Term
| Bank Reconciliation (Bank Statement) |
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Definition
Bank Statement :
Add:
Deposits in Transit
Deduct:
Outstanding Checks
Add/Subtract Bank Erros
Corrected Bank Balance |
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Term
| Bank Reconciliation (Company Books) |
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Definition
Add:
Collection of Note
Interest Revenue
Deduct:
NSF Check
Bank Service Charges
Company Books :
Add/Subtract Company Errors
Corrected Bank Book Balance |
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Term
| Balance sheet presentation of accounts receivable |
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Definition
Balance Sheet:
Cash
Accounts Receivable 3,000,000
Less: Allowances for Doubtful Accounts (300,000)
Net Realizable Value of Accounts Receivable: 2,700,000 |
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Term
| Journal Entry for Accounts Receivable |
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Definition
DR Accounts Receivable
CR Sales (or Service Revenue) |
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Term
| Journal Entry for Bad Debt Expense |
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Definition
DR Bad Debt Expense
CR Allowances for Doubtful Accounts |
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Term
| What is bad debt expense? |
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Definition
| Bad debt expense is the amount not collected at the end of the year |
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Term
| What is the realizable value? |
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Definition
| The realizable value is the amount of cash expected to be collected at year end. |
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Term
| Barton Co. estimates $3000 of its A/R will prove uncollectable. The total accounts receivable balance at December 31, 2013 is $278,000 |
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Definition
Barton, Co.
Partial Balance Sheet
December 31, 2013
Cash
Accounts Receivable $278,000
Less : Allowances for D/A 3,000
Net Realizable Value of Accounts Receivable $275,000 |
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Term
| Formula for Interest Revenue |
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Definition
Total payment x interest % x n/360
n=number of months that have passed |
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Term
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Definition
| Ratios are computed to evaluate the liquidity (how quickly the asset can be converted to cash) of a company's accounts receivable |
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Term
| Formula for the Receivables Turnover Ratio |
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Definition
| Net Credit Sales -------------------- Average Net Receivables The turnover ratio is used to asses the liquidity of the ratio's. It shows how often the accounts receivable is converted to cash. |
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Term
| Formula for the average collection period |
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Definition
365 Days
----------------------
Receivables Turnover Ratio
The Average Collection Period is the average amount of time that a receivable is outstanding. It is useful is determining how efficient management has been in granting credit to produce sales. |
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Term
| How is Aquisition Computed |
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Definition
Decline in Asset Value
-------------------
Assets Useful Life |
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Term
| Aquisition Cost - What will be included in the cost of the asset? |
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Definition
A) Aquisition - Compute cost
B) Use - Assets useful life and subsequent expenditures
C) Disposal - Record disposal |
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Term
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Definition
| Allocating cost of plant asset to expense (Moving from balance sheet to income statement). Deprecation requires three values: Cost, Salvage Value, Useful Life |
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Term
| Formula for Deprecation Rate |
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Definition
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Term
| Formula for strait-line method |
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Definition
(Cost- Salvage or Residual Value)
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Useful Life Measured in Years
The strait-line method maximizes net income and when using this method, deprecation is the same each year for the assets useful life. |
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Term
Using the strait-line method, calculate and journalize:
A delivery truck cost $10,000 and has an estimated residual value of $1,000 at the end of its estimated useful life in 5 years. |
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Definition
(10,000 - 1000)
-------------- = 1,800/year
5 Years
Journalizing to Record Anual Deprecation
Dec. 31 DR Deprecation Expense 1800
CR Accumulated Deprecation 1800 |
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Term
Sale of Assets - Recording Journal Entries With Gains or Losses:
On September 30, 2013 Evans Company sells a machine that originally cost %100,000 for %60,000. The machine was placed in service on January 1, 2010. Using the strait-line method, it was deprecated with an estimated salvage value of $20,000 and a useful life of 10 years. |
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Definition
A) Annual Deprecation
(100,000 - 20,000)
---------------- = $8000
10 Years
B) Deprecation to September 30, 2013
9/12 x 8000 = $6000
C) Determine Book Value of Assets:
Cost 100,000
Accumulated Deprecation 30,000
(3 years x 8,000) + 6000 --------
Book Value 70,000
Cash Received 60,000
-------
Loss on Disposal of Asset ($10,000)
D) Recording the Sale of the Plant Asset:
Sept. 30 Cash 60,000
Accumulated Deprecation - machine 30,000
Loss on Disposal of Asset 10,000
Machine 100,000 |
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Term
| Balance Sheet Presentation of Property, Plant, and Equipment - LOSS |
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Definition
DR Cash x
DR Accumulated Deprecation - machine x
DR Loss on Disposal of Asset x
CR Machine x |
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Term
| Balance Sheet Presentation of Property, Plant, and Equipment - GAIN |
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Definition
DR Cash x
DR Accumulated Deprecation - machine x
CR Gain on Sale x
CR Machine x |
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Term
| Formula for ASSET Turnover Ratio |
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Definition
Net Sales
---------
Average Total Assets |
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Term
| Formula for Return on Assets |
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Definition
Net Income
-----------
Average Total Assets |
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Term
