Buy sells a television for $1,000 cash plus 5% sales tax

Debit: cash for $1,050 Credit: sales tax payable for $50 sales revenue for $1,000

ISSUANCE OF PREFERRED STOCK JOURNAL: Burlington Corporation issued 1,000 shares of $1 par value preferred stock for $10 per share. Prepare the appropriate journal entry to record the stock issuance.

Debit: cash for $10,000 Credit: preferred stock for $1000 additional paid-in capital-preferred for $9000

FACE VALUE BONDS: On January 1, Duffy Enterprises issued $100,000 in bonds that mature in 10 years. The bonds were issued at face value. The bonds have a stated interest rate of 8% and pay interest once per year on December 31.

Debit: cash for $100,000 Credit: bonds payable for $100,000

PREMIUM BONDS: On January 1, Duffy Enterprises issued $100,000 in bonds that mature in 10 years. The bonds were issued at 103. The bonds have a stated interest rate of 8%. The bonds pay interest once per year on December 31.

Debit: cash for $103,000 Credit: bonds payable for $100,000 premium on bonds payable for $3,000

Marianne's Grocery sold groceries for $100 cash plus 10 percent sales tax. Prepare the appropriate journal entry to record the sale.

Debit: cash for $110 Credit: sales tax payable for $10 sales revenue for $100

REISSUANCE OF TREASURY STOCK JOURNAL: Previously, Feinberg Corporation repurchased 1,000 shares of its $0.05 par value common stock for $25 per share. Today, the company reissues 500 shares of its treasury stock for $26 per share. Prepare the appropriate journal entry to record the repurchase of the shares.

Debit: cash for $13,000 Credit: treasury stock for $12,500 additional paid-in capital for $500

STOCK ISSUANCE JOURNAL: national beverage issued 100,000 shares of $0.01 par value common stock for $20 per share

Debit: cash for $2,000,000 Credit: common stock for $1,000 additional paid-in capital for $1,999,000

COMMON STOCK ISSUANCE JOURNAL: Byrd Corporation issued 5,000 shares of $0.05 par value common stock for $10 per share. Prepare the appropriate journal entry to record the stock issuance.

Debit: cash for $50,000 Credit: common stock for $250 additional paid-in capital for $49,750

UNEARNED REVENUE JOURNAL: on December 9th, live nation entertainment received $8 million cash for advance ticket sales for two lady gaga concerts to be held on may 12 and 15, 2014

Debit: cash for $8,000,000 Credit: unearned revenue for $8,000,000

DISCOUNT BONDS: On January 1, Duffy Enterprises issued $100,000 in bonds that mature in 10 years. The bonds were issued at 95. The bonds have a stated interest rate of 8%. The bonds pay interest once per year on December 31.

Debit: cash for $95,000 discount on bonds payable for $5,000 Credit: bonds payable for $100,000

DEPRECIATION EXPENSE JOURNAL: the effects of $130 of depreciation on the accounting equation and the journal entry to record them follow:

Debit: depreciation expense for $130 Credit: accumulated depreciation for $130

DIVIDENDS DECLARATION DATE JOURNAL: national beverages declares a cash dividend of $118,139,000 during its 2013 fiscal year

Debit: dividends for $118,139,000 Credit: dividends payable for $118,139,000

JOURNAL: On April 22, the board of directors for Cosmic Candy, Incorporated declared a cash dividend of $1 per share payable to stockholders of record on May 15. The dividends are paid on June 8. The company has 1,000 shares of stock outstanding. Prepare the appropriate journal entry that will be recorded on June 8.

Debit: dividends payable for $1000 Credit: cash for $1000 date of payment

DIVIDENDS DATE OF PAYMENT JOURNAL: national beverage paid the previously declared cash dividend of $118,139,000

Debit: dividends payable for $118,139,000 Credit: cash for $118,139,000

ACQUISITION OF TANGIBLE ASSETS JOURNAL: Cedar Fair purchased a new ride for $26,000,000 less a $1,000,000 discount. Cedar Fair paid $125,000 for transportation and $625,000 for installation of the ride. signed note payable for new roller coaster and paid cash for transportation and installation costs.

