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9 Cards in this Set
- Front
- Back
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Difference b/w A/P and N/P?
Generally, current maturites of LT Debt are included in _____ ________. However, some exceptions apply. LT Debts maturing currently are excluded if they are to be: 1. ____________ 2. ____________ 3. ____________ Callable debt is classified as ______. ST Debt is excluded from Current Assets if the co. ____________________ basis and ___________. Dividends are generally paid within _______ and __________ are not a liability. DIVIDENDS ARE NOT AN EXPENSE, ASSET, ANYTHING! THEY ARE DIVIDENDS |
N/P written promise. A/P arises from time lag from goods received and paid.
Current liabilities; 1. Retired by non-current assets 2. Refinanced (retired from new debt issue) 3. Converted to capital stock. Current intends to refinance on a LT basis; has the ability to do so. 3 months; stock dividends |
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Sales Tax Payable Example
Credit Sales (subj. to tax) = 100 Other Cash Sales (inc. tax) = 106 Tax rate = 6% J/Es? Income Tax / Salary Payable are current liabilities. So are __________, _________ and ________. Employers and employees subject to ______. Employers subject to _________. Employees subject to _________ and _______. Ex: Salary Expense = 100 FICA tax = 7 Unemployment tax = 2 Union Dues = 1 Inc. Tax Withholding = 15 J/E's for salaries and payroll taxes? |
A/R 106
, Sales tax payable 6 , Revenue / Sales 100 Cash 106 , Sales tax payable 6 , Revenue / sales 100 payroll deductions; compensated absences; employee bonuses; FICA tax; unemployment tax; income tax withholding; union dues; Salaries and wages expense 100 , Withholding taxes payable 15 , FICA tax payable 7 , Union dues 1 , Cash 77 Payroll Tax Exp. 9 , FICA tax payable 7 , Unemployment tax payable 2 |
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Compensated absences
Accrue liability for vacation if _________. Ex: 12/31/08 Employee accum. 2 days of vacation, paid 100/day. J/E? 5/31/09. Employee uses vacation, but now paid 105/day. Unpaid bonuses are a current liability; should not record until decision communicated to employees. Likewise, a restructuring liability should be recognized when it becomes an obligation (tells employees laid off, tells employees about relocation, etc.) |
it accumulates;
Wages Exp. 200 , Vacation Liability 200 Wages Exp. 10 Vacation Liability 200 , Cash 210 |
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Contingencies
for GAINS, contingencies ___________. They are _____________. Loss Contin. If probable (future event likely to occur....), ___________, otherwise _________. (examples?) If reasonably possible _________. (examples?) If remote do nothing. (examples?) (Some argue that a Expected Value might be more accurate). Reasonably estimated is not necessarily ______, it can be __________. - If some amount in the range __________________, that amount ____________. - If _______________, ________________ J/E for probable lawsuit cont. liability 100 |
are NOT recorded; only disclosed if the probability is high
recognize if reasonably estimated; disclose in footnote; ie. Warranties/Collectibility of A/R; disclose in footnote; ie. pending litigation, guarantees; ie. risk of fire destroying building; a single amount; a range of amounts; is better than the others; should be accrued; no amount if better than the others; the minimum amount should be accrued. Lawsuit Loss 100 , Lawsuit Liability 100 |
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Warranty - type of conting. liability... 2 types:
1. ___________ use when warranty is an integral part of the sale 2. ___________ use when warranty sold separately from the product (ie. extended warranties)... Ex Revenue = 3000 Spent 20 servicing warranties. Total cost for warranties est = 120 J/E's warranty expense approach? What if warranties not intergal part of sale, 150 of sale related to warranties. J/E for sales warranty approach? |
1. Expense Warranty Approach
2. Sales Warranty Approach Ex1 Cash 3000 , Rev 3000 Warranty Exp 20 , Cash 20 Warr. Exp 100 , Warranty Liability 100 Ex2 Cash 3000 , Rev 2850 , Unearned Rev. 150 Warr. Exp. 20 , Cash 20 Revenue 25 , Unearned Rev. 25 |
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Rebates/Premiums - est. the # of rebates used, charge to Rebate/Premium Exp & Liability for Rebate/Premium.
Guarantees - like co-signing a car loan... amount of liability is the fair value of the guarantee Early Extinguishment of Bonds Payable: If bonds retired early by purchasing them, the Gain or Loss on the Sale is tricky. 2 J/Es - Each involving Cash 1. First amortize the bonds for the partial period. and "Pay out the cash" 2. Close out accounts (B/P, Discount/Premium) and use the Cash Paid excluding the accrued interest. |
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IFRS Differences - ST-Liabilities:
1. _______________ 2. _______________ Current Ratio? Acid-test Ratio? These help measure? |
1. Contingencies - probable is defined as "more likely than not (>50%)
2. When there is a range of possible contingency with equal chance of occurring, the MIDPOINT in the range is recorded as Liability Current = Current Assets / CL Acid-test = (Cash + Marketable Securities + Net Receivables) / Current Liab. These measure liquidity... |
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Debuture bonds are also known as __________.
Asset Retirement Obligation, should be recognized when there is a _______ of its _______. Otherwise it should be recorded when ______________. The PPE associated with the ARO should be ____________. The FULL AMOUNT of PPE should be ______ and the ARO should be adjusted for discount rate - charged to _________. Ex: 1/1/09. 1,000,000 platform - 5 yr useful life. - SL Depreciation. ARO 50,000 in 5 years. r=9%. J/Es for 2009/2010? |
Unsecured bonds.
reasonable estimate; present value; it can be reasonably estimated; increased by the ARO's PV; depreciated; accretion expense; Ex: PV of ARO = 32,497 1/1/09 PPE 1,032,497 , ARO 32,497 , Cash 1,000,000 12/31/09 Depreciation Exp. 206,499 , A/D 206,499 Accretion Expense 2925 , ARO 2925 2010 Depreciation Exp. 206,499 , A/D 206,499 Accretion Expense 3187 , ARO 3187 |
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Off balance sheet financing is an attempt to prevent recording the obligations. Forms include:
- ___________ - __________ (like _____) - __________ Fair Value Option - SFAS ___ Can irrevocably choose to record many ____ and _____ at _____. Unrealized G/L _____________. Ratios: Debt-Asset Ratio? Times Earned Interest Ratio? Measures the ____________ |
- Non-consolidated Subsidiaries
- Special Purpose Entities (SPE) (like Enron) - Operating Leases assets; liabilities; fair value; must be reported in earnings. Total Debt / Total Assets EBIT / Interest Expense ability of company to meet interest payments. |
