Accounting 2- chapter 8, 9, 10, 11, 12
Discount on Bonds payable is a ______________________account
Contra liability account
Otto's Office Supplies, Inc. has an accrual basis net income of $208,000 in 20X6 and the following related items: Amortization expense $52,000 Accounts receivable decrease 28,000 Inventory decrease 20,000 Interest payable increase 24,000 Dividends paid 4,000 What is Otto's Office Supplies, Inc.'s net cash flow from operating activities in 20X6?
$332,000
Lumos, Inc. has an accrual basis net loss of $80,000 in 20X6 and the following related items: Depreciation expense $44,000 Accounts receivable decrease 32,000 Inventory increase 24,000 Accounts payable increase 12,000 Accrued liabilities increase 20,000 How much is Lumos' net cash flow from operating activities in 20X6?
$4,000
Units-of-activity method
A depreciation method where the amounts depends on the usage of the asset- useful life expressed in units of production
stock dividend
A pro rata (proportional to ownership) distribution of the corporation's own stock to stockholders *often issued by companies that don't have cash
Your Company uses the indirect method to prepare the statement of cash flows. If bonds payable increased since last year, the change would be:
Added to financing activities
Your Company uses the indirect method to prepare the statement of cash flows. If you received $18,000 from the sale of equipment, it would be:
Added to investing activities
Separate Entity Limited Liability Ability to raise capital continuous life
Advantages of a Corporation
The journal entry to record the issuance of 1,000 shares of $5 par value preferred stock for $30,000 includes
Dr. Cash $30,000 Cr. Preferred Stock $5,000 Cr. Paid in Capital in Excess of Par - Preferred $25,000
convertible bonds
Bonds that can be converted into common stock at the bondholder's discretion
Pending Law suits product warranty Debt guarantee
Contingent Liabliities
Sales Tax payable Wages Payable Taxes Payable Unearned Revenue Estimated Warranty Liability
Current Liabilities
Preferred Stock journal entry
DR Cash CR Preferred Stock CR Paid Capital Excess Par-Prefered
Assume a par value of $2 per share and market value of $40 per share. The journal entry to record the issuance of 1,000 shares of common stock would include
DR Cash $40,000 Cr. Common Stock $2,000 Cr. Paid in Capital in Excess of Par - Common $38,000
Stock Split
Decision to increase the number of shares outstanding *increases marketability of the stock
Your Company uses the indirect method to prepare the statement of cash flows. If Land increased $100,000 since last year, the change would be:
Deducted from investing activities
Your Company uses the indirect method to prepare the statement of cash flows. If A/P decreased since last year, the change would be:
Deducted from operating activities
Your Company uses the indirect method to prepare the statement of cash flows. If there was a Gain on Sale, it would be:
Deducted from operating activities
depletion expense
Depreciation of Natural resources oil gas timber etc.
Double Taxation Management- administrative burden Cost
Disadvantages of Corporation
Advantages of Stocks vs Bonds
Don't need to make interest payments in tough economic times
Your Company declares a dividend of $0.50 per share on 1/1/11. Its date of record is 2/1/11 and payment date 3/1/11. What journal entry is required on 3/1/11 if there are 500,000 shares authorized, 200,000 shares issued, and 100,000 shares outstanding
Dr. Dividends Payable $50,000 Cr. Cash $50,000
Your Company declares a dividend of $0.50 per share on 1/1/11. Its date or record is 2/1/11 and payment date 3/1/11. What journal entry is required on 1/1/11 if there are 500,000 shares authorized, 200,000 shares issued, and 100,000 shares outstanding
Dr. Retained Earnings $50,000 Cr. Dividends Payable $50,000
If Your Co. purchases back 2,000 shares of its own $1 per share par value stock for $45,000, what journal entry is required
Dr. Treasury Stock $45,000 Cr. Cash $45,000
FICA taxes withheld: Social Security Medicare Federal income taxes State income taxes CA Disability
Employee Tax withholdings
Match FICA: Social Security and Medicare FUTA -Federal Unemployment SUTA - State Unemployment CA Training Tax Workers Comp
Employer Taxes
Declining-balance depreciation yields more depreciation expense than straight-line depreciation over the life of an asset. T/F
False
When compared to the straight-line method, the units-of-production-method results in more depreciation in the first year of the asset's life.
False Double Declining Method
Federal unemployment taxes are an example of a payroll deduction.
False FUTA is a employer accrued tax
Salary Expense is debited for the amount of the net wages payable to employees.