| Notes Payable are classified as __? |
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Definition
| Notes Payable are classified as current liabilities |
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Term
| Formula for Interest Expense : |
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Definition
Note Payable x Interest % x m/12
m = # of months that have passed |
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Term
| Prepare the Journal Entry for Issuing the Note Payable |
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Definition
To record note to bank:
DR Cash x
CR Notes Payable x |
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Term
| Record Repayment of Note and Interest: |
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Definition
To record payment of note:
DR Notes Payable x
DR Interest Expense x
CR Cash x |
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Term
Current Liabilities - Short-term Notes Payable
Burrow Inc. borrowed $100,000 Sept. 1, 2009, by signing a 12%, 6 month note payable. |
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Definition
A)
Sept. 1 Cash 100,000
Notes Payable 100,000
Dec. 31 Interest Expense 4000
(100,000 x .12 x 4/12 months)
Interest Payable 4000
B) Journal
March 1 DR CR
Notes Payable 100,000
Interest Payable 4,000
Interest Expense 2,000 (Record Jan. and Feb. Interest)
Cash 106,000 |
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Term
| Formula for the Times Interest Earned Ratio |
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Definition
(Net Income + Interest Expense +Income Tax Expense)
----------------------------------------------
Interest Expense
The Times Interest Earned Ratio shows the amount of resources generated for each dollar of interest expense. (Higher the Better) |
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Term
| Formula for Times Interest Earned |
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Definition
Income before interest and income taxes
-----------------------------------
Interest Expense |
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Term
| Bonds are what kind of securities? |
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Definition
| Bonds are Debt Securities |
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Term
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Definition
1) Do not affect stockholder control
2) Interest on bonds is tax deductible
3) Bonds can increase return on equity |
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Term
Issuing Bonds at Face Value. Journalize:
"Devor Corporation 100, five year, %10, $1000 bonds dated January 1, 2010 at 100." |
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Definition
Jan. 1
DR Cash 100,000
CR Bonds Payable 100,000 |
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Term
| What kind of account is a discount account? |
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Definition
| A discount account is a contra-liability account. |
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Term
Bonds Discounts and Premiums. Journalize:
"On Jan. 1, 2005, Candlestick, Inc., sells 100,000, 5 year, %10 bonds, at 98 with interest payable on Jan.1." |
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Definition
Jan. 1
DR Cash 98,000
DR Discount on Bonds Payable 98,000
CR Bonds Payable 100,000 |
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Term
| What kind of account is a premium account? |
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Definition
| A premium account is an Adjunct account and is added to bonds payable on the balance sheet. |
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Term
| Journalize a bond sold at premium: |
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Definition
DR Cash
CR Premium on Bonds Payable
CR Bonds Payable |
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Term
| Formula for Interest payment: |
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Definition
| Interest Payment = Bond face value x Stated interest rate |
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Term
Recording Interest Payments With Amortization of Premium or Discount. Journalize:
"Devor Corporation issues 100, 5 year, $1000 bonds dated Jan. 1, 2010, at 100." |
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Definition
Jan. 1
DR Cash 100,000
CR Bonds Payable 100,000
(1000 x 100)
Dec. 31
DR Bond Interest Expense 10,000
CR Cash 10,000
(100,000 x 10%) |
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Term
| Show the balance sheet presentation for bonds |
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Definition
Long-term Liabilities
-Bonds Payable --------------- 1,000,000
-Less: Discount on bonds payable (80,000) ___920,000
------------------------------------ --------- |
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Term
| Formula for Bonds Discount Amortization: |
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Definition
Bonds Discount Amortization
Bonds Discount
--------------
Number of Interest Periods |
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Term
| What happens to the payments throughout the payment of a long-term notes payable? |
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Definition
| With each payment, the interest portions get smaller and the principle portions get larger. |
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Term
Stockholders Equity
How do you find the number of shares of common stock issued? |
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Definition
| Common stocks par value x # of shares issued |
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Term
Stockholders Equity
How do you find the number of shares of common stock issued? |
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Definition
| # of total shares - preferred stock - treasury stock |
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Term
Stockholders Equity
How do you find the total amount of Paid-In Capital? |
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Definition
| Total (Common + Preferred) stock + Paid-In Capital |
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Term
Stockholders Equity
How do you find the Treasury cost per year? |
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Definition
Total Treasury Stock
------------------
Shares of common stock owned by treasury |
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Term
Stockholders Equity
How do you find the total amount of stockholders' equity? |
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Definition
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Term
| What is a stock split and how is it calculated? |
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Definition
# of shares after Stock Split = Shares x stock split
Stock Split is issuing additional shares. After the split, equity is the same as before. |
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Term
| What happens after a corporation retires stock? |
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Definition
| After a corporation retires stock its assets and equity are always reduced by the amount paid for the retiring stock. |
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