Bus 242 Midterm Study Guide

When a corporation issues bonds, the proceeds received for the bonds depend on what?

Face Amount, Interest Rate, and Market Rate

If the market rate equals the contract rate, bonds will sell at the _____ amount; if the market rate is greater than the contract rate, the bonds will sell for less than their face value, a _____; if the market rate is less than the contract rate, the bonds will sell for more than their face value, a _____.

Face; discount; premium

When bonds are issued at face amount, the entry to record the issuance is a debit to what and a credit to what?

DR: Cash and CR:Bonds Payable

The two methods of computing the amortization of a bond discount are straight-line method and effective interest rate method. Which of these methods is required by GAAP unless the methods do not differ significantly?

Effective Interest Rate

Gains and losses on the redemption of bonds are reported in the Other revenue (expenses) section of the income statement. A _____ is recorded if the price paid for the redemption is below the bond carrying amount. A _____ is recorded if the price paid for the redemption is above the carrying amount.

Gain; Loss

What are advantages and disadvantages of a corporation?

A-Separate Continuous Legal Life and Limited Liability D-Double Taxation

A corporation may reacquire some of the stock that it has issued. The stock remaining in the hands of stockholders is then called _____.

Outstanding

If a corporation goes out of business and is liquidated, in what order are assets distributed?

Creditors, Preferred Stockholders, Common Stockholders

When common stock stock is issued in exchange for land, what accounts are debited and credited?

Debit-Land Credit-Common Stock

What is required for declaration of cash dividends?

Sufficient Retained Earnings, Sufficient Cash, and Action By Board

What dates included in a dividend announcement require journal entries? Which dates do not require a journal entry?

Require Journal Entries- Dates of Declaration and Payment

Do Not Require Journal Entries-Date of Record

What are major reasons for stock splits?

Reduce Market Price Per Share To Attract More Investors

What activities are considered operating, investing, and financing activities?

OP- From Sale of Products, From Providing Services, To Purchase Inventory, To Pay Employees, To Pay Taxes

Invest-From Sale of Property, Plant, and Equipment, From Sale of Investments, To Buy Property, Plant, and Equipment, To Purchase Investments

Financing-From Issuing Long-Term Liabilities, From Issuing Stock, To Pay Dividends, To Shareholders, To Repurchase Common Stock(Treasury Stock), To Repay Long-Term Liabilities

Using the indirect method of determining cash flows from operating activities, would you add or decrease Accounts Receivable to/from Net Income?

Increase In Accounts Receivable= Subtract In Net Income

What is the formula used to determine working capital?

Current Assets - Current Liabilities= Working Capital

What is the formula used to determine Earnings per Share (EPS) on Common Stock?

(Net Income - Preferred Dividends) / Shares of Common Stock Outstanding

What is the purpose of analyzing the number of days' sales in receivables?

Measure The Company's Efficiency In Collecting Receivables And In The Management Of Credit

Management uses both objective measures of past operations and subjective estimates about future decisions; managerial accounting reports do not always have to be prepared according to generally accepted accounting principles (GAAP). Is this statement true or false?

True

What are the five basic phases of the management process?

Improving, Planning, Decision Making, Directing, and Controlling

Is direct labor a prime cost, conversion cost, both, or neither?

Both

Know what activities are considered period costs or product costs.

Product (Manufacturing) Costs-

Direct Materials Cost- Wood Used In Neck And Body

Direct Labor Cost- Wings of Saw Operator and Wages of Employees Who Assemble the Guitar

Factory Overhead- Wages of Janitor, Power to Run The Machines, Depreciation Expense-Factory Building, Sand Paper Buffing Materials, Oil Used to Lubricate Machines, and Salary of Production Supervisors

What type of business reports three types of inventory on its balance sheet: materials inventory, work in process (WIP) inventory, and finished goods inventory? (Manufacturing, retail or service)

Manufacturing

A __________________ reports cost of goods sold as beginning inventory + purchases - ending inventory, where a __________________ reports cost of goods sold as beginning finished goods inventory + cost of goods manufactured - ending finished goods inventory.

Retail; Manufacturing

Know how to compute straight-line amortization of a bond discount.

Ex: $1100 in 5 Semianual payments = 1100/10=$100

A company issued $2,500,000 of five-year, 10% bonds at par value on January 1, 2020. Interest is payable semiannually, on June 30 and December 31. Prepare the journal entry related to the issuance of the bond:

Cash; Bonds Payable

Know how to compute new quantity of shares after a stock split. Also, know how to compute new price of shares after a stock split.

Multiply By The Number Of Shares( EX: 3 for 1 would multiply by 3 so 100 Shares would end up being 300 Shares

Know how to compute Accounts Receivable turnover.

Sales on Account/ Average Accounts Receivable

Know what prime and conversion costs are.

Prime-Direct Materials

Conversion- Factory Overhead(also includes indirect materials & Labor)

Both- Direct Labor

Know the difference in managerial and financial accounting.

Managerial