ACT 210 Final Exam Note Card

ACT 210 Final Exam Note Card • Operating activities: cash receipts and payments involving revenues and expenses • Investing activities: cash receipts and payments involving the purchase and sale of long-term assets and current investments • Financing activities: cash receipts and payments with lenders (borrowing and repaying debt) and investors (issuing stocks, paying dividends, and purchasing treasury stock) • Contingent Liability: A potential liability that may occur in the future, such as pending lawsuits or honoring product warranties. • Services on Account: A: - Increase & L - No Change & SE - Increase / Declaration Div: NI - No Change & SE - Decrease • COGS = Expense Account / Net Income = Revenues - Expenses / • Increase Current Ratio: Company able to meet short term obligations • Warranty: Initial Expense - Dr. Warranty Expense & Cr. Warranty Liability / Use Up - Dr. Warranty Liability & Cr. Cash • NRV: Only find if Unit Cost is GREATER than Unit NRV, then multiply quantity by both and find diff / Dr. COGS & Cr. Inventory • Discount: 1/10, n/30 = 1% discount if paid within 10 days, if not then full amount within 30 days o If taking discount: Dr. A/P & Cr. Inventory/Cash (inventory = discount amount) • Depreciation: o Straight Line: Principal minus RV divided by Years (will be same number for all years) o Double Declining: Principal times 2 divided by Years / Principal minus Year 1 depreciation times 2 divided by Years o Activity Based: Principal minus RV divided by Expected Usage = Price/Usage (X) THEN (X) times Miles Driven • Transactions Question: o Purchase Rental Space for X in Advance: Dr. Prepaid Rent & Cr. Cash o Pay Salaries from Prev. Year: Dr. Salaries Payable & Cr. Cash o Issue Shares: Dr. Cash & Cr. Common Stock/APIC (cash is TOTAL ammt, common stock is par times shares issued) o Purchase Treasury Stock: Dr. Treasury Stock Cr. Cash o Declare Dividends: Dr. Dividends & Cr. Div Payable (*shares outstanding minus any treasury stock bought back) o Pay Dividends: Dr. Dividends Payable & Cr. Cash o Sell Treasury Stock: Dr. Cash & Cr. Treasury Stock/APIC (cash is resell shares times resale price, treasury stock is resell shares times original purchase price from prev question, APIC is difference from both) GAIN= Resale Price > Purchase Price o Supplies Remaining: § Ending balance in T Acct. should reflect number given, find what the Cr. would be and that is answer, then Dr. Supplies Expense & Cr. Supplies o Provided Services to Customers who Paid in Advance: § Dr. Deferred Revenue & Cr. Service Revenue (remember to account for this in T Acct. sheet) o Unpaid Salaries: § Dr. Salaries Expense & Cr. Salaries Payable (write in T Accts.) o Rent Expense After First Year: § Dr. Rent Expense Cr. Prepaid Rent (initial purchase divided by years = ammt/year to record) (create rent exp T Acct) • Post-Closing Trial Balance: o **Empty Revenue, Expenses, Dividends into Retained Earnings o Example Post-Closing Trail Balance: § Dr. (Cash, A/R, Supplies, Prepaid Rent, Land) Cr. (A/P, Deferred Revenue, Salary Payable, Common Stock, APIC) Dr. (Treasury Stock) Cr. (Retained Earnings)

• Ratios: o Receivable Turnover: Net Credit Sales divided by Avg. A/R o Avg. Collection Period: 365 divided by Receivable Turnover Ratio o Inventory Turnover: COGS divided by Avg. Inventory o Current Ratio: Current Assets divided by Current Liabilities o Acid Ratio: Cash plus Current Investments plus A/R divided by Current Liabilities o Debt-to-Equity: Total Liabilities divided by Stockholders Equity o Times Interest Earned: Net Income plus Int. Expense plus Tax Expense divided by Int. Expense o Gross Profit: Gross Profit divided by Net Sales o Return on Asset: Net Income divided by Avg. Total Assets o Return on Equity: Net Income divided by Avg. Stockholder Equity o Profit Margin: Net Income divided by Net Sales o Asset Turnover: Net Sales divided by Avg. Total Assets • Horizontal & Vertical Analyses: o Horizontal: Change Ammt - New Ammt. minus Old Ammt. & Change % - New Ammt. divided by Old Ammt. minus 1 = % (remember to show if +/-) (calculate individual row across) (2 decimals is 55.782 = 55.78%, 55.787 = 55.79%) o Vertical: Take each line ammt. and divide by Total Assets for that year (show % answer as negative if negative numbers used) • Statements of Cash Flows: o Operating Cash Flow (Asset é => - ∆ , Asset ê => + ∆ & Liability é => + ∆ , Liability ê => - ∆) § Net Income (from income statement) § Depreciation Expense (from income statement) § A/R (change ammt. from balance sheet, if neg in balance sheet then positive in this section) § Inventory (change ammt. from balance sheet, if positive in balance sheet then (negative) in this section) § Prepaid Rent (change ammt. from balance sheet, if positive in balance sheet then (negative) in this section) § A/P (from balance sheet change ammt., write exactly as stated either positive or negative) § Interest payable (from balance sheet change ammt., write exactly as stated either positive or negative) § Income tax Payable (from balance sheet change ammt., write exactly as stated either positive or negative) • Net Operating Cash Flow (Cr.) o Investing Cash Flow ( ∆ Long Term Asset) § Purchase Equipment (from balance sheet change ammt., if positive number then negative in this section) • Net Investing Cash Flow (Cr.) o Financing Cash Flow ( ∆ Long Term Liabilities, ∆ in Common Stock, ∆ Retained Earnings for Dividends) § Repay Note Payable (from balance sheet change ammt., write exactly as stated either positive or negative) § Pay Cash Dividends (nothing here in the practice) • Net Financing Cash Flow (Cr.) • Net Change in Cash (net operating cash flow +/- net investing cash flow +/- net financing cash flow) • Beginning Cash (previous year/old cash ammt. from balance sheet) • End Cash (net change in cash + beginning cash)