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ACCTG 331 Exam 1
Hopefully I am not cooked
| Term | Definition |
|---|---|
| Revenue | The inflow of cash or accounts receivable that a business receives when it provides goods or services to its customers |
| Core Revenue Recognition Principle | Companies recognize revenue when goods or services are transferred to customers for the amount the company expects to be entitles to receive in exchange for those goods or services |
| Step 1 (Revenue Recognition) | Identify the contract with a customer |
| Step 2 (Revenue Recognition) | Identify the performance obligation(s) in the contract |
| Step 3 (Revenue Recognition) | Determine the transaction price |
| Step 4 (Revenue Recognition) | Allocate the transaction price to each performance obligation |
| Step 5 (Revenue Recognition) | Recognize revenue when (or as) each performance obligation is satisfied |
| Performance obligations | Promises to transfer goods or services to a customer |
| Control | The seller recognizes revenue when it satisfies a performance obligation by transferring the promised good/service. We consider transfer to have occurred when the customer has _________ of the good/service. |
| Control | Customer is more likely to _______ a good/service if has: obligation to pay the seller, legal title to the asset, physical possession of the asset, assumed the risks and rewards of ownership, accepted the asset |
| Over time | Revenue is recognized ______ ______ if either: customer consumes benefit of seller's work as it is performed, customer controls asset as it is created, seller is creating an asset that has no alternative use to the seller & legal right to payment |
| Output-based estimate | Measures progress toward completion as the proportion of the goods/services transferred to date |
| Input-based estimate | Measures progress toward completion as the proportion of effort expended thus far relative to the total effort expected to satisfy the performance obligation |
| Distinct | A good/service is ______ if it is both: capable of being ______, separately identifiable from other goods/services in the contract |
| Transaction price | The amount the seller expects to be entitled to receive from the customer in exchange for providing goods/services |
| Stand-alone selling price | The amount at which the good/service is sold separately under similar circumstances |
| Contract | An agreement that creates legally enforceable rights and obligations |
| Contract does not exist | A _____ ______ ____ _______ if neither the seller nor the customer has performed any obligations under the contract and both the seller and the customer can terminate the contract without penalty |
| Prepayments | Nonrefundable up-front fees for particular activities (for example up-front initiation fees for gym memberships) |
| Quality-assurance warranties | Obligate the seller to make repairs or replace products that later are found to be defective or unsatisfactory |
| Extended warranties | Offered as an additional service that covers new problems arising after the customer takes control of the product |
| Option | A feature of a contract that allows the customer to receive additional goods or services at no cost or a discount |
| Variable consideration | The portion of a transaction price that depends on the outcome of future events. Calculated either by expected value (sum of each possible amount multiplied by its probability) or most likely amount |
| Right of return | Allows customers to return merchandise if they decide they don't want it, are not satisfied with it, or are unable to resell it |
| Principal | Controls goods/services and is responsible for providing them to the customer |
| Agent | Doesn't control goods/services but rather facilitates transfers between sellers & customers |
| Licenses | ________ allow customers to access a seller's intellectual property (IP) |
| Functional intellectual property | Some licenses transfer a right of use to IP that has significant stand-alone functionality, meaning that it can perform a function or a task or be played or aired over various types of media |
| Symbolic intellectual property | Other licenses provide the customer with the right of access to seller's IP with the understanding that the IP does not have significant stand-alone functionality |
| Franchise | In a _____ arrangement, a franchisor grants to the franchisee the right to sell the franchisor's products and use its name |
| Bill-and-hold | A _________ arrangement exists when a customer purchases goods but requests that the seller retain physical possession of the goods until a later date |
| Consignment | In a ______ arrangement, one company (the "consignor") transfers goods to another company (the "consignee") to sell, while still retaining legal title to the goods |
| Contract liability | The seller has a _______ _______ if it received payment prior to satisfying a performance obligation |
| Account receivable | The seller recognizes an _______ _______ if the seller has an unconditional right to receive payment, which is the case if only the passage of time is required before the payment is due |
| Contract asset | A seller has a _____ _____ if it has a conditional right to receive payment after satisfying a performance obligation |
| Construction in progress | Equivalent to work-in-process inventory in a manufacturing company |
| Billings on construction contract | A contra account to the CIP asset |
| Bonds | Obligate the issuing corporation to repay a stated amount at a specified maturity date |
| Bond indenture | Describes the specific promises made to bondholders |
| Debenture bond | "unsecured" meaning it is backed only by the "full faith and credit" of the issuing corporation |
| Subordinated debenture | Not entitled to receive any liquidation payments until the claims of other specified debt issues are satisfied |
| Mortgage bond | Backed by a lien on specified real estate owned by the issuer |
| Callable | Most corporate bonds are ______ (or redeemable). The ____ feature allows the issuing company to buy back outstanding bonds from bondholders before their scheduled maturity date |
| Covenants | Restrictions on a debt issuer's activities that reduce the chance it will default on the debt |
