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21 Cards in this Set
- Front
- Back
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Direct Method Formula
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Cash Collections from Customers
-Cash Paid to Suppliers -Cash paid for operating expenses -cash paid for interest -cash paid for taxes =operating cash flow |
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Direct Method Cash collections
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Sales-increase in accounts recievables
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Direct method cash paid to suppliers
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-COGS+decrease in inventory (beginning inventory+purchases-COGS) +increase in accounts payable (beginning accts payable +purchases-cash paid to suppliers)
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Cash Wages
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-wages-decrease in wages payable
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Cash interest
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-interest expense+increase in interest payable
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Cash Taxes
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-tax expense+increase in taxes payable+increase in deferred tax liability
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Reinvestment Ratio
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The reinvestment ratio measures a firm’s ability to acquire long-term assets with cash flows from operations. In contrast, the investing and financing ratio, which is more comprehensive, measures the firm’s ability to purchase assets, satisfy debts, and pay dividends
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Cost Recovery Method
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The cost recovery method is used when future cash collections are not assured even after receipt of partial payments. Gross profit is not recognized until all of the cost of goods sold is collected.
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Installment Method
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The installment sales method is used when the assurance of payment and estimated bad debts does not exist before cash is collected. Sales revenue and COGS are recognized only when cash is received.
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Free cash flow (FCF) is generally defined as...
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cash flow from operations (CFO) less net capital expenditures
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On January 1, 2004, JME purchased a truck that cost $24,000. The truck had an estimated useful life of 5 years and $4,000 salvage value. The amount of depreciation expense recognized in 2006 assuming that JME uses the double declining balance method is:
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Your answer: C was incorrect. The correct answer was B) $3,456.
yr. 2004 = 24,000 × 2/5 = 9,600 yr. 2005 = (24,000 − 9,600) × 2/5 = 5,760 yr. 2006 = (24,000 − 9,600 − 5,760) × 2/5 = 3,456 |
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Is treasury stock an asset?
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No. it is a reduction in owners equity
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Diluted EPS =
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[(Net income − Preferred dividends) + Convertible preferred dividends + (Convertible debt interest)(1 − t)] /
[(Weighted average shares) + (Shares from conversion of conv. pfd shares) + (Shares from conversion of conv. debt) + (Shares issuable from stock options)] |
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example of intangible asset
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copyright, patoont
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A company’s chart of accounts is:
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A company’s chart of accounts is a detailed list of the accounts that make up the five financial statement elements and the line items presented in the financial statements. Contra accounts are used for entries that offset other accounts. The categories that make up owners’ equity are capital, additional paid-in capital, retained earnings and other comprehensive income.
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According to the Financial Accounting Standards Board (FASB) conceptual framework,
what is the concept of reliability |
Reliability refers to information that can be verified (measured accurately) and has representational faithfulness (they are what they report to be) and neutrality (does not consider the economic impact of the reported information).
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what is the general journal?
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Journal entries record every transaction, showing which accounts are changed by what amounts. A listing of all the journal entries in order by date is called the “general journal.”
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standard auditor's report contains three parts:
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1.The financial statements are prepared by management and are their responsibility and the auditor has performed an independent review.
2.The audit was conducted using generally accepted auditing standards, which provides reasonable assurance that there are no material errors in the financial statements. 3.The auditor is satisfied the statements were prepared in accordance with accepted accounting principles, and the principles chosen and estimates are reasonable. Under U.S. GAAP, the auditor is required to state an opinion on the company's internal controls. The auditor may add this opinion as a fourth element of the auditor's report or provide it separately. |
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he formula for converting COGS from LIFO to FIFO is
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COGS FIFO = COGS LIFO – increase in the LIFO reserve.
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cfo indirect method formula
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net income
+ depreciation + decrease in accounts receivable + decrease in inventory + increase in accounts payable |
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management discussion and analysis must discuss:
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MD&A portion of the financial disclosure is required to discuss results of operations,
capital resources and liquidity and a general business overview based on known trends |
