ACCOUNTING FINAL

There are 2 major categories of Long Term Assets

1. tangible assets

2. intangible assets

tangible assets

consists of a physical substance i.e. land, land improvements, buildings, equipment, and natural resources.

intangible assets

a lack of physical substance, often tied to a legal contract

Long-term assets are actively used in

operations for over one or more years and not intended for resale, considered “productive” assets

When reporting asset acquisition we

record as an asset that is expensed over time

basket purchases are a

purchase of more than one asset at the time for one purchase price

Goodwill formula

purchase price - fair value net assets

Expenses are typically viewed as

ordinary repairs & maintenance

To Capitalize is typically referred to as

extraordinary repairs, additions, and improvements

Accumulated Depreciation is a

contra-asset account and holds a normal credit balance

Book value formula

cost of the asset - current balance in accumulated depreciation

Residual value is

the amount a company expects to receive from selling a long-term asset at the end of its service life

straight line

is the method that allocates an equal amount of depreciation to each year of an assets service life

copyright

an exclusive right of protection given to a creator of a published work, such as a song, film, painting, photograph, or book

trademark

an exclusive right to display a word, slogan, symbol, or emblem that distinctively identifies a company, product, or service

depreciation

allocation of the cost of a tangible fixed asset

depletion

allocation of the cost of natural resources

amortization

allocation of the cost of an intangible asset

expenditures are classified as

repairs and maintenance

the account that is credited in a je to record depreciation on machinery is

accumulated depreciation

book value

the original cost of an asset minus accumulated depreciation

useful life

the estimated use the company expects to obtain from an asset before disposing of it

residual value

the amount the company expects to receive for the asset at the end of its service life

the most commonly used depreciation methods are

a. straight-line b. activity-based c. declining-balance

equity financing

when ownership is exchanged for capital

corporation

a seperate legal entity from its owners, formed under state laws

articles of incorporation consist of

a. nature of business b. number of authorized shares c. initial board of directors

board of directors

sets company policies and appoints officers to manage the corporation

stockholders

own corporations by holding shares of stock and vote to elect the composition of board of directors

advantages of a corp. consist of

a. voting rights b. receive dividends c. share in the distribution of assets d. limited liability e. raise capital and transfer ownership

Three types of stock

a. Outstanding b. Treasury c. Unissued

disadvantages of a corp. consist of

a. double taxation b. more paperwork

limited liability

the concept that stockholders are only liable for what they invest

contributed capital

money invested by shareholders into the company

unauthorized stock

shares a corporation is allowed to issue

unissued stock

shares that have never been sold

issued stock

shares sold to investors (outstanding and treasury stock)

outstanding

shares held by investors that receive dividends

treasury stock

shares repurchased by the company

IPO (initial public offering)

the first time a company sells stock to the public

PAR

the legal value assigned per share of stock

APIC (additional paid in capital)

the amount received above par value

No Par Stock

stock that has no assigned par value

Preferred Stock

type of stock that gives priority to in dividends and liquidation

Retained Earnings

cumulative profits minus dividends paid to stockholders

Dividends

cash payments made to stockholders

Declaration Date

date when dividends are officially announced

Record Date

date used to determine which stockholders will receive dividends

Payment Date

date when dividends are actually paid

Statement of Stockholder’s Equity

financial statement that summarized changes in equity accounts over time

Earning per share

measure of income earned per share of stock