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Accounting207 T3
Test 3 study cards
| Question | Answer |
|---|---|
| ______- probable future sacrifices of economic benefits that arise from past transactions. | Liabilities |
| What are current liabilites? | short term obligations that will be paid with in 1 yr or t/ operating cycle whichever is longer |
| ____ _____- know employer vs employee, know types of taxes and how applied. | payroll liabilities. |
| As for taxes, what are the employee's responsibilities? (4) | Income Taxes (fed, state, city), FICA (social sec), Medicare, and other optional items such as insurance, charitable contributions, garnishment, pension/retirement |
| ________- what happens to you if you dont pay your bills. | Garnishment |
| As for taxes, what are the employee's responsibilities? (5) | Employees wages, "Matching" FICA, "Matching" Medicare. unemployment taxes (fed and state), and other optional items (insurances, pension/retirement) |
| As for total wages what is the percentages going to the following: 1. FICA 2. Medicare | 1. currently 4.2 on 106,800, but will go back to 6.2% in 2012, 2. 1.45% |
| ________- medicare for low income families. | Medicade |
| What is gross pay vs net pay? | salary exp vs. cash to empolyee-- after all taxes are removed |
| _______- annuity recieved from employer during the remaining life time of employee, and possibly spouse, in retirement yers...now they are quickly disappearing. | Pensions |
| Why are pensions quickly disappearing? | they are disappearing because they are now a liability on the balance sheet of the employer and are requirements as to how much must be funded and people are living longer than expected. |
| ______- means the company has to start saving and setting aside cash or other investments for a portion of pensions. | Funded |
| ______- a pension recieved by the US govt in retirement for most employees of most organizations and their spouses. | FICA |
| What is the biggest problem with FICA? | Not enough money (assets) set aside by the govt to cover liabilities especially as the "baby boomers" begin to retire |
| __________-a way to save for retirement through your employer- what replaces pensions and move with the employee as they change jobs. | 401k |
| What is the 401k known as for educators? | 403b |
| Who contributes to a persons 401k? | both the employer and employee |
| Who manages someones 401k account? | An investment firm |
| What is the major difference between a pension and a 401k? | Pensions kept the employee tied to an employer where as with a 401k you could move around also bot the employer and employee contribute to the 401k and employer only contrib. to pension |
| Employee contributions to their 401k are deducted from their income _____ personal income taxes are calculated. | BEFORE |
| When will Income taxes be paid? | When the employee starts recieving the money in their retirement years. (same forI IRA) |
| ________- an individual retirement savings account for the self-employed or employees who do not have a 401k. | IRA or Roth IRA |
| What is the difference between IRA or Roth IRA? | IRA is like 401k - deduct personal income now, tax later- retirement, Roth IRA- pays taxes now recieves tax free money in their retirement years |
| Generations: 1883-1900= ______, 1901-1924=_____,1925-1942=_____,1943-1960=_______,1961-1981=____,1982-2001=_____,2001-present=____. | lost gen, greatest gen, silent gen, baby boomers (76 mill), gen x, gen y, gen z |
| ____ _____ result from an "estimated" expense that is determined from past trends and are recorded when the matching revenues are recorded. | Estimated Liabilities |
| What are some examples of estimated liabilities? | income tax payable, property taxes payable, warranty liability, vacation pay liability, coupons, frquent flier miles, sick pay liability, pensions, bonuses all retirement responsibilities including possible health care |
| Which is more difficult for accounting? Pensions and bonuses or 401ks? What do they follow? | pensions and bonuses, the matching principle. |
| When do expenses appeear on the income statement? | in the period of the revenue |
| As for sales tax on retail, the business acts an agent for the ____ and recognizes it as a ______ until remitted to the ______. | government, liability, government |
| When a business accrues sales tax on a retail item does it incur a revenue or expense? | No- acts as a bridge to the government. |
| Sales Tax JE for a sale with Sales Tax: Dr:_________ Cr:________ Cr:________ | Dr: Cash Cr: sales, sales tax payable |
| ______ ____ _____-arise as a result of differences between GAAP used for financial statements and rules created by the IRS. (will be seen on almost all B/s's) | Deferred Income Taxes |
| Deferred Taxes can be either an ____ or ____, current or noncurrent. | asset, liability |
| Deferred Income Taxes Payable are a _____ to the IRS and are still owed even though an expense has already been recognized on the IS. | Deferred Income Taxes Payable |
| ___ ___ ____ are an asset and have been pre-paid to the IRS before the expense has been recorded on IS. | Deferred Tax Asset |
| _______-the cost of borrowing. | Interest |
| Lender accrues interest and has a _____. Where the Borrower pays interest and has a _____. | notes recievable, notes payable |
| Maturity Value= ______+______ | Principal + Interest |
| Amount Borrowed=_____. | Principal |
| Interest = ___*____*______ | Principal*AnnualIntRate*Time |
| Time(for interest)=______/______ | period being covered from last time interest being paid to next time it is recorded/function of a year |
| How long is interest collected for? | From the date the money is borrowed (or lent) until it is paid back (or collected) |
| What is the interest recorded referred to as? | Interest accrues |
| When will the principal/face be paid back? | maturity date |
| When can Interest be paid? | periodically or at maturity