Account 244: Final exam
38 Cards in this Set
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Chapter 10
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...
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Adv of bonds over stock
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stockholder control is not affected
tax savings result
earnings per share may be higher
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Dis of bonds
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Interest must be paid on a periodic basis
Principal (face value) of the bonds must be paid at maturity.
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Secured Bonds
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when the issuer pledges specific assets as collateral
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Unsecured bonds
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They are issued against the credit of the borrower.
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Registered Bonds
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bonds issued in the name of the owner.
bonds are made by check
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Bearer (coupon) bonds
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holder of bonds must send in a coupon to receive interest payments
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Convertible Bonds
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bonds that can be converted to common stock
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Callable Bonds
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Bonds that the issuing company can retire at a specific amount prior to maturity date
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Serial Bonds
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bonds that mature in installments
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What is the contractual interest rate?
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usually stated as an annual rate.
used to determine the amount of interest that is due
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What is the present value?
(3 factors)
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the dollar amounts to be received
the length of time until the amounts are received
the market interest rate
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What is the market interest rate?
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the rate investors demand for loaning funds
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What is the result of a discount
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the interest rate incurred by the company increases to the level of the current market interest rate.
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What is the result of a premium
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Causes the total cost of borrowing to be less than the bond interest paid
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When you add a premium to bonds payable you get the..
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To the carrying value of bonds payable on the balance sheet
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What is the carrying value of a bond?
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The bonds face value minus any discounts or plus any premiums.
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Adjusting entry on Dec 31 to account for interest to be paid Jan 1
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"...." expense 400
"...." payable 400
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To find the total cost of borrowing you...
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Compute all of the interest payments then add discount or minus premium
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When sales taxes are not rung up separately...
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Divide the total amount by 100% plus the sales tax percentage.
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How do you compute the Times interest earned ratio
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Income (before income taxes and interest expense) divided by Interest expense
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How do you compute the debt to total assets ratio?
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total debts divided by total assets
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What is "working capital" a measure of? How do you compute it?
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It is a measure of a companys liquidity.
Current assets - current liabilities
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Calculation To determine amortization amount of a bond..
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(Carrying value of bonds at beginning of period ( X ) Effective Interest Rate) minus (Face amount of bonds ( X ) Contractual Interest Rate)
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Chapter 11
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...
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Adv of a Corporation
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ability to acquire capital
continuous life
separate legal existence
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Dis of a corporation
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Government regulations
additional taxes
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What is a treasurer?
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They have custody of the corporations funds and is responsible for maintaining the companys cash position
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What is Par Value Stock?
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capital stock that the charter (which indicates the amount of stock a corp can authorize) has assigned a specific value per share for.
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Stockholder's equity section contains:
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paid in capital
Capital stocks (common, preferred)
Common stock dividends
Total capital
Additional paid in capital
In excess of par value
total paid in capital(then RE, RE + TPIC then - TS
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The closing entry of retained earnings for
Net income
Net loss
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Income summary
Retained Earnings
2. Retained Earnings
Income Summary
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Treasury stock is...
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When a corporation owns buys its stock that was previously issued.
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JE for when dividends are declared
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Retained earnings
Dividends payable
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JE for for the payment date of dividends
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Dividends Payable
Cash
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Stock Dividends increase what and decrease what?
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Increase: total paid in capital and total par value of common stock
Decrease: total retained earnings
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A stock split is a:
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the issuance of additional shares to stock holders.
Decreases: par/stated value per share
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A prior period adjustment is...
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a correction in reporting the net income
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say a company understated depreciation expense and it resulted in an overstated net income. What is the JE to fix it?
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Retained Earnings
Accum. Depreciation
(You debit RE because RE's normal balance is credit)
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Account 244: List of Accounts