SLIDES WEEK 6 Flashcards
(22 cards)
Value-added taxes (VAT)
payable to the government
provision
Liability of uncertain timing and/or amount
Warranty, environmental damage, legal cases
A provision is money a company sets aside to cover a future cost or loss it expects to happen — but isn’t sure when or how much exactly.
Provisions recognition when 3 criteria are met:
- A company has a present obligation as a result of a past event
(e.g., sale) - It is probable that an outflow of resources (e.g., money) will be
required to settle the obligation - A reliable estimate can be made of the amount of the obligation
warranty
magine you’re a company that sells laptops. You offer a 1-year warranty — meaning if something breaks, you’ll fix or replace it for free.
example warranty journal entry
dr warranty expense
cr repair parts
callable bonds
they may be retired before the maturity date
can bond holders sell their bond to other investors
yes
bonds can be
callable
secured
convertible
preemptive rights of shareholders
keep the same % ownership when new shares are issued
where’s the number of authorized shares registered
in the charter
Initial Public Offering (IPO)
The first time a corporation issues publicly traded shares
what happens with the number of shares and par value when share split is used
par value decreases and number of shares increases
treasure share are generally accounted using the ..
cost method
two important moments dividends
decleration
payment
declaration as journal entry
dr cash dividends
cr dividends payable
payment moment journal entry
dr dividends payable
cr cash
close cash dividends to RE
dr RE
cr cash dividends
is dividend credit or debit
temporary debit
do preference rights come or dont come with voting rights
do not come with voting rights
what is then the thing about priory shares
- giving priority for getting dividends
- given priority when the corporation is liquidated
What does it mean if preference shares are cumulative and have dividends in arrears?
Cumulative preference shares mean unpaid dividends are not lost — they are carried forward as dividends in arrears.
These must be paid before any dividends go to common shareholders.
you’ll get them the next year
