Accounting Comprehensive

(T/F) The fundamental activities of a business are selling activities and marketing activities.

False

Gilman Company declares and pays a dividend of $4000 to stockholders. Record this transaction:

Debit - Dividends Credit - Cash

A net loss ______ retained earnings :

Decreases

Activity Based

Depreciation rate = Depreciable cost / total hours expected

A distribution of net income to owners is called :

Dividend

Earnings per share ratio

Earnings per share = net income - dividends on preferred stock / average shares of common stock outstanding

Revenues minus expenses equals :

Net income

Book Value Equation

original cost - accumulated depreciation = book value

Double declining balance

- 2 / service life - depreciation expense = assets cost X depreciation rate

Goodwill equation

- assets - liabilities = net assets - purchase price - fair value of net assets = goodwill

GAAP assumptions

- monetary unit - going concern - economic entity - periodicity

What appears on the statement of stockholders equity?

-net income -beginning balance of retained earnings -dividends

The primary functions of accounting are to:

1. communicate information to decision makers 2. maintain records of a company's operations

The two primary functions of financial accounting are to:

1. communicate measurements to external parties 2. measure business activities

Accounting equation is:

Assets= Liabilities + Stockholder's equity

Return on assets = Profit margin X asset turnover

Net income / average total assets = net income / net sales X net sales / average total assets

Price - Earnings ratio

Price earnings ratio = stock price / earnings per share

Return on equity ratio

Return on equity = net income / stockholders equity (equals a percentage)

Return on the market value of equity ratio

Return on the market value of equity = net income/ market value of equity

The fundamental model of business valuation is commonly referred to as the:

accounting equation

Company

decrease in resources

Straight Line

depreciation expense = asset cost - residual value / service life =depreciable cost / service life

Stockholders

increase in resources