HADM 1210: Prelim #1 (Ch. 1-4)

What are the five non-operating accounts on the income statement?

Gain and loss on the sale of investments, interest revenue, dividend revenue, and interest expense

What is the formula to calculate ending retained earnings?

Beginning retained earnings + net income - dividends = ending retained earnings

Always ____ revenues

Credit

Always ____ expenses

Debit

Always ____ dividends

Debit

What is an Accrued Revenue

Revenue you’re supposed to get, but you didn’t receive it yet (ex. Interest Rev.)

What is a Deferred Revenue

Unearned Revenue

What is an Accrued Expense

Expenses that have been incurred, but not paid yet (ex. Salary Exp.)

What is a Deferred Expense

Prepaid Expense

Income Statement Steps

Sales Revenue - COGS = Gross Profit - Operating Expenses + Gain on Sale of assets = Operating Income + other revenues and expenses = income before taxes - income taxes = Net Income

EPS

Net Income/Total # of Shares

Is A/P a current or non-current liability?

Current

One Year Rule

If the asset can be turned into cash or the liability needs to be fulfilled in one year, it’s current

All of the entries on the trial balance will eventually be put somewhere on the balance sheet or income statement (T or F)

True

Where does dividends go from the trial balance?

Used for ending RE calculation for the balance sheet

Net profit margin equation

Net Income/Net Sales (Sales Revenue)

What type of adjustment is depreciation? What do you debit and credit?

Deferred Expense (D. Depreciation Exp, C. Accumulated Depreciation)

What type of adjustment is interest on money you borrowed? What do you debit and credit?

Accrued Expense (D. Interest Exp, C. Interest Payable)

What type of adjustment is interest on money someone borrowed from you?

Accrued Revenue (D. Interest Receivable, C. Interest Rev)

What is the equation for interest?

Interest = Principal × Rate × Time (where Time = months / 12)

Where does Accumulated Depreciation go (Balance or Income)?

Balance Sheet (as a contra-asset subtracted under Property & Equipment)

Where does Depreciation Expense go (Balance or Income)?

Income Statement (inside Operating Expenses)

What accounts (ALOE RED) does a Deferred Expense adjustment affect?

Increases Expense (+E) and Decreases Asset (-A)

What accounts (ALOE RED) does a Deferred Revenue adjustment affect?

Decreases Liability (-L) and Increases Revenue (+R)

What accounts (ALOE RED) does an Accrued Expense adjustment affect?

Increases Expense (+E) and Increases Liability (+L)

What accounts (ALOE RED) does an Accrued Revenue adjustment affect?

Increases Asset (+A) and Increases Revenue (+R)

Current Ratio

Current Assets/Current Liabilities

What type of cashflow is buying Treasury stock (Operating, Investing, Financing)?

Financing

What type of cashflow is buying other companies’ stock (Operating, Investing, Financing)?

Investing

Are intangible assets long term or short term?

Long term

How do you classify goodwill? (ALOE RED)

Intangible asset

Net Sales =

Gross Sales - ContraRevenue (Credit discount + Sales discount)

Gross Profit =

Net sales - Cost of Sales