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ACCT207 > Exam 3 Concepts > Flashcards

Exam 3 Concepts Flashcards

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1
Q

If a company has a ___________ ___________ they will pay the debit within one year or within the operating cycle.

A

current liability

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2
Q

__________ _________ is a written promissory note.

A

Notes Payable

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3
Q

_________ ___________ are received before the company delivers goods or provides services.

A

Unearned Revenue

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4
Q

A company _________ pertains to:

  1. Salaries
  2. Wages
A

payroll

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5
Q

**Payroll tax expense **results from 3 taxes that governmental agencies levy on employers:

  1. FICA tax
  2. Federal Unemployment Tax
  3. State Unemployment Tax
A

^^^

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6
Q

Bonds are a form of interest-bearing _______ ________.

A

notes payable

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7
Q

When a corporation issues bonds, it is __________ money.

A

borrowing

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8
Q

A ________ bond is where there is collateral.

A

secured

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9
Q

An ________ bond is where there is **NO **collateral, it is just issued against general credit.

For example, Apple can issue 80+ billion worth of bonds because they can afford to pay it back.

A

unsecured

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10
Q

A _______ bond is one that can be converted into stock.

A

convertible

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11
Q

A ________ bond is one that a company can buy back (redeem) at a stated dollar amount *prior *to maturity.

A

callable

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12
Q

A bond ______ lists:

  1. Name of company who issued
  2. Face Value
  3. Maturity Date
  4. Contractural (stated) interest
A

certificate

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13
Q

When the _______ ______ changes, the market value of the bond changes.

A

interest rate

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14
Q

A bond is _______ when it is paying less than the market.

A

discounted

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15
Q

When a bond is paying more than the market, there is a ________.

A

premium

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16
Q

Major types of current liabilities:

  1. Notes Payable
  2. Accounts Payable
  3. Sales Tax Payable
  4. Unearned Revenues
  5. Accured Liabilities
    • Taxes
    • Salaries
    • Wages
    • Interest Payable
A

^^^

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17
Q

When do companies record sales tax payable?

A

At the time that the sale occurs.

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18
Q

Sales taxes are **NOT **an ________ to the company.

A

expense

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19
Q

Companies record the current maturities of long-term debt as a _______ liability in the balance sheet.

A

current

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20
Q

When companies issue bonds, they _______ Cash for the Cash Proceeds and _______ Bonds Payable for the face value of the bonds.

A

debit; credit

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21
Q

Bonds discounts and bond premium are ________ over the life of the bond.

A

amortized

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22
Q

When companies redeem bonds at maturity, they ______ cash and ______ Bond Payable for the face value of the bonds.

A

credit; debit

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23
Q

Companies that redeem bonds _______ maturity:

  1. Eliminate the carrying value of the bonds at the redemption date.
  2. Record the cash paid, and
  3. Recognize the gain or loss on redemption
A

before

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24
Q

Companies can report the amount of each liability in the balance sheet or in schedules in the ________________________________.

