Final Exam

Current Liabilities

Obligations that require a firm to pay cash or another current asset, create a new current liability, or provide goods or services within one year or one operating cycle, whichever is longer.

Stockholders

Shares are owned by varying numbers by the owners of a corporation called this

residual value (salvage value)

The amount of cash or trade-in consideration that the company expects to receive when an asset is retired from service

par value

The arbitrary monetary amount printed on each share of stock that establishes a minimum price for the stock when issued, but does not determine its market value

depreciable cost

The cost of an asset minus its residual value

Unearned Revenue

The liability created by receiving revenue in advance.

Outsanding shares

The number of issued shares actually in the hands of stockholders

Bond

Type of note that requires the issuing entity to pay the face value of the bond to the holder when it matures and usually to pay interest periodically at a specified rate

Warranty

Usually guarantees the repair or replacement of defective goods during a period ranging from few days to several years following the sale

issued shares

the number of shares actually sold to stockholders

Useful life

the period of time over which the company anticipates deriving benefit from the use of the asset

straight-line depreciation method

produces a constant amount of depreciation expense in each period of the asset's life and is consistent with a constant rate of decline in service potential.

Accounts Payable

Arises when a business purchases goods or services on credit

paid-in capital

Amount received in excess of par value is recorded in an account called this

declaration date

Date on which a corp announces intention to pay a dividend on common preferred stock

date of record

Date on which a stockholder must own one or more shares of stock in order to receive the dividend

payment date

Date on which dividend will actually be paid

preferred stock

Generally pays a regular dividend, similar to debt, with preferred stock dividend equating to interest payments, value of this most closely tied to interest rate levels and company's overall creditworthiness

long-term debt

Generally refers to obligations that extend beyond one year, based on a formal agreement or contract-bonds, long-term notes, debentures, capital leases

Depreciation

Is the process of allocating, in a systematic and rational matter, the cost of a tangible fixed asset, other than land, to expense over the asset's useful life

stock split

Like a stock dividend, increases number of outstanding shares without altering proportionate ownership of a corp

Accrued Liabilities

Recognized by adjusting entries and usually represent the completed portion of activities that are in process at the end of the period

face value

Repaid at maturity, which is a specified date in the future

stock dividend

Transfers shares of stock from the corp to its stockholders-additional shares of the corps own stock

Contingent Liability

When a liability depends on a future event, such as the outcome of a lawsuit, recognition depends on how likely the occurrence of the event is and whether a good estimate of the payment amount can be made

Treasury stocks

When firms reaquire their own stock

units of production method

When the decline in an asset's service potential is proportional to usage of asset and asset usage can be measured, depreciation expense can be computed through this. Usage gauged by measure of productive capacity

Accumulated Depreciation

Which represents the total amount of depreciation expense that has been recorded for an asset since the asset was acquired, is reported on the balance sheet as a contra-asset

Declining balance depreciation method

accelerated depreciation method that produces a declining amount of depreciation expense each period by multiplying the declining book value of an asset by a constant depreciation rate

Operating Assets

long-lived assets that are used by the company in the normal course of operations-not sold to customers, generate revenue

Stockholders' Equity

represents the owners' claims against the assets of a corporation after all liabilities have been deducted

retained earnings

the accumulated earnings (or losses) over the entire life of the corporation that have not been paid out in dividends

authorized shares

the maximum number of shares the business may issue in each class of stock