| Serial bonds | A more structured (and less popular) way to retire bonds on a piecemeal basis. Retired in installments during all or part of the life of the issue |
| Convertible bonds | Retired as a consequence of bondholders choosing to convert them into shares of stock. Can be converted into (exchanged for) shares of stock at the option of the bondholder |
| Effective interest method | Used to determine interest expense for bonds payable. Interest for each period is calculated by multiplying the OB of the debt at beg. of period by ___ ___ ___ that was determined at time bond was issued |
| Straight-line method | Under this method, the company allocates a discount or a premium equally to each period over the term to maturity |
| Debt issue costs | Typically include legal and accounting fees, printing costs, and registration and underwriting fees. Recorded by combining them with any discount (or subtracting them from any premium) on the debt |
| Implicit rate of interest | Rate implicit in the agreement. May be that it is not apparent |
| Important ratios | Debt to equity = total liabilities / shareholder's equity Rate of return on assets = net income / total assets Return on equity = net income / shareholder's equity Times interest earned ratio = (net income + interest expense + tax expense) / interest |
| Early extinguishment of debt | When debt of any type is retired prior to its scheduled maturity date, the transaction is referred to as ___ ___ __ ___ |
| Detachable stock purchase warrants | Another (less common) way to sweeten a bond issue is to include these as part of the security issue |
| Shareholders' equity | A residual amount - what's left over after liabilities have been subtracted from assets (in other words, net assets) |
| Ownership interests of shareholders | ___ ___ ___ ___ arise primarily from two sources: paid-in capital & retained earnings |
| Paid-in capital | Amounts invested by shareholders in the corporation |
| Retained earnings | Amounts earned by the corporation on behalf of its shareholders |
| Comprehensive income | Represents the total nonowner changes in equity for a reporting period |
| Accumulated other comprehensive income (AOCI) | The sum of all the OCI that has been reported in current and prior periods. The amount is reported in the statement of shareholders' equity |
| Statement of shareholder's equity | Reports the transactions that cause changes in its shareholders' equity account balances |
| S corporation | Have characteristics of both regular corporations and partnerships. Owners have the limited liability protection of a corporation, but income and expenses are passed through to the owners as in a partnership, avoiding double taxation |
| Limited liability company | Owners are not liable for the debts of the business, except to the extent of their investment. Unlike a limited partnership, all members of a limited liability company can be involved with managing the business without losing liability protection |
| Limited liability partnership (LLP) | Similar to a limited liability company, except it doesn't offer all the liability protection available in the limited liability company structure. Partners are liable for their own actions but not entirely liable for the actions of othe rpartners |
| Model Business Corporation Act (MBCA) | Serves as a guide to states in the development of their corporate statutes |
| Articles of incorporation | Describes: the nature of the firm's business activities, the shares to be authorized and the par value (if any) of those shares, and the composition of the initial board of directors |
| Board of directors | Establishes corporate policies and appoints offers who manage the corporation |
| Preferred stock | The distinguishing designation is _____ _____. A corporation can create preferred stock with whatever preferences/features it desires, as long as it does not violate the corporation laws of its state |
| Right of conversion | Allows them to exchange shares of preferred stock for common stock at a specified conversion ratio |
| Redemption privilege | Allows preferred shareholders the option, under specified conditions, to return for a predetermined redemption price |
| Cumulative | Typically preferred shares are _______, which means that if the specified dividend is not paid for a given year, the unpaid dividends (called dividends in arrears) accumulate and must be made up in a later year b4 any dividends are paid on common shares |
| Participating | A ______ feature allows preferred shareholders to receive additional dividends beyond the stated amount |
| Nonparticipating | Today, most preferred stock is __________ |
| Retired stock | Assumes the same status as authorized but unissued shares, just as if the shares never had been issued |
| Treasury stock | Represents shares repurchased and not retired. Because reacquired shares are essentially the same as shares that never were issued at all ______ ______ have no voting rights, nor do they receive cash dividends |
| Deficit | We refer to a debit balance in retained earnings as a _______ |
| Dividends | Distributions of assets the company has generated on behalf of its shareholders. Thus, these are one way a corporation provides a return to its shareholders |
| Liquidating dividend | Occurs if a dividend exceeds the balance in retained earnings. This might occur when a corporation is being dissolved and assets are distributed to shareholders |
| Date of record | The specific date that the company determines which stockholders will receive the dividend. Registered owners on the _____ __ _____ are entitled to receive the dividend, even if they sell those shares prior to the payment date |
| Ex-dividend date | To be a registered owner of shares on the date of record, an investor must purchase the shares before the ___ ____ ____. Usually 1 bus. day before the date of record and is the first day the stock trades without the right to receive the declared dividend |
| Shareholders' equity | A residual amount - what's left over after liabilities have been subtracted from (in other words, ne assets): assets - liabilities = shareholders' equity |
| Property dividend | When a noncash asset is distributed (often called a dividend in kind or a nonreciprocal transfer to owners) |
Created by:
mangobango