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