ACCT 2840: Exam 3

long lived assets

resources owned by a business that enable it to produce goods and services, normally last longer than 1 year

tangible asset

plant, property, equipment

intangible asset

trademarks, copyrights, patents, licensing rights

acquisition cost

all reasonable and necessary costs to prepare and acquire an asset for sale

straight line depreciation equation

acquisition cost-residual value/life

double declining depreciation equation

1/life times 2

book value equation

aquisition cost-accumulated depreciation

capital expenditure

expenditures that are added to the acquisition cost of an asset

Revenue expenditure

expenditures that are expensed as incurred

tangible asset cost of operation

depreciation

intangible asset cost of operation

amortization

advantages of issuing additional stock

does not have to be repaid and dividends are optional

advantages of a bank loan

interest is tax deductible and ownership is not diluted

authorized shares of capital stock

total number of shares ever allowed to be sold to stockholders

issued shares of capital stock

number of shares actually sold to investors at any given time

treasury shares of capital stock

number of shares a company has repurchased from issued shares

outstanding shares of capital stock

true number of shares in market circulation

par value

the minimum amount to be contributed to stockholders

par value facts

legal requirement, specified in the charter, no relationship to market price

common stock is recorded

at par

additional paid in capital

amount paid for stock in excess of par

no-par value stock

record entire selling price in common stock

cash dividend declaration date

announces dividends are getting paid

record date of cash dividends

shares are valued/confirmed

payment date cash dividends

payment given

outstanding shares equation

issued shares-treasury stock

balance sheet reports

static cash balance and cash at the end of the period

balance sheet does NOT report

sources or inflow of cash, used or outflows of cash

operating activities

primary business

investing activities

buying and selling ppe, intangibles, and investments

financing activities

debt, stock and dividends

direct

adjusts each line of the income statement to the cash basis

indirect

adjusts net income to cash basis by looking at what affected income that did not affect cash

net profit margin

how much comes from each dollar of sale-up

gross profit percentage-up

percentage of profits earned on dollars of sale after COGS

fixed asset turnover ratio-up

how efficiently a company uses fixed assets

receivable turnover-up

how many times per year a/r is collected

days to collect-down

how many days it takes for a/r to be collected

inventory turnover-up

how many times per year inventory is sold

days to sell-down

how many days it takes for inventory to be sold

current ratio-up

whether current assets are enough to pay current liabilities

debt to asset-down

proportion of companies assets financed by debts