Clemson ACCT 2010 - Grant - Final
Exam Set - Chapters 1-4 & 11-13
Managers - ANS-analyze financial statements to evaluate past financial performance
and make future decisions
Time period assumption - ANS-the long life of a company is divided into shorter periods,
such as months, quarters, and years
What are the two sources of financing available to businesses? - ANS--Equity (owners'
contributions and reinvestments of profit)
-Debt (loans)
Sole Proprietorship - ANS-owned by one person; owner is personally liable for debts of
business
The Statement of Cash Flows shows - ANS-each major type of business activity that
cause a company's cash to increase or decrease during the accounting period
Corporate Ownership - ANS-shares of stock can be purchase in small amounts
ownership interest are transferable
stockholders are not liable for the corporations debits - creditors have no legal claim on
the personal assets of stockholders like they do on the personal assets belonging to
owners of sole proprietorships and partnerships
an internal report prepared to check that debts equal credits and all temporary accounts
have been closed - ANS-Post-Closing Trial Balance
Cash equivalents - ANS-(1) readily convertible to known amounts of cash and (2) so
near to maturity that their value is unlikely to change
Common Stock - ANS-the basic voting stock issued by a corporation to stockholders
Partnership - ANS-owned by two or more people; each partner is personally liable for
debts
Systematic accounting process - ANS-1. Analyze
2. Record
3. Summarize
,Are balance sheet accounts considered permanent or temporary? - ANS--Permanent
because they take stock of what exists at a point in time
-Will continue to have a financial impact beyond the end of the current period
accounts that track financial results for a limited period of time by having their balances
zeroed out at the end of the accounting year
revenue, expense, dividends - ANS-Temporary Account
Creditors - ANS-use financial statements to asses compliance with loan covenants
Analyst - ANS-use financial statements to generate advice for investors and others
accounts that track financial results from year to year by carrying their ending balances
into the next year
retained earnings - ANS-Permanent Account
Are income statement accounts considered permanent or temporary? - ANS--
Temporary because they depict a flow of what happened over a period of time
-Revenues and expenses report the financial impact of activities in just the current
period
Transaction - ANS-business activity that affects the basic accounting equation
Corporation - ANS-separate entity from both a legal and accounting perspective;
owners are not personally responsible for debts; can be public or private
Classifying Cash Flows - ANS-cash flows fro operating activities
Cash flows from investing activities
Cash flows from financing activities
Benefits of common stock - ANS-voting rights
dividends
residual claim
preemptive rights
Public company - ANS-have stock bought and sold on stock exchange
Voting rights - ANS-for each share you own you get a set number of votes on major
issues
Cash flows from operating activities - ANS-cash inflows and outflows related to
components of net income
,What are the two types of transactions? - ANS--External exchanges (involve assets,
liabilities, and/or stockholders' equity between the company and someone else)
-Internal events (occur within the company itself)
Cash basis accounting - ANS--Reports revenues when cash is received and expenses
when cash is paid
-Not allowed under GAAP
The normal balance in a contra-account is always the same/opposite of the account it
offsets? - ANS-opposite
Fixed Asset Turnover equation - ANS-Net Revenue / Avg Net Fixed Assets
How do companies list liabilities? - ANS-order of maturity (how soon they will be paid in
cash or fulfilled by providing a service)
Return on Equity equation - ANS-(Net Income - Preferred Dividends) / (Avg Common
Stockholders Equity) x 100
AMORTIZATION IS RECORDED FOR THE USE OF SOFTWARE:
- the app software developed for Sonic-Gateway, estimated to have three years of
usefulness, has now been used for one month at an estimated expense of $250. - ANS-
Amortization Expense 250
Accumulated Amortization 250
Cost principle - ANS-assets and liabilities are first recorded at cost, which is their cash-
equivalent value on the date of the transaction
Balance sheet - ANS-reports the amount of assets, liabilities, and stockholders' equity of
a business at A POINT IN TIME
Direct Method of Operating Cash flows - ANS-reports the components of cash flows
from operating activities as gross receipts and gross payments - the difference between
