ACCT201 Final Exam Study Guide

This set of flashcards will help you review key concepts in accounting, focusing on fixed assets, depreciation, liabilities, stockholders' equity, cash flows, and related calculations.

What are fixed assets also known as?

Plant assets or Property, Plant & Equipment.

How is the cost of a fixed asset determined?

It includes all costs necessary to get the asset ready for use.

Which fixed asset is not depreciated?

Land.

What is the formula for calculating the book value of an asset?

Book value = Cost - Accumulated depreciation.

What does salvage value represent?

Estimate of the asset's value at the end of its useful life.

How is straight-line depreciation calculated?

(Cost - Salvage value) / Useful life.

How must straight-line depreciation be adjusted if an asset is purchased during the year?

Adjust by the number of months the asset is in use divided by 12.

How are ordinary repairs treated in accounting?

Ordinary repairs are expensed as incurred.

What is the entry to record a gain or loss on the disposal of a fixed asset?

Compare book value to sale price; gain if sale price > book value, loss if sale price < book value.

What are goodwill acquisitions?

Goodwill is acquired through business combinations and is not a separable or identifiable asset.

How are research and development costs treated for accounting purposes?

They are expensed as incurred.

What fees are included in the cost of patents?

All costs associated with securing the patents and their legal life.

Define intangible assets.

Assets that have no physical substance.

How is amortization expense calculated?

Using the straight-line method over the asset’s useful life.

What is the formula for calculating asset turnover?

Asset turnover = Net sales / Average total assets.

What distinguishes Property, Plant & Equipment from Intangible assets?

Property, Plant & Equipment are tangible, while Intangible assets lack physical substance.

What is the Units of Activity method of depreciation?

(Cost - Salvage Value) / Total units of activity, multiplied by units used annually.

What entry is made for the issuance of a note?

Record the note at its principal value.

How is interest calculated on a note?

Interest = Principal * Rate * Time.

How is payroll recorded?

Record gross pay less deductions equals net pay.

What are convertible bonds?

Bonds that can be converted into common stock.

What are callable bonds?

Bonds that can be redeemed early by the issuing corporation.

How are bonds payable recorded at par value?

At face value (100% of face value).

What does carrying value of bonds payable include?

Face value plus unamortized premium or minus unamortized discount.

How is interest owed to bondholders calculated?

Interest = Face Value * Rate.

How do you calculate gain or loss on redemption of bonds?

Compare payment to carrying value; loss if payment > carrying value, gain if payment < carrying value.

What can a shareholder lose if a corporation goes bankrupt?

Their initial investment only.

What differentiates authorized shares from issued shares and outstanding shares?

Authorized shares are the maximum allowed by the corporate charter; issued shares are what has been sold; outstanding shares are currently held by shareholders.

How does treasury stock affect stockholders' equity?

Treasury stock reduces total stockholders’ equity.

What is the difference between common stock and preferred stock?

Common stock usually grants voting rights; preferred stock typically has priority dividends.

What are the key dates related to dividends?

Declaration date, record date, and payment date.

What is cumulative preferred stock?

Preferred stock that accumulates dividends if not paid.

What is a stock split?

A division of existing shares into multiple shares to increase liquidity.

What is a payout ratio?

The proportion of earnings paid out as dividends to shareholders.

How are cash flows from operations calculated using the indirect method?

Start with net income and adjust for changes in non-cash variables.

What activities are included in cash flows from financing activities?

Transactions related to long-term liabilities and shareholder equity.