UF Financial Accounting Flashcards

Terms Definitions
inventory costs
sum of costs incurred bringing an article to useable/salable condition and location
sales revenue
= (# units sold) * (sales price)
= (# units sold) * (unit costs)
= BI + P - EI
(beg inv + purchases - end inv)
goods available for sale
= BI + P
(beg inv + purchases)
weighted avg method
(cost of goods avail for sale)
(# of units avail for sale)
4 types of inventory costing methods
-Weighted Avg Method
-Specific Identification Method
gross profit
= net sales - COGS
LIFO reserve
a contra-asset account for the excess of FIFO over LIFO inventory
Diff in BI = BI LIFO - BI FIFO
Diff in EI = EI LIFO - BI FIFO
Diff in COGS = (Diff in BI) - (Diff in EI)
lower of cost or market (LCM)
if (cost is lower)
else (NRV is lower)
COGS (diff)
  Inventory (diff)
inventory turnover ratio
Avg Inventory
Measures how many times inv was produced and sold during period.
Inc - means inv moves quickly through production to customer, reducing overhead.
fixed asset turnover
(net sales)
(avg net fixed assets)
Measures sales dollars generated by each dollar of fixed asset used.
Inc - means efficient mgt of fixed assets.
capital expenditure
huge additions that increase the productive life or efficiency --added to asset account.
revenue expenditure
maintain productive capacity for current period --not added to assets.
ordinary repairs and maintenance
expenditures for normal operating upkeep
extraordinary reprairs
infrequent expenditures that increase usefulness in the future.
the process of allocating the cost of buildings and equipment over their productive lives using a systematic and rational method
book value
= (acquisition cost) - (accumulated depr)
residual value
salvage value - estimated amount to be recovered at end of the useful life
straight-line depreciation
(cost - residual)
----------------- = depr expense
(useful life)
units-of-production depreciation
(cost - residual)
----------------- * (actual production) = depr expense
(useful life)
double-declining balance depreciation
(cost - accum depr)
------------------- * 2 = depr expense
(useful life)
asset impairment
occurs if (future cash flow
then record an asset impairment loss
depreciation of an intangible asset
(purchase price of a business) - (fair market value of the business' assets & liab)
Means the favorable reputation that a company has with its customers.
The only way to report goodwill as an asset is to purchase another business.
probable deobts or obligations of the entity that result from past transactions, and will be paid with assets or services.
working capital
(current assets) - (current liabilities)
accounts payable turnover ratio
Avg Acc Payable
Measures how quickly mgt is paying trade accounts.
Inc - means paying quickly.
paid by both employee and employer
time value of money
interest associated with the use of money over time
deferred revenues
revenues that have been collected but not earned
contingent liability
a potential liability that has arisen as a result of a past event, but is not an effective liability until some future event occurs.
operating lease
does not meet any of the 4 GAAP criteria:
1) lease term at least 75% of expected life
2) ownership transferred at end of lease
3) lease allows purchase of asset at a price below market value
4) present value of lease payments at least 90% of fair market value of asset
capital lease
meets at least 1 of 4 GAAP criteria:
1) lease term at least 75% of expected life
2) ownership transferred at end of lease
3) lease allows purchase of asset at a price below market value
4) present value of lease payments at least 90% of fair market value of asset
a series of periodic cash receipts or payments that are equal in amount each interest period
deferred taxes
the difference between income tax expense and current taxes payable, caused by diff rules for GAAP statements & IRS tax returns.
temporary differences
timing differences that cause deferred income taxes and will reverse in the future.
defined contribution plan
employer makes cash payments to an investment fund, and when employee retires he is entitled to part of the fund.
defined benefit plan
employee's retirement benefits are based on a % of their pay at retirement or the number of years of employment.
unsecured bond, no assets are specifically pledged to guarantee re-payment
bond principle
amount payable at maturity of a bond and on which periodic cash interest payments are computedalso called: par value, face amount, maturity value
bond indenture
bond contract that specifieds the legal provisions of a bond issue
callable bonds
may be called for early retirement at the option of the issuer
convertible bonds
may be converted to other securities of the issuer
senior debt
gets preference over other creditors if bankruptcy, etc
subordinated debt
paid off after some other creditors
debt-to-equity ratio
total liabilities
owner's equity
Measures relationship between amount capital provided by creditors and amount provided by owners.
High - means company relies heavily on funds provided by creditors, increases risk
coupon rate
stated rate of interest on bondsalso called: contract, stated rate
market rate of interest
current interest rate on debt when incurred
also called: yield, effective interest rate
when does a bond sell at par?
stated rate = market rate
when does a bond sell at a premium?
when does a bond sell at a discount?
market > stated
times earned ratio
NI + Int Exp + Inc Tax Exp
Int Exp
Measures the amount of resources generated for each dollar of interest expense
High - means extra margin of protection in case profitability deteriorates.
zero coupon bonds
coupon rate=0, pay no cash interest.issue price is computed by present value principle only.
straight-line amortization
a simplified method that allocates an equal dollar amount to each interest period
how are gains or losses recorded when bonds are retired early?
extraordinary item
an exclusive legal right to use a special name, image, or slogan
the exclusive right to publish, use, and sell a literary, muscial, or artistic work.
granted by federal govt for an invention;
exclusive right given to owner to use, manufacture, and sell the patented product
a contractual right to sell certain products or services, use certain trademarks, or perform activities in a geographical region
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