Financial Accounting Ch 6

Accrual basis – Records revenues when they are earned
The amount of revenue from the sale of funeral services would be shown on the – Profit and Lose Statement
Investors – assessing amounts, timing, and uncertainty of future cash returns on their investment
*revenues* – Increases in owner's equity as a result of selling services or products to customers.
11. Emmitt had the following final balances after the first year of operations: assets, $55,000; stockholders' equity, $25,000; dividends, $3,000; and net income, $10,000. What is the amount of Emmitt's liabilities?
A. $55,000.
B. $30,000.
C. $13,000.
D. $7,000. – B. $30,000.
*financial accounting* – The branch of accounting that is concerned with recording transactions using generally accepted accounting principles (GAAP) for a business or other economic unit and with a periodic preparation of various statements from such records.
restrictive endorsement – An endorsement restricting further transfer of a check's ownership
proving cash – the process of determining whether the amount of cash, both on hand and in the bank, is the same as that which is indicated in the accounting records
GED Corporation, located in the United States, has an accounts payable obligation of ¥800 million payable in one year to a bank in Tokyo. The current spot rate is ¥115/$1.00 and the one year forward rate is ¥110/$1.00. The annual interest rate is 3 percent in Japan and 6 percent in the United States. GED can also buy a one-year call option on yen at the strike price of $0.0080 per yen for a premium of 0.010 cent per yen.  The maximum future dollar cost of meeting this obligation using the call option hedging is
Revenues – Earnings from the sale of goods or services to costumers. Revenues are reported whether or not have yet been paid for.
strategic planning – Which is developing long-term (expanding) actions to achieve the company's objectives. long term actions are called strategies, which often involve periods of 5 to 10 years
GED Cоrpоrаtiоn, locаted in the United Stаtes, has an accounts payable obligation of ¥800 million payable in one year to a bank in Tokyo. The current spot rate is ¥115/$1.00 and the one year forward rate is ¥110/$1.00. The annual interest rate is 3 percent in Japan and 6 percent in the United States. GED can also buy a one-year call option on yen at the strike price of $0.0080 per yen for a premium of 0.010 cent per yen.  The maximum future dollar cost of meeting this obligation using the call option hedging is
Verifiability – Implies consensus among observers
statement of cash flows – a fourth financial statement that reports the cash flows during a period (operating, investing, or financing activities)
income taxes- depreciation – MACRS — deduces taxable net income
*method used for income tax does NOT have to be used for financial statement purposes
Adequate Disclosure – financial statements contain all information necessary to understand a business's financial condition

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