midterm memorization

Question 1

Bond: Discount amortized formula

Answer 1

Interest expense - Interest paid

Question 2

Bond Interest Paid formula

Answer 2

Face value x COUPON x 1/2
the MARKET is so INTERESTING

Question 3

Calculation of Pmt for bonds

Answer 3

Face value x COUPON x 1/2
FACE the powerful PMT

Question 4

Bond carrying value formula

Answer 4

Face value - unamortized discount

Question 5

Bond: straight line amortization formula

Answer 5

Discount / # of payments OR
Discount / n (years x Pmt/year)
OR Premium / n (years x Pmt/year)

Question 6

JOURNAL: bond issued at discount with straight line amortization AND effective interest rate amortization

Answer 6

Dr. cash
Dr. discount

Cr. Bonds Payable

Question 7

JOURNAL: 6 months interest for bond straight line amortization at discount AND effective interest rate amortization

Answer 7

Dr. Interest expense

Cr. Cash
Cr. Discount

*reverse the Dr. to discount when paying out interest

Question 8

Bond Financial Calculator
i=

Answer 8

i = MARKET RATE
MARKET IS SO INTERESTING

Question 9

JOURNAL: bond issues at premium with straight line amortization AND effective interest rate amortization

Answer 9

Dr. Cash

Cr. Bonds Payable
Cr. Premium

Question 10

JOURNAL: 6 months interest for bond straight line amortization at premium AND effective interest rate amortization

Answer 10

Dr. Interest expense
Dr. Premium

Cr. Cash

*reverse the Cr. to premium when paying out interest

Question 11

STAT CASH FLOWS: For increases in A/R and other assets -

Answer 11

DEDUCT from net income in statement of cash flows

*non-cash items increased

Question 12

STAT CASH FLOWS: For increases in A/P and other liabilities -

Answer 12

ADD BACK to net income from statement of cash flows

Question 13

How to reconcile acc. dep.

Answer 13

1. Remove asset (ex. Cr. Land)
2. Remove Acc. Dep. => Dr. Acc. Dep
3. Record cash changing hands
4. Plug for gain/loss

Question 14

STAT CASH FLOWS - JOURNAL
Increase in A/R

Answer 14

Dr. change in A/R
Cr. change in cash

Question 15

STAT CASH FLOWS - JOURNAL
Dividend paid

Answer 15

Dr. change in retained earnings
Cr. change in cash

Question 16

STAT CASH FLOWS - JOURNAL
Prepaid expense charge

Answer 16

Dr. change in cash
Cr. change in prepaid

Question 17

STAT CASH FLOWS - JOURNAL
Land sold for cash @ cost

Answer 17

Dr. change in cash
Cr. change in land

*CHANGE IN LAND from balance sheet NOT CURRENT COST

Question 18

How to remove acc. dep.

Answer 18

Dr. Acc Dep

Question 19

Acc Dep has a normal _______ balance

Answer 19

Debit
*Technically under assets

Question 20

STAT CASH FLOWS - JOURNAL
Bonds Payable

Answer 20

Dr. Bonds Payable
Cr. Common Stock

*IF additional info

Question 21

REMINDER: liabilities go up with a credit, if the change is (negative), then DEBIT the liability

Answer 21

:)

Question 22

REMINDER: “used by” or “provided by” (financing section)

Answer 22

:)

Question 23

REMINDER: adding back bad debt expense or depreciation expense means DEBIT the expense

Answer 23

:)

Question 24

JOURNAL - Issuance of common stock

Answer 24

Dr. cash

Cr. Common Stock ($1 par OR $1 stated value)
Cr. APIC

Question 25

JOURNAL - Common Stock Buyback - tested?

Answer 25

Dr. Common Stock ($1 par) Dr. APIC (keep from original JE) Dr. Retained Earnings (plug) Cr. Cash

Question 26

JOURNAL - Common Stock Reissue - tested?

Answer 26

Dr. cash Cr. Common Stock ($1 par) Cr. APIC (plug)

Question 27

JOURNAL - PAR VALUE METHOD Treasury stock Buyback

Answer 27

Dr. Treasury Stock ($1 par) Dr. APIC (keep from original JE) Dr. Retained Earnings (plug) Cr. Cash

Question 28

JOURNAL - PAR VALUE METHOD Treasury stock Reissue

Answer 28

Dr. Cash Cr. Treasury Stock ($1 par) Cr. APIC (plug)

Question 29

JOURNAL - COST METHOD Treasury stock Buyback

Answer 29

Dr. Treasury Stock Cr. cash

Question 30

JOURNAL - COST METHOD Treasury stock Reissue

Answer 30

Dr. cash Cr. Treasury Stock Cr. APIC Treasury Stock (plug)

Question 31

WHAT increases retained earnings?

Answer 31

NET INCOME

Question 32

What decreases retained earnings?

Answer 32

Cash dividends, small stock dividend, large stock dividend, BUY&RETIRE shares, Treasury stock buyback par value method

Question 33

small stock dividend transfers ____ from retained earnings to _______

Answer 33

FMV Common stock and APIC

Question 34

large stock dividend transfers ___ from retained earnings to ______

Answer 34

par value common stock

Question 35

REMINDER: NO JOURNAL for STOCK SPLIT

Answer 35

:)

Question 36

How to allocate dividends

Answer 36

1. cumulative preferred previous years 2. current year preferred/common => COMMON ONLY IF PARTICIPATING 3. Non-participating calculation => common gets remainder 4. Participating calculation through fraction ratios

Question 37

INVESTMENTS - JOURNAL Acquisition of bond in MARCH

Answer 37

Dr. investment Dr. interest RECEIVABLE Cr. cash *MEMORIZE

Question 38

INVESTMENTS - JOURNAL Bond interest

Answer 38

Dr. Cash Cr. interest receivable Cr. interest revenue

Question 39

INVESTMENTS - JOURNAL Selling the bond

Answer 39

Dr. cash Cr. investments Cr. gain if sell price > than bought price

Question 40

REMINDER: Investments => company revenue for cost method insignificant has NO JOURNAL

Answer 40

:)

Question 41

REMINDER: Investments => company revenue for EQUITY method significant has DR. Investments and CR. Equity in Earnings

Answer 41

:)

Question 42

INVESTMENTS Cash dividends for cost method

Answer 42

Dr. cash Cr. dividend revenue

Question 43

INVESTMENTS Cash dividends for equity method

Answer 43

Dr. cash Cr. investments

Question 44

SALE OF INVESTMENT

Answer 44

Calculate investment in stock and then calculate 1/2 of shares, then plug for gain or loss

Question 45

REMINDER: Fair Value Method Journal the PLUG for the Fair Value Adjustment T-account

Answer 45

:)