Accounting Ch. 9

Front 1

funds supplied by creditors

Back 1

debt

Front 2

funds provided by owers

Back 2

equity

Front 3

liabilities

Back 3

probable debts or obligations that result from past transactions, which will be paid with assets or services

Front 4

interested paid (is/is not) included in the reproted amount of the liability because it _____

Back 4

is not; accrues

Front 5

current liabilities

Back 5

short-term obligations that will be paid iwthin the current operating cycle or one year (whichever is longer)

Front 6

liquidity

Back 6

the ability to pay current obligations

Front 7

a company has liquidity if __________

Back 7

it is able to pay its current obligations

Front 8

Quick Assets / Current Liabilities

Back 8

Quick Ratio

Front 9

quick assets

Back 9

cash, marketable securities, and accounts receivable

Front 10

Quick Ratio measures...

Back 10

the level of liquidity

Front 11

specific operating activities are financed in part by a related___ ___

Back 11

current liability

Front 12

delaying payment to suppliers to conserve cash (is/is not) advisable because it ruins positive relationships with suppliers

Back 12

not

Front 13

Cost of Goods Sold / Average Accounts Payable

Back 13

Accounts Payable Turnover

Front 14

Accounts payable turnover measures...

Back 14

how quickly management is paying its trade accounts

Front 15

Accrued Liabilities

Back 15

expenses that have been incurred but have not been paid at the end of the accounting period (i.e. property taxes, electricity, salaries)

Front 16

adjusting entry for vacation time of $125,000

Back 16

Compensation expense (+E, -SE)..........125,000
Accrued Vacation Liability (+L)............125,000

Front 17

under the matching concept, the cost of vacation time must be recorded when employees _____ rather than when they ______

Back 17

perform a service; take a vacation

Front 18

when vacations are taken...

Back 18

Accrued vacation liability (-L)
Cash (-A)

Front 19

federal, state, local income taxes, social security taxes, and federal/state unemployment taxes are...

Back 19

payroll taxes

Front 20

FITW

Back 20

Federal Income Tax Withheld

Front 21

FICA Taxes

Back 21

Social Security taxes that are imposed equally on the employer and employee

Front 22

includes all funds earne dby employees as well as funds paid to others on behalf of employees

Back 22

employee compensation expense

Front 23

FUTA

Back 23

Federal Unemployment Tax Act

Front 24

Time Value of Money

Back 24

interest associated with the use of money over time

Front 25

to the borrower, interest is an _____; to the creditor, it is _____

Back 25

expense, revenue

Front 26

Interest =

Back 26

principal x interest rate x time

Front 27

to provide accurate info on its current liabilities, a company must reclassify its ______ as a _________ within a year of its maturity date

Back 27

long-term debt, current liabilitiy

Front 28

deferred revenues

Back 28

when a company collects cash before the related revenue has been earned (before providing the service)

Front 29

contingent liability

Back 29

potential liability that has arisen as the result of a past event; is not effective until some future event occurs

Front 30

working capital

Back 30

the dollar difference between total current assets and total current liabilities

Front 31

if a business has too little working capital...

Back 31

it may not meet its obligations to creditors

Front 32

if a business has too much working capital...

Back 32

it may have unproductive assets and incur additional costs

Front 33

long-term liabilities

Back 33

all the of the tnity's obligations not classified as current liabilities

Front 34

secured debt

Back 34

a liability supported by an agreement that if it's not satisified, the creditor can take ownership

Front 35

private placement

Back 35

raising long-term debt from a financial service organization

Front 36

note payable

Back 36

a written promise to pay a stated sum at one or more specified future dates called MATURITY DATES

Front 37

bonds

Back 37

publicly traded debt that exceeds the financial ability of any single creditor

Front 38

operating lease

Back 38

when an asset is leased on a short-term basis - does not meet criteria established by GAAP and not recorded as a liability

Front 39

capital lease

Back 39

leasing of an asset on a long-term basis; meets at least 1 of 4 GAAP criteria; recorded as an asset and liability

Front 40

4 Criteria for Leases

Back 40

- lease term is 75% or more of asset's expected economic life
- owernship of asset is transferred to lessee at end of lease term
- lease contract permits lessee to purchase asset at a price lower than its FMV
- present value of lease payments if 90% or more of FMV of asset when lease is signed

Front 41

managers prefer recording leases as (operating/capital) so they can report less debt on the balance sheet

Back 41

operating

Front 42

present value

Back 42

the current value of an amount otbe received in the future a future amount discounted for compound interest

Front 43

present value =

Back 43

1/(1+i)^n x amount

Front 44

annuity

Back 44

a series of periodic cash receipts or payments that are equal in amount each interest period