False Gross wages
The costs incurred to remove an unwanted structure on land purchased as a building site should be debited to the Land Improvements account.
False It is included on the Land cost as an asset
A building that is being depreciated at $10,000 per year is being depreciated under the declining-balance method of depreciation.
False Straight-Line
When the salvage value of an asset is revised, it is necessary to go back and restate prior years' earnings to reflect the change. T/F
False no just the current year
An asset is being depreciated over a 10 year useful life. At the end of the fifth year, company management determines that the asset will only be used for three more years. How should this change be handled? The change should be reflected in the current and future years' ________ _________.
Financial statements
The recording of a product warranty expense in the year the merchandise under warranty is sold is supported by which principle(s) or concept?
Full disclosure and matching principles
Bonds
Group of interest-bearing notes issued by corporations, universities, and gov't agencies
plant assets
Long-lived assets, such as land, buildings, and equipment, used in the operation of the business.
Bonds payable are usually classified on the balance sheet as:
Long-term Liability
Your Company declares a dividend of $0.50 per share on 1/1/11. Its date or record is 2/1/11 and payment date 3/1/11. What journal entry is required on 2/1/11 if there are 500,000 shares authorized, 200,000 shares issued, and 100,000 shares outstanding.
No entry is required on the record date
what is the journal entry for the Record Date?
No entry necessary
Stock Issued Above Par is recorded in what equity account?
Paid in Capital Excess Par
Premium on Bonds Payable
Receive more than face value because contract rate is greater than market More than 100
____________Dividend doesn't effect ownership percentage or total value of stock.
Stock Dividend
Disadvantages of Stocks vs Bonds
Tax disadvantage Lose control of corp. - no voting rights Earnings per share may be lower
Authorized Stock
The maximum number of shares of stock that the corporate charter allows the corporation to issue.
Issued Stock
Total number of shares that the corp. issued or sold (Includes Treasury Stock)
Betterments and extraordinary repairs are treated as capital expenditures.
True
Par Value and Stated Value have NO relationship to market value.
True
Preferred Stock is entitled to dividends before common stockholders
True
Sales Tax Payable is the liability account used to record a seller's Sales Tax Expense not yet remitted to the government.
True
The book value at the end of the useful life of an asset is often less than its salvage value when the declining-balance method is used.
True
The rate of depreciation to be applied to an asset that has a 10-year useful life using the double declining balance method would be 20%.
True
When as asset is discarded, it is possible to have a gain or a loss on the disposal.
True
Discounts are considered and _______________cost of borrowing
additional
Goodwill
amount by which fair market value of assets acquired exceeds cost (Only recorded when buy other company)
Face Value (Principal)
amount of bond that needs to be paid back
Par Value
an arbitrary value assigned to each share of stock and printed on the stock certificate *No relationship to Market value
Treasury stock is a ____________ account and is recorded at _____________.
contra equity recorded at cost
Treasury Stock
contra equity account used when a company buys back its own stock
Book Value
cost - accumulated depreciation
Payment Date
date dividends are mailed DR Dividends payable CR Cash
Federal and state income tax are a ___________ tax
employee tax
State Unemployment Taxes (SUTA) is an ________ tax
employer tax
Sales tax is always a ___________ because merchants collects on behalf of the state.
liability
Advantages of a corporation
limited liability, ability to raise capital and continuous life
Straight-Line Method
most common method of depreciation results in same amount of depreciation each year
Outstanding Stock
number of shares held by stockholders
What is the amount assigned per share by the corporation in its charter?
par value
Discount on Bonds Payable
receive less than face value because market value is greater than the contract rate less than 100.
Plant assets are stated at ________value on the balance sheet.
replacement
declaration date
the date on which the board of directors officially declares the dividend DR Retained Earnings CR Dividends Payable
Copyright
the exclusive legal right to reproduce and sell artistic or published work
market interest rate
the rate investors demand for loaning money
A debt guarantee can lead to a potential contingent liability.
true
A single liability can be divided between current and non-current portions.
true
A warranty is an example of an estimated liability.
true
Both the straight-line and declining balance method use depreciable cost in the calculation of annual depreciation expense.
true
Current liabilities are those obligations due within a year or the company's operating cycle, whichever is longer.
true
Repairs made to keep a plant asset in normal, good operating condition are called ordinary repairs and treated as revenue expenditures.
true
The purchase of treasury stock decreases total stockholders' equity.
true
Your Company receives $105,000 for its bonds with a face value of $100,000. Your Company's coupon rate must be higher than the market interest rate.
true