Test #4 Flashcards Preview

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Flashcards in Test #4 Deck (19)
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1
Q

What rights do common stockholders have?

A

They can vote in matters, each of their stocks receives an equal dividend, and they have rights to assets (after liabilities) to liquidation.

2
Q

Current Liabilities examples

A

Accounts Payable, Notes Payable due within one year, Salaries Payable, Interest Payable, Sales Tax Payable, Income Tax Payable and Unearned Revenue.

3
Q

Current vs long term liabilities

A

due within one year versus due in more than one year

4
Q

Interest equation

A

Face value x annual interest rate x fraction of the year

5
Q

If interest bleeds into the next year, how to you account for that interest to wrap up Dec 31st?

A

Debit interest expense, credit interest payable

6
Q

What happens when you finally settle a notes payable?

A

debit notes payable (face value), debit interest expense, debit interest payable, credit cash

7
Q

how are things recorded in a perpetual inventory system?

A

as each sale is made

8
Q

What category does “sales tax” fall under?

A

Current liability (sales tax payable), paid by customer

9
Q

How do unearned revenues/deferred Liabilities arise?

A

Unearned revenue arises when a business has received cash in advance of providing goods or performing work and, therefore, has an obligation to provide goods or services to the customer in the future.

10
Q

When do businesses record warranty expense, and why?

A

The matching principle requires businesses to record Warranty Expense in the same period that the company records the revenue related to that warranty. The expense, therefore, is incurred when the company makes a sale, not when the company pays the warranty claims.

11
Q

When dealing with amortization, what do you record?

A

notes payable (debit), interest expense (debit), cash (credit)

12
Q

When is interest traditionally paid on bonds?

A

Twice a year (semi annually)

13
Q

What interest rate do we use for bonds?

A

Always market rate, not stated rate

14
Q

Paid in capital

A

Amount stockholders have invested in the corporation

15
Q

Retained earnings

A

amount of earnings the corporation has retained

16
Q

treasury stock

A

corporation’s own stock that it has reacquired

17
Q

where are cash dividends declared from?

A

retained earnings NOT from paid-in capital

18
Q

how to record stock with a par value

A

par value is recorded as common stock, excess is recorded as paid-in capital

19
Q

how to record stated value stock with no par

A

same as par stock - common stock, excess is recorded as paid-in capital