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19 Cards in this Set
- Front
- Back
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Accounting treatment of PPE
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Property, Plant, and Equipment are noncurrent (long-term assets).
* These assets are shown on the BALANCE SHEET in the last half of the asset section, after current assets. * The STATEMENT of CASH FLOWS will indicate any cash expenditures for PPE as cash used for investing activities. [The USE of long-term assets is shown on the INCOME STATEMENT with depreciation, depletion, and amortization expense]. |
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Comparison of depreciation methods & their effect on the financial statements
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Read p 272-278 in the book. Since these methods apply to PPE, it would seem like the balance sheet is primarily affected.
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Intangible assets (define)
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are rights, privileges, or benefits that result from owning long-lived assets that do not have physical substance. Intangible assets are usually grouped separately on the balance sheet.
[Examples]: copyrights, patents, licenses, trademarks, franchises. |
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Depreciation, amortization, depletion
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Depreciation --->PPE
The general term “amortization” ---> Intangible assets Depletion--> Natural resource |
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Gain on sale of PPE (calculate)
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If BV > cash proceeds, it is a loss.
If cash proceeds > BV, it is a gain. If cash = BV, no gain or loss. *Gains and losses go on the income statement. |
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Classification of liabilities on balance sheet
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Current & Noncurrent (aka long-term)
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Current liabilities (define)
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Liabilities that will be paid off within one year.
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Definitely determinable liabilities (identify: give examples of it)
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Payroll/deductions (taxes – FIT [20%], social security [FICA 6.2%], Medicare [1.45%].
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Estimated liabilities (identify – give example(s) of it)
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Warranties
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Components of paid in capital (contributed capital) [identify]
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Look at p. 375 and/or homework problems.
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The effect of treasury stock on the balance sheet
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Since treasury stock is a contra-EQUITY account, it affects the Balance Sheet by reducing Total stockholder’s equity (ALL of it) when it is PURCHASED.
When treasury stock is SOLD, it increases the TOTAL shareholders’ equity (listed below both categories of C.C. and R.E.) & increases additional paid-in capital (listed under C.C.) [p.380] |
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The effect of stock split on the balance sheet
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The contributed capital is INCREASED & the retained earnings is DECREASED.
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The impact of the Declaration date on financial statements
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On the Balance Sheet, a liability called “dividends payable” is created. The amount of this liability (a positive amount) is balanced in the accounting equation with a reduction from retained earnings. The Statement of the Changes in Shareholder’s Equity is affected. But there is NO effect on the Income Statement.
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Accumulated depreciation is….
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a contra-asset.
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The diagram of authorized shares of stock (identify the parts on the diagram)
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AUTHORIZED
ISSUED NON-ISSUED OUTSTANDING TREASURY |
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The table of the list of components of Contributed capital [identify]
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Stock dividend Stk. split
Par value no effect decreases Market price decreases decreases # of issued shares increases increases # of outst. Shares increases increases # of treasury shares no effect increases Total equity no effect no effect Balance on common stock increases no effect |
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Declaration date (define & state a fact about this date)
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The Board of Directors decides a dividend will be paid & announces it to the shareholders (declares dividends).
>>>>> Fact: once a liability is created, dividends payable increases (under liabilities) & retained earnings are reduced. |
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Record date (define)
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The Board of Directors determines exactly who will receive the dividends.
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Payment date (define & state a fact about this date)
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When the dividend is paid out or distributed to investors/owners.
>>>>> Fact: once it is paid....the liability is reduced, the cash is reduced. |