Debit: equipment for $25,750,000 Credit: cash for 750,000 note payable for $25,000,000

RECORDING A PURCHASE JOURNAL: Remington Company purchased office equipment for use in the business with an invoice price of $28,000. The company paid $1,500 to have the equipment delivered and another $500 to have it installed. The company paid cash for the transportation and installation costs and signed a note for the invoice price of the new equipment.

Debit: equipment for $30,000 Credit: notes payable for $28,000 cash for $2,000

ACCRUED INCOME TAX JOURNAL: lets assume General Mills calculated taxable income to be $1,000,000, and is subjected to a 35% tax rate, so income taxes owed are $350,000

Debit: income tax expense for $350,000 Credit: income tax payable for $350,000

INTEREST ON BONDS ISSUED JOURNAL: general mills issues bonds on January 1, 2015, at their total face value of $100,000. the bonds have an annual stated interest rate of 6% payable in cash on december 31 of each year, General Mills will need to accrue an expense and liability for interest at the end of each accounting period. the end of the first accounting period is January 31, 2015

Debit: interest expense for $500 Credit: interest payable for $500 100,000 x 0.06 x 1/12

ASSET IMPAIRMENT LOSSES JOURNAL: Cedar Fair recorded a write-down of $25,000,000 on equipment

Debit: loss on impairment for $25,000,000 Credit: equipment for $25,000,000

EMPLOYER PAYROLL TAXES JOURNAL:

Debit: payroll tax expense Credit: FICA payable unemployment taxes payable

EMPLOYER PAYROLL TAXES JOURNAL: assume General Mills was required to contribute $45,900 for FICA, and an additional $4,750 for federal and state unemployment tax

Debit: payroll tax expense for $50,650 Credit: FICA tax payable for $45,900 unemployment tax payable for $4,750

DIVIDENDS YEAR END JOURNAL: all temporary accounts, including dividends, are closed into retained earnings at each accounting year-end

Debit: retained earnings for $118,139,000 Credit: dividends for $118,139,000

ACCRUED PAYROLL JOURNAL: adam palmer earned gross pay of $600 in the current payroll period. General Mills withheld $60.90 in federal income taxes, $45.90 for FICA, and $10 for united way, resulting in net pay of $483.20. lets assume that general mills has 1,000 workers just like Adam.

Debit: salaries and wages expense for $600,000 Credit: withheld income taxes payable for $60,900 FICA payable for $45,900 united way payable for $10,000 cash for $483,200

PAYROLL DEDUCTIONS JOURNAL:

Debit: salaries and wages payable Credit: withheld income tax payable FICA payable united way payable cash

TREASURY STOCK JOURNAL: Previously, Milad Corporation issued 5,000 shares of $0.05 par value common stock for $10 per share. Today, the company repurchased 1,000 shares of its stock for $25 per share. Prepare the appropriate journal entry to record the repurchase of the shares.

Debit: treasury stock for $25,000 Credit: cash for $25,000

UNEARNED REVENUE CONTINUED: when the may 12 concert is held, live nation entertainment can recognize one half of the unearned revenue as earned revenue, as they have fulfilled part of the liability

Debit: unearned revenue for $4,000,000 Credit: service revenue for $4,000,000

what are the two types of maintenance costs incurred during use?

Expense: ordinary repair and maintenance (tire rotation) Capitalize: extraordinary repairs, replacements, and additions (changing whole engine)

Future Value of Single Amount formula:

FV = I (1 + i)^n FV=future value of invested amount I=initial investment i=interest rate n=number of compounding periods

issued stock

Shares of stock that have been distributed by the corporation

treasury stock

Shares previously issued to and owned by stockholders that have been reacquired

outstanding shares

Shares that are currently held by stockholders (not the corporation itself)

payment date

The date on which a cash dividend is paid to the stockholders of record

date of declaration

The date on which the board of directors officially approves a dividend

date of record

The date on which the corporation prepares the list of current stockholders

Initial Public Offering (IPO)

The first public offering of a corporation's stock.

comprehensive other comprehensive income (loss)

Unrealized gains and losses

What does a company need to do when it disposes of a depreciable asset by "retiring" the asset to a junkyard?

