Flashcards in Test #4 Deck (35):
What are PLANT / FIXED ASSETS?
- have physical substance (a definite size and shape)
- are used in the operations of business
- are not intended for sale to customers
- are expected to be of use to the company for a number of years
What is an example of PLANT / FIXED ASSETS?
- pizza oven
- pizza truck
What is it called if an asset is INTENDED FOR SALE?
What does PP&E stand for?
Property, Plant, and Equipment
What is a PHYSICAL SUBSTANCE?
something you can touch, but is not for sale
What are 3 things needed to calculate DEPRECIATION?
2. Useful Life
3. Salvage Value
What are the two ways USEFUL LIFE can be stated in? What's their methods?
1. time (years) --> straight line method
2. units (miles or hours) --> units of activity
What is the formula for DEPRECIABLE COST?
depreciable cost = cost - salvage value
What is COST when computing depreciation?
all expenditures necessary to acquire the asset and make it ready for intended use
What is USEFUL LIFE when computing depreciation?
estimate of the expected life based on need for repair, service life, and vulnerability to obsolesce
What is SALVAGE VALUE when computing depreciation?
estimate of the asset's value at the end of its useful life
Where is DEPRECIATION EXPENSE reported?
Where is ACCUMULATED DEPRECIATION reported?
What is the formula for ANNUAL DEPRECIATION EXPENSE using the straight line method?
cost - salvage value = depreciable cost
depreciable cost / useful life (in years) = annual depreciation expense
What is the formula for ANNUAL DEPRECIATION EXPENSE using the units of activity method?
depreciable cost / total units of activity = depreciable cost per unit
depreciable cost per unit * units of activity during the year = annual depreciation expense
What does a DEPRECIATION JOURNAL ENTRY look like?
Dr. Depreciation Expense
Cr. Accumulated Depreciation
to record depreciation
What is ACCUMULATED DEPRECIATION classified as?
contra-asset (permanent account)
What is DEPRECIATION EXPENSE classified as?
expense (temporary account)
What is the formula needed to calculate BOOK VALUE?
cost asset - accumulated depreciation = book value
What will book value EQUAL in the end?
What are INTANGIBLE ASSETS?
legal rights that have no physical substances
What are common types of INTANGIBLE ASSETS?
- trademarks and trade names
What is the formula to calculate INTEREST ON A LOAN?
Face Value * APR = Annual Interest
Annual Interest / 12 = Monthly Interest
Monthly Interest * Life of Note in a Month = Interest Over Life of a Note
How are WORKING CAPITAL and CURRENT RATIO measured?
What is the formula for WORKING CAPITAL?
current assets - current liabilities = working capital
What is the formula for CURRENT RATIO?
current assets / current liabilities = current ratio
Can WORKING CAPITAL be a negative number?
What is the formula for GROSS PAY?
hours worked * rate of pay = gross pay
What is the formula for NET PAY?
gross pay - FICA (7.65%) - income taxes withheld = net pay
What PAYROLL DEDUCTIONS are MANDATORY?
- FICA tax
- Federal Income Tax (FUTA)
- State Income Tax (SUTA)
What PAYROLL DEDUCTIONS are VOLUNTARY?
- Union Dues
- Pension Plans
What is the percentage of FICA that gets taken out? How is it broken down?
7.65% total in deductions
6.2% in Social Security
What taxes does the EMPLOYEE have to pay?
- Income Tax
What taxes does the EMPLOYER have to pay?