Accounting: Reasonably Estimable Liabilities and Disclosure Requirements

Reasonably estimate x probable

liability recorded

Reasonably estimate x reasonably possible

disclosure required

Reasonably estimate x remote

disclosure not required

Not Reasonably Estimable x probable

disclosure required

Not reasonably estimable resonably possible

disclosure required

no reasonably estimable x remote

disclosure not required

Anything with remote

Disclosure not required

Anything with reasonably possible

disclosure required

FIRST journal entry for initial installment note

"Cash" increase debit of total money borrowed

SECOND journal entry for initial installment note

"Installment Note" increase credit of total money borrowed

FIRST journal entry of EACH payment

"Installment Note" decrease debit of dec. in carry val.

SECOND journal entry of each payment

"Interest Expense" increase debit of interest expense

THIRD journal entry of each payment

"CASH" decrease credit of above 2 added

Depreciation expense

non-cash

non-cash +-

add

gains/loss

reverse

Assets

reverse

Liabilities

no reverse

amortization

non-cash

wages payable

liability

deferred revenue

liability

prepaid rent

asset

inventory

asset

prepaid insurance

asset

equipment

long term asset

prepaid expense

asset

Charter (articles of incorporation)

Legal document birthing corporation and sets rules

Authorized stock

Max # of shares that charter allows to sell

Issued stock

Number of shares actually sold

Outstanding stock

Number of shares currently owned by shareholders

Treasury stock

shares that have been bought back by company

Par value

legal “value” assigned to a share at birth

market price

How much the share is actually worth

JE1 Buying $10 worth par stock for $25

Cash debit 25

JE2 Buying $10 worth par stock for $25

Common stock 10 credit

JE3 Buying $10 worth par stock for $25

Additional Paid in Capital 15 credit

Treasury stock type

contra equity

Is increased equity debit or credit?

credit

is increased treasury stock debit or credit

debit

EPS

How much profit company made for each share of stock

EPS formula

(Net inc - dividends) / weighted avg # of common shares outstanding

what account are dividends paid from

retained earnings

JE1 Declaration

Retained earnings debit

JE2 Declaration

Dividends payable credit

JE1 Dividend payment

Dividends payable debit

JE2 Dividend payment

Cash credit

Owners equity equation

O= A - L

Owners equity sources

Contributed capital, retained earnings

Why treasury stock is recorded?

proves cash didn’t go nowhere when buying them back

Debt to equity ratio

How much financing comes from debt vs shareholders

Is high debt to equity ratio good or bad

bad, risky, too much debt

Debt to equity equation

total debt / shareholders equity

Price earnings PE ratio

Measures what the market is willing to pay for $1 of companies earnings (hype)

High PE ratio suggests?

investors expect high future growth (so they pay a premium now)

Horizontal analysis

Comparing data across time (years)

Vertical analysis

Comparing data as a percentage of a base amount (like net sales)

Stock split journal entry

no entry

Dividiend yield

ratio of dividends paid relative to its stock price

dividend yield formula

cash dividends per share / market price per share

Growth ratio formula

(current year amount - base year amount) / base year amount

Main ratio used in horizontal analysis

growth ratio

Growth ratio

Percentage change of a specific item from one period to the next

JE1 Warranty estimate

debit warranty expense

JE2 Warranty estimate

credit estimated warranty liability

JE1 warranty repair

Debit estimated warranty liability

JE2 warranty repair

credit merchandise inventory

effect of dividend on stockholders equity

no effect

f or i purchase of treasury stock

financing

f or i buy/sell OUR STOCK

financing

f or i buy/sell OTHER COMPANY stock

invest