Update the Depreciation Expense and Accumulated Depreciation accounts and then record the disposal

carrying value =

face value + premium (or - discount)

interest on a bond: annual interest =

face value x stated interest rate

interest payment =

face value x stated interest rate x fraction of year

authorized shares

the maximum number of shares of capital stock of a corporation that can be issued

debt-to-asset ratio =

total liabilities / total assets

year-end

when a company closes all temporary accounts

stated interest rate

rate stated on face of bond

Seasoned New Issue

subsequent issues of new stock to the public

A company reported net income of $9,660,000 for the year. There were 4.1 million shares of common stock outstanding at the beginning of the year and 4.3 million shares outstanding at the end of the year. No dividends were declared during the year. What is the company's earnings per share (EPS) for the year?

$2.30 per share 4.1 + 4.3 / 2 = 4.2 9.66 / 4.2 = 2.3

times interest earned ratio =

(Net income + Interest expense + Income tax expense) / Interest expense

declining balance method: annual depreciation =

(cost - accumulated depreciation) x 2/useful life (book value) x 2/useful life

straight line method: Depreciation expense =

(cost - residual value) x 1/useful life

units of production method: depreciation expense =

(cost - residual value) x actual production for the period / estimated total production

return on equity (ROE) =

(net income - preferred dividends) / average common stockholder's equity

Earnings per share (EPS) =

(net income - preferred dividends) / average number of common shares outstanding

A company has net income of $14,600,000. Stockholders' equity was $47,550,000 at the beginning of the year and $68,150,000 at the end of the year. The company does not have any preferred stock outstanding. What is the company's return on equity (ROE) during the year?

0.25 47,550,000 + 68,150,000 / 2 = 81,625,000 14,600,000 / 81,625,000 = 0.25

On September 1, Year 1, the Central Illinois University ticket office sold $1,800,000 worth of season basketball tickets. Ten home games will be played: four games will be played during Year 1 and six games will be played during Year 2. What is the adjusted balance in Deferred Revenue account at December 31, Year 1?

1,080,000 1,800,000 / 10 = 180,000 180,000 x 4 = 720,000 1,800,000 - 720,000 = 1,080,000

4 key events that occur with any note payable

1. establish the note 2. accruing interest incurred but not paid 3. recording interest paid 4. recording principal paid

During the current year, Armstrong Corporation reported net income of $18 million and EPS of $5.00 per share. The average number of common shares outstanding during the year was 3.6 million. The price of a share of its common stock was $2.50 at the beginning of the year and $5.00 at the end of the year. What is the company's price/earnings (P/E) ratio at the end of the year?

1.00 5.00 / 5.00 = 1.00

Binding Company reported net fixed assets of $190,000 at the end of Year 1 and $210,000 at the end of Year 2. The company also reported net revenues of $200,000 for Year 1 and $240,000 for Year 2. What was the fixed asset turnover ratio?

1.2 240,000 / ((190,000 + 210,000)/2)

On January 1, Year 1, the Starshina Company paid $25,000 for a photocopier with an estimated useful life of 4 years, and an estimated residual value of $5,000. The company uses the straight-line method. What is the amount of depreciation expense for Year 2?

5,000 25,000 - 5000 = 20,000 20,000 x 1/4 = 5,000

Rambling Company's debt-to-assets ratio is 75% and its competitors have debt-to-asset ratios near 60%. Which of the following statements is true?

Rambling Company has adopted a riskier financing strategy than its competitors.

Present Value of Single Amount formula:

PV = FV / (1 + i)^n PV=present value of invested amount

net pay =

gross wages - payroll deductions

compound interest:

interest earned on the initial investment and on previous interest (used in calculating time value of money)

simple interest:

interest earned on the initial investment only

what does bond amortization cause when bonds are issued at a premium?

interest expense < interest payment

what does bond amortization cause when bonds are issued at a discount?

interest expense > interest payment

Rule of 72

interest rate x n = 72 n=how long it takes to double ones money

equity financing

issuing new stock

contingent liabilities

liabilities that arise from past events and depend on future events for resolution

fixed asset turnover ratio =

net revenues / average net fixed assets

face value

payment made when bond matures