Accounting Exam 3 Equations

Cash Ratio

(Cash + Equivalents)/Total current liabilities (Does not include accounts revivable)

Acid Test Ratio

(Cash + Cash Equivalents + Short-term investments + current receivables)/current liabilities

Account Receivable Turnover

Net credit sales/Average Net Accounts Receivables [(year A + year B)/2]

Average Net Accounts Receivables

(year A + year B)/2

Net Realizable Value (NRV)

Accounts Receivable - bad debt allowance

Interest on balance sheet vs income statement

Interest Receivable vs Interest revenue

Book Value

Cost - Account Depreciation = Salvage/Residual value

Ending balance

Beginning balance + estimated amount - paid amount

Number of days sale equation

365/accounts receivable turnover

Unit depletion expense

Depreciation rate x units extracted

Depreciation Rate

(Cost - residual)/estimated total capacity

Goodwill

Purchase amount - (Fair market value - liabilities)

Double Declining Depreciation Rate

2(1/years) = %

$ - accumulated depreciation x %

Straight line/Annual depreciation

(Cost-salvage value)/useful life

Times-interest-earned

(income before tax + interest expense)/interest expense

Taxes rate

base - earnings = taxable amount subject to FICA % (only applies to net pay that is equal to or under the taxable amount)

Interest payable

$ x % x (month/12 OR day/365)