Exam 3 Study Guide (5 pages)

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Exam 3 Study Guide



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View Full Document

Exam 3 Study Guide

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Pages:
5
Type:
Study Guide
School:
University of Arizona
Course:
Acct 200 - Introduction to Financial Accounting
Edition:
1

Unformatted text preview:

ACCT 200 1st Edition Exam 3 Study Guide Lectures 16 22 Lecture 16 current short term liabilities due within a year Notes payable borrow money from bank etc sign document create interest expense interest rates are ALWAYS annual line of credit more expensive because its on demand fica tax gross payroll x fica rate Sales tax collected is not revenue it s a liability government collects monthly usually sometimes quarterly Contingent liabilities Example slip on wet floor at Mcdonald s and break your leg and sue probable they will lose lawsuit so they have to record the liability and disclose the estimable amount Contingent gains Example might win money from suing but unsure don t record contingent gains until we get the money Warranties company must record warranty expense in the same period as the sale Warranty is expense and liability Lecture 17 Watch wording annuity lump sum future or present Bond bond issuer borrows money and regularly pays the interest Sold in 1000 increments Bonds spread the risk Lecture 18 Read and know different types of bond characteristics will be definition questions on exam Unsecured bonds are riskier than secured bonds and will have higher interest rates Callable bonds less interest can pay anytime as interest rates change Convertible bonds lender can t force shareholders to convert bonds to stock Market rate of interest determines if a bond is sold at face value or a premium or discount Interest payment is based on stated or contract rate of interest Use the tables based on the market rate of interest Concept is when you have a low interest rate you can offer your bond at a premium so that effectively the bondholders earn 8 because of your discount E 9 4 Face value of bond principal 25 000 000 Market rate of interest 5 annually 2 5 per half year Contract stated rate of interest 6 annually 3 per half year Semi annual interest 10 year bond 20 periods because it s 2 payments per year 2 steps to value the bond 1 Figure out interest payment



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