Financial Accounting Equations

liquid funds – flüssige Mittel
cyclical stock – a stock that tends to rise and fall with the economy
owner withdrawls – drawing account
Proprietorship – a business owned by one person
Expenses – Costs of providing products and
services.
Operating cycle – days in inventory + days in accounts receivable – days in accounts payable
Chart of Accounts – A list of all the account titles and discount numbers assigned to them.
Fact Pattern: Tam Co. is negotiating to purchase equipment that would cost $100,000, with the expectation that $20,000 per year could be saved in after-tax cash costs if the equipment were acquired. The equipment’s estimated useful life is 10 years, with no residual value, and would be depreciated by the straight-line method. Tam’s predetermined minimum desired rate of return is 12%. Present value of an annuity of $1 at 12% for 10 periods is 5.65. Present value of $1 due in 10 periods at 12% is .322.   [ 12 ] Payback period to Tam Co. is   A. 4.0 years. B. 4.4 years.   C. 4.5 years. D. 5.0 years.
Writing off an uncollectible account under the allowance method requires a debit to
A. Accounts Receivable.
B. Allowance for Doubtful Accounts.
C. Bad Debts Expense.
D. Uncollectible Accounts Expense. – V
Earnings per share – net income-dividends on preferred stock/ average shares of common stock outstanding
Equipment – 1. Asset
2. Balance Sheet
3. Debit
4. Permanent
Gross profit will result if
A. operating expenses are less than net income.
B. sales revenues are greater than operating expenses.
C. sales revenues are greater than cost of goods sold.
D. operating expenses are greater than cost of goods sold. – C
Owners Equity – Increase – Revenues, Investments.
Monetary Unit Assumption – Accounting assumption that money is the common denominator of economic activity and provides an appropriate basis for accounting measurement and analysis. Pg.63
Fаct Pаttern: Tаm Cо. is negоtiating tо purchase equipment that would cost $100,000, with the expectation that $20,000 per year could be saved in after-tax cash costs if the equipment were acquired. The equipment’s estimated useful life is 10 years, with no residual value, and would be depreciated by the straight-line method. Tam’s predetermined minimum desired rate of return is 12%. Present value of an annuity of $1 at 12% for 10 periods is 5.65. Present value of $1 due in 10 periods at 12% is .322.   [ 12 ] Payback period to Tam Co. is   A. 4.0 years. B. 4.4 years.   C. 4.5 years. D. 5.0 years.
income statement – A financial statement showing the revenue and expenses for a fiscal period
Two categories of stockholder's equity usually found in the balance sheet of a corporation – Common stock and retained earnings
75. Which accounting amount best represents value created for stockholders during the current period?
A. Retained earnings.
B. Total assets.
C. Net income.
D. Stockholders' equity. – C. Net income.
Effective Interest Method of Amortization – The process of transferring a portion of the premium or discount to interest expense.

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