A

notes accompanying statements

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25
The statement of cash flows classifies cash receipts and cash payments as \_\_\_\_\_\_\_, \_\_\_\_\_\_\_\_\_, and \_\_\_\_\_\_\_\_\_ activities.
**operating, investing,** **financing**
26
\_\_\_\_\_\_\_\_\_ activities include the cash effects of transactions that create revenues and expenses. They help determine net income.
Operating
27
\_\_\_\_\_\_\_ activities include (a) cash transactions that involve the purchase or disposal of investments and property, plant, and equipment, and (b) lending money and collecting the loans.
Investing
28
\_\_\_\_\_\_ activities include (a) obtaining cash from issuing debt and repaying the amounts borrowed (b) obtaining cash from stockholders, repurchasing shares, and paying dividends
Financing
29
Operating activities include \_\_\_\_\_\_\_ \_\_\_\_\_\_\_ items.
income statement
30
Investing activities include changes in \_\_\_\_\_\_\_ and \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.
investments and long-term assets
31
Financing activities include changes in ________________ and \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_.
long-term liabilities and stockholder's equity
32
**Operating activities ** Cash inflows: From sale of.... From interest...
goods or services received and dividends received
33
**Operating activities:** Cash outflows: To \_\_\_\_\_\_\_ for inventory. To employees for \_\_\_\_\_\_\_. To \_\_\_\_\_\_\_ for taxes. To \_\_\_\_\_\_\_ for interest. To others for \_\_\_\_\_\_\_.
suppliers wages government lenders expenses
34
**Investing Activities** Cash inflows: From sale of \_\_\_\_\_\_. From sale of investments in \_\_\_\_ or equity securities of other entities. From collection of \_\_\_\_\_ on loans to other entities.
PPE debt principal
35
**Investing Activities:** Cash Outflows: To purchase \_\_\_\_\_\_. To ______ investments in _____ or other equity securities of other entities. To \_\_\_\_\_\_ loans to other entities.
PPE purchase; debt make
36
**Financing Activities** Cash Inflows: From \_\_\_\_\_\_ of \_\_\_\_\_\_ \_\_\_\_\_\_\_. From issuance of \_\_\_\_\_\_ (bonds and notes).
sale; common stock debt
37
**Financing Activities:** Cash Outflows: To \_\_\_\_\_\_ as dividends. To \_\_\_\_\_\_ long-term debt or reacquire capital stock (treasury stock).
stockholders redeem
38
SIGNIFICANT NONCASH ACTIVITIES 1. Direct Issuance of common stock to purchase assets 2. Conversion of bonds into common stock 3. Direct issuance of debt to purchase assets 4. Exchanges of plant assets
^^^^
39
**Companies do not report in the body of the statement of cash flows significant financing and investing activities that do not affect cash.** Instead, they report these activities in either a \_\_\_\_\_\_ \_\_\_\_\_\_\_ at the bottom of the statement of cash flows or in a separate note or \_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_ to the financial statements. The reporting of these noncash activities in a separate schedule satisfies the \_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_.
seperate schedule supplementary schedule full disclosure principle
40
The sum of the \_\_\_\_\_\_\_\_\_, \_\_\_\_\_\_\_\_\_\_, and \_\_\_\_\_\_\_\_\_\_ sections equals *the net _increase_ or _decrease_ in cash for the period*. This amount is added to the beginning cash balance to arrive at the ending cash balance—the same amount reported on the balance sheet.
**operating, investing, and financing**
41
In a company's \_\_\_\_\_\_\_ phase, the company continues to show *negative cash from investing* and **positive cash from financing activities**.
growth
42
In a company's \_\_\_\_\_\_\_\_ phase, net cash provided by *operating activities* and *net income* are approximately the **same**.
maturity
43
In a company's **maturity phase**, a company begins to: 1. Pay \_\_\_\_\_\_\_\_ 2. Retire \_\_\_\_\_\_\_ 3. Buy back \_\_\_\_\_\_\_
dividends debt stock
44
During a company's **introductory phase**, why do companies have negative net cash provided by operating activities?
Companies usually spend more on inventory than the amount expensed for cost of goods sold because they are building up inventory and their cash collections frequently lag the amount reported for sales.
45
During a company's \_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_, net cash provided by operating activities decreases. *Cash from investments might become positive as the company sells off excess assets.* Cash from financing activities might be negative as the company buys back stock and redeems debt.
decline phase
46
3 Major Steps in Preparing the Statement of Cash Flows: 1. Determine net cash provided/used by operating activities by **converting net income from an accrual basis to a cash basis** 2. Analyze changes in noncurrent asset and liability accounts and record as investing and financing activities, or disclose as noncash transactions 3. Compare the net change in cash on the statement of cash flows with the change in the cash account reported on the balance sheet to make sure the amounts agree
^^^
47
To convert net income from an accrual basis to a cash basis you can use either of the two methods: 1. ________ method, and 2. ________ method **Both methods arrive at the same total amount** for “Net cash provided by operating activities.” They differ in **how** they arrive at the amount.
indirect direct
48
The \_\_\_\_\_\_\_ \_\_\_\_\_\_\_ adjusts net income for items that do not affect cash to determine net cash provided by operating activities.
indirect method
49
The \_\_\_\_\_\_ \_\_\_\_\_ shows operating cash receipts and payments.
direct method
50
98% of companies prefer the \_\_\_\_\_\_\_ method because it: 1. Is easier and *less costly* 2. Focuses on the differences between net income and net cash flow from operating activities
indirect
51
A company does NOT report sales taxes as an expense. It simply forwards to the government the amount paid by the customer
^^
52
\_\_\_\_\_\_ \_\_\_\_\_\_\_ have specific assets of the issuer pledged as collateral for the bonds.
Secured bonds
53
\_\_\_\_\_\_ \_\_\_\_\_\_ are issued against the general credit of the borrower. ## Footnote *Larger corporations with good credit ratings use these.*
Unsecured Bonds
54
Bonds that the issuing company can redeem (buy back) at a stated dollar amount prior to maturity are \_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_.
callable bonds
55
The \_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ is the date that the final payment is due to the investor from the issuing company.
maturity date
56
A Bond issued above face value is a \_\_\_\_\_\_\_ and a Bond issued below face value is a \_\_\_\_\_\_\_\_.
discount premium
57
When the contractual interest rate and the market interest rate are the same, \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.
**bonds sell at face value**
58
Bond prices vary inversely with changes in the market interest rate. As market interest rates decline, bond prices \_\_\_\_\_\_\_\_.
increase *As market demand decreases, price increases.*
59
The carrying value (book value) of bonds issued at a discount is determined by subtracting
**Balance of the Discount account - Bonds Payable Account**
60
The sale of bonds above face value causes the total cost of borrowing to be \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ because the borrower is not required to pay the bond premium at the maturity date of the bonds.
*less than the bond interest paid*
61
A bond premium is considered to be a ___________________ that reduces bond interest expense over the life of the bonds.
**reduction in the cost of borrowing**
62
Two common types of off-balance-sheet financing result from: 1. Unreported contingencies and 2. Lease transactions.
1. common contingencies include lawsuits. If it is probable that the company will lose the suit then it should accrue the loss. 2. Capital leases are treated like a debt-financed purchase-increasing both assets and liabilities

ACCT207 (4 decks)

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