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20 Cards in this Set
- Front
- Back
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Sales Tax Payable
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Ex – Cooley Grocery store for March 25 cash register reading showing sales or $10,000 and sales taxes of $600
Cash $10,600 Sales Tax Payable $600 Sales $10,000 $10,600 / 1.06 = $10,000 If you don't know portion .27,000 / 1.08 = $25,000 |
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Unearned Revenue
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Cash received in advance
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Secured Bonds
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have specific assets of the issuer pledged as collateral for the bonds
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Unsecured Bonds
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are issued against the general credit of the borrower (the company issuing the bonds)
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Convertible Bonds
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can be converted into common stock at the bondholder’s option
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Callable Bonds
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are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer (the company issuing the bonds)
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Bonds at Face Value
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Assume that Devor Corporation issued 100, 5-year, 10% $1,000 bonds dated January 1, 2010 at 100 (100% of face value) – Assume interest is Payable annually on Jan 1
Cash 100,000 Bonds Payable 100,000 (100 $1,000 bonds x $100 = $100,000) |
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Discount Bonds
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Assume that on Jan 1 Candlestick Inc sells $100,000, 5-year, 10% bonds at 98 (98% of face value) with interest payable Jan l
(100,000 * 0.98) Cash $98,000 Discount on Bonds Payable 2,000 Bonds Payable $100,000 |
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Premium Bonds
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Candlestick Inc sells $100,000, 5-year, 10% bonds at 102 (102% of face value)
(100,000 * 1.02) Cash $102,000 Bonds payable $100,000 Premium on Bonds Payable 2,000 |
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Current Ratio
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Current Assets/ Current Liabilities
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Solvency ratios
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measure the company’s ability to survive over a long period of time.
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Debt to total Assets Ratio
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Total Liabilities / Total Assets - this indicates how much of the company’s assets are financed with debt (Accounts Payable, Notes Payable, Bonds Payable, etc)
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Times Interest Earned
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(Net Income + Interest Expense + Tax Expense) / Interest Expense) = this indicates how many times a company can pay their interest payments when they become due.
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Advantages of Corporation
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Separate Legal Existence
Limited liability of stockholders Transferable Ownership Rights Ability to acquire capital Continuous life Corporation Management – professional managers |
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Disadvantages of Corporations
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Corporation management – separation of ownership and management
Government regulations Additional Taxes – federal and state income taxes Double Taxation – taxes paid on cash dividends same income taxed on net income of corp. |
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Par Value
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Assigned Value per share
If Hydro issued 1,000 shares of $1 par common stock for cash at $5 per share – Cash $5,000 Common Stock $1,000 Paid-in Capital in Excess of Par $4,000 |
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No Par Value
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Assume Hydro-Slide Inc. issues 1,000 shares of $1 par value common stock at par for cash –
Cash $1,000 Common Stock $1,000 |
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Treasury Stock
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is a corporation’s own stock that has been issued, fully paid for, reacquired by the corporation and held in its treasury for future use
Treasury Stock 32,000 Cash 32,000 |
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Preferred Stock
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Preference or priority over common stock
Stine Corporation issues 10,000 shares of $10 par value preferred stock for $12 cash per share Cash (10,000x$12) $120,000 Preferred Stock (10, 000x$10) $100,000 Paid in Capital in Excess of Par-Preferred 20,000 |
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Three Dates of Importance in Regards to Dividends
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Declaration Date
Dec 1 Cash Dividends 50,000 Dividends Payable 50,000 To record declaration of cash dividend Record Date – NO ENTRY Marks date of ownership of outstanding shares determined for dividend purposes. Determines who will be paid dividends Payment Date Dividend Checks are mailed out to stockholders of record and payment of dividend is recorded Jan 20 Dividends Payable 50,000 Cash 50,000 |
