WGU D104 Intermediate Accounting II Units 4-6

WGU D104 Intermediate Accounting II Units 4-6

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31 terms ericblake1999 Preview WGU D 250 term mal Asset Turnover Rationet sales/average total assets Profit Margin Rationet income/total sales Rate of return on assetsnet income/average total assets Current ratiocurrent assets/current liabilities acid-test ratio(cash + short-term investments + net receivables) / current liabilities rate of return on common stock equity(net income - preferred dividends) / average common stockholders' equity payout ratiocash dividends / (net income - preferred dividends) book value per sharecommon stockholders' equity / outstanding shares sum-of-the-years'-digits methodAccelerated depreciation with higher depreciation cost in beginning and lower charges in the end. Numerator is the # of years of est. life remaining at the 1st of the year, denominator is sum of the years individually. (e.g. 5/15, 4/15, 3/15, 2/15, 1/15) Variable charge depreciation method (activity method or units-of-activity/ production approach) ((cost - salvage value) X current units) / total estimated units activity method(actual activity in period / total estimate activity) X (cost - salvage value)

double declining balance methodAn accelerated depreciation method that computes annual depreciation by multiplying the depreciable asset's decreasing book value by a constant percent that is two times the straight-line depreciation rate.Multiple assets group depreciation methodAssets similar in nature and have approx. same useful lives. Total of the annual depreciation expense for all assets in the group / total cost of the assets.Multiple assets composite depreciation method Assets are dissimilar and have different lives. Total annual depreciation expense of all assets / total cost of all assets.Composite life(Original cost - salvage value) / total annual depreciation Composite depreciation rateTotal annual depreciation of all assets / total cost of all assets.Journal entry for gain on sale of composite depreciation equipment Debit cash & accumulated depreciation (subtract gain), credit equipment.ImpairmentIf the carrying amount exceeds the undiscounted future cash flows. Loss = carrying amount > fair value.Journal entry for impairmentDebit impairment loss, credit accumulated depreciation When is the restoration of an impairment loss permitted? When an assets is held for disposal. Impairment loss is reported at the lower of cost or net realizable value (fair value - cost to sell/dispose) not to exceed amount of initial impairment loss.Depletion base for natural resources(cost to acquire + cost to explore + cost to develop i.e. intangible costs + cost to restore). Tangible costs to extract resources depreciated separately.Natural resources depletion rate(depletion base - salvage value) / total units to be recovered.Natural resources depletion expense(depletion rate X units of usage) / extracted Journal entry to record ore extractedDebit inventory (ore), credit mineral mine Journal entry to record the ore soldDebit cost of goods sold, credit inventory (ore) Journal entry to record depletion expense for mine Debit depletion expense, credit accumulated depletion Types of current liabilitiesAccounts payable, notes payable, dividends payable, customer advances/deposits, unearned (deferred) revenues, sales tax payable, current maturities of long-term debt Journal entry to record issuance of a noteDebit cash, credit notes payable Journal entry to record payment of the note at maturity Debit notes payable, debit interest expense, credit cash Journal entry to record issuance of a zero interest bearing note Debit cash, debit discount on notes payable, credit notes payable

Journal entry to record payment of a zero interest bearing note at maturity Debit notes payable, credit cash Journal entry to record sale of gift certificate booklet Debit cash, credit unearned gift card revenue Journal entry to record redemption of gift cards debit unearned gift card revenue, credit sales revenue Journal entry to record a sale with sales tax and a loss on sales tax Debit cash, debit loss on sales tax collection, credit sales revenue, credit sales tax payable Journal entry to record payment to the sales tax agency Debit sales tax payable, credit cash Journal entry to record a sale when sales tax is not segregated Debit cash, credit sales revenue Journal entry to record payment to sales tax agency when sales tax is not segregated with a loss on sales tax Debit sales revenue, debit loss on sales tax collection, credit cash Journal entry to record sale with segregated sales tax and a gain on sales tax Debit cash, credit gain on sales tax collection, credit sales revenue, credit sales tax payable Journal entry to record payment to sale tax agency with sales tax segregated Debit sales tax payable, credit cash Journal entry to record payment to sales tax agency if sales tax is not segregated and there is a gain on sales tax Debit sales revenue, credit gain on sales tax collection, credit cash Journal entry to record accrued interest expense Debit interest expense, credit interest payable Journal entry to record a long term loan with payment due during the current fiscal year Debit cash, credit current maturities of long term debt, credit note payable Long term debt due on demandConsidered a current liability or will be due on demand within a year.Long term debt that matures within one year and is to be converted into stock should be reported as?Noncurrent and accompanied with a note explaining the method to be used in its liquidation.Companies should accrue an estimated loss from a loss

contingency by:

A charge to expense and a liability recorded only if it is probable (70% or more) and reasonably estimated.Contingencies usually accruedCollectability of receivables, obligations related to product warranties and product defects, and premiums offered to customers.Contingencies not accruedRisk of loss or damage of enterprise property by fire, explosion or other hazards, general or unspecified business risks, or risk of loss from catastrophes assumed by property and casualty insurance companies including reinsurance.

Contingencies that may be accruedThreat of expropriation of assets, pending or threatened litigation, actual or possible claims and assessments, guarantees of indebtedness of others, obligations of commercial banks under standby letters of credit, agreements to repurchase receivables that have been sold.How are gain contingencies recorded?They are not recorded / accrued until realized. However, they are disclosed in the notes when a high probability exists they will be realized.How to record a contingent warranty liability that is probably and estimable, but not fulfilled?Debit warranty expense and credit warranty liability.Journal entry to record warranty liability at the point of sale Debit warrant expense, credit warranty liability Journal entry to record warranty costs incurredDebit warranty liability, credit cash, inventory, accrued payroll Journal entry to record the revenue recognized on the service type warranty Debit unearned warranty revenue, credit warranty revenue Service type warrantySold separately from the product. It's recorded as a separate performance obligation in an unearned warranty revenue account. It's recognized on a straight line basis over the warranty period.Journal entry to record bond issuance at par/face/ maturity value Debit cash, credit bonds payable.Journal entry to record issuance of bond at discount Debit cash, debit discount, credit bonds payable Journal entry to record issuance of bond at premium Debit cash, credit premium, credit bonds payable Journal entry to record bond interest payment mid-year Debit interest expense, credit cash Journal entry to record bond interest payment end of the year Debit interest expense, credit interest payable Journal entry to record bond interest payment end of the year with a discount Debit Interest expense, credit discount on bonds payable, credit interest payable How is a discount on a bond amortized?Calculate discount rate by multiplying the percent discount by face value of bond. Divide by term and calculate the current portion during bond interest payment.Journal entry to record bond interest payment mid year with a discount Debit interest expense, credit discount on bonds payable, credit cash.Journal entry to record interest expense on a bond at premium mid year Debit interest expense, debit premium on bonds payable, credit cash.Journal entry to record interest expense on a bond at a premium at the end of the year Debit interest expense, debit premium on bonds payable, credit interest payable