these cash inflows and outflows = Net Cash Provided by (used in) Operating Activities
Issued Shares - ANS-shares of stock that have been distributed by the corporation
(owned forever by one stockholder or another, UNLESS the company repurchases
them)
Indirect Method of Operating Cash flows - ANS-presents the operating activities section
of the cash flow statement by adjusting net income to compute cash flows from
operating activities
Outstanding shares - ANS-shares that are currently held by stockholders (not the
corporation itself)
, GIFT CARDS REDEEMED:
- SonicGateway redeemed $100 of gift cards that customers used to pay for game
downloads - ANS-Unearned Revenue 100
Sales Revenue 100
Cost principle of accounting - ANS-assets are initially reported on the balance sheet
based on their original cost to the company
Trial balance - ANS-an internal report that lists all accounts and their balances to check
on the equality of total recorded debits and total recorded credits
Earnings per share equation - ANS-(Net Income - Preferred Dividends / Avg # of
Common Shares Outstanding) x 100
Price/Earnings Ratio equation - ANS-stock price/EPS
REVENUE EARNED BUT NOT YET RECORDED:
- SonicGateway provided $2,500 of promotional services to other app developers in
September, with payment to be received in October - ANS-Accounts Receivable 2,500
Service Revenue 2,500
Classified balance sheet - ANS-a balance sheet that shows a subtotal for current assets
and current liabilities
Statement of cash flows - ANS-reports the operating, investing, and financing activities
that caused increases and decreases in cash during the period
Net cash flows provided by (used in) operating activities is always the same under the
____________________________ methods - ANS-direct and indirect
Stock Authorization - ANS-Par Value
No-par Value Stock
Par Value - ANS-an insignificant value per share of capital stock specified in the charter
Determining Operating Cash Flows Using the Indirect Method - ANS-Net Income
+ Depreciation
+ Decreases in Current Assets
- Increases in Current Assets
- Decreases in Current Liabilities
+ Increases in Current Libaibilities
------------------------
Net Cash flow provided by (used in) operating activities
Operating activities - ANS--Directly related to running the business to earn profit
Exam Set - Chapters 1-4 & 11-13
Managers - ANS-analyze financial statements to evaluate past financial performance
and make future decisions
Time period assumption - ANS-the long life of a company is divided into shorter periods,
such as months, quarters, and years
What are the two sources of financing available to businesses? - ANS--Equity (owners'
contributions and reinvestments of profit)
-Debt (loans)
Sole Proprietorship - ANS-owned by one person; owner is personally liable for debts of
business
The Statement of Cash Flows shows - ANS-each major type of business activity that
cause a company's cash to increase or decrease during the accounting period
Corporate Ownership - ANS-shares of stock can be purchase in small amounts
ownership interest are transferable
stockholders are not liable for the corporations debits - creditors have no legal claim on
the personal assets of stockholders like they do on the personal assets belonging to
owners of sole proprietorships and partnerships
an internal report prepared to check that debts equal credits and all temporary accounts
have been closed - ANS-Post-Closing Trial Balance
Cash equivalents - ANS-(1) readily convertible to known amounts of cash and (2) so
near to maturity that their value is unlikely to change
Common Stock - ANS-the basic voting stock issued by a corporation to stockholders
Partnership - ANS-owned by two or more people; each partner is personally liable for
debts
Systematic accounting process - ANS-1. Analyze
2. Record
3. Summarize
,Are balance sheet accounts considered permanent or temporary? - ANS--Permanent
because they take stock of what exists at a point in time
-Will continue to have a financial impact beyond the end of the current period
accounts that track financial results for a limited period of time by having their balances
zeroed out at the end of the accounting year
revenue, expense, dividends - ANS-Temporary Account
Creditors - ANS-use financial statements to asses compliance with loan covenants
Analyst - ANS-use financial statements to generate advice for investors and others
accounts that track financial results from year to year by carrying their ending balances
into the next year
retained earnings - ANS-Permanent Account
Are income statement accounts considered permanent or temporary? - ANS--
