Acc 201 Chapter 9 part 1 final exam

Acc 201 Chapter 9 part 1 final exam - Contingent...

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Chapter 9: Liabilities Current ratio – While high ratio normally suggests good liquidity, too high a ratio suggests inefficient use of resources. Current Ratio = Current Assets / (divide) Current liabilities Accounts Payable turn-over ratio: The accounts payable turnover ratio measures how quickly management is paying trade accounts. High accounts payable ratio normally suggests that a company is paying its suppliers in a timely manner. Accounts Payable Turnover = Cost of Good Sold / (divide) Average Accounts Payable The ratio can be stated more intuitively by dividing in into the number of days in a year: Average Age of payable = 365 days / (divide) Turnover ratio Time value of money concept: interest that is associated with the use of money over time. Interest = Principal x Interest Rate x Time Deferred Revenues: Are revenues that have been collected but not earned; they are liabilities until the good or services are provided.
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Unformatted text preview: Contingent liabilities is a potential liability that has risen as the result of a past event; not an effective liability until some future event occurs. (lawsuits, Environmental problems, product warranties) 1) a liability that is both probable and capable of being reasonably estimated must be recorded and reported on the balance sheet 2) a liability that is reasonably possible must be disclosed in a not in the financial statements whether it can be estimated or not. 3) remote contingencies are not disclosed. Present value concepts *Present value (PV) is the current value of an amount to be received in the future; a future amount discounted for compound interest. o Present Value of a single amount: The present value of a single amount is the worth to you today of receiving that amount some time in the future....
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This note was uploaded on 03/19/2008 for the course ACCT 201 taught by Professor Anothony during the Fall '07 term at Michigan State University.

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