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