Temporary because they depict a flow of what happened over a period of time
-Revenues and expenses report the financial impact of activities in just the current
period
Transaction - ANS-business activity that affects the basic accounting equation
Corporation - ANS-separate entity from both a legal and accounting perspective;
owners are not personally responsible for debts; can be public or private
Classifying Cash Flows - ANS-cash flows fro operating activities
Cash flows from investing activities
Cash flows from financing activities
Benefits of common stock - ANS-voting rights
dividends
residual claim
preemptive rights
Public company - ANS-have stock bought and sold on stock exchange
Voting rights - ANS-for each share you own you get a set number of votes on major
issues
Cash flows from operating activities - ANS-cash inflows and outflows related to
components of net income
,What are the two types of transactions? - ANS--External exchanges (involve assets,
liabilities, and/or stockholders' equity between the company and someone else)
-Internal events (occur within the company itself)
Cash basis accounting - ANS--Reports revenues when cash is received and expenses
when cash is paid
-Not allowed under GAAP
The normal balance in a contra-account is always the same/opposite of the account it
offsets? - ANS-opposite
Fixed Asset Turnover equation - ANS-Net Revenue / Avg Net Fixed Assets
How do companies list liabilities? - ANS-order of maturity (how soon they will be paid in
cash or fulfilled by providing a service)
Return on Equity equation - ANS-(Net Income - Preferred Dividends) / (Avg Common
Stockholders Equity) x 100
AMORTIZATION IS RECORDED FOR THE USE OF SOFTWARE:
- the app software developed for Sonic-Gateway, estimated to have three years of
usefulness, has now been used for one month at an estimated expense of $250. - ANS-
Amortization Expense 250
Accumulated Amortization 250
Cost principle - ANS-assets and liabilities are first recorded at cost, which is their cash-
equivalent value on the date of the transaction
Balance sheet - ANS-reports the amount of assets, liabilities, and stockholders' equity of
a business at A POINT IN TIME
Direct Method of Operating Cash flows - ANS-reports the components of cash flows
from operating activities as gross receipts and gross payments - the difference between
these cash inflows and outflows = Net Cash Provided by (used in) Operating Activities
Issued Shares - ANS-shares of stock that have been distributed by the corporation
(owned forever by one stockholder or another, UNLESS the company repurchases
them)
Indirect Method of Operating Cash flows - ANS-presents the operating activities section
of the cash flow statement by adjusting net income to compute cash flows from
operating activities
Outstanding shares - ANS-shares that are currently held by stockholders (not the
corporation itself)
, GIFT CARDS REDEEMED:
- SonicGateway redeemed $100 of gift cards that customers used to pay for game
downloads - ANS-Unearned Revenue 100
Sales Revenue 100
Cost principle of accounting - ANS-assets are initially reported on the balance sheet
based on their original cost to the company
Trial balance - ANS-an internal report that lists all accounts and their balances to check
on the equality of total recorded debits and total recorded credits
Earnings per share equation - ANS-(Net Income - Preferred Dividends / Avg # of
Common Shares Outstanding) x 100
Price/Earnings Ratio equation - ANS-stock price/EPS
REVENUE EARNED BUT NOT YET RECORDED:
- SonicGateway provided $2,500 of promotional services to other app developers in
September, with payment to be received in October - ANS-Accounts Receivable 2,500
Service Revenue 2,500
Classified balance sheet - ANS-a balance sheet that shows a subtotal for current assets
and current liabilities
Statement of cash flows - ANS-reports the operating, investing, and financing activities
that caused increases and decreases in cash during the period
Net cash flows provided by (used in) operating activities is always the same under the
____________________________ methods - ANS-direct and indirect
Stock Authorization - ANS-Par Value
No-par Value Stock
Par Value - ANS-an insignificant value per share of capital stock specified in the charter
Determining Operating Cash Flows Using the Indirect Method - ANS-Net Income
+ Depreciation
+ Decreases in Current Assets
- Increases in Current Assets
- Decreases in Current Liabilities
+ Increases in Current Libaibilities
------------------------
Net Cash flow provided by (used in) operating activities
Operating activities - ANS--Directly related to running the business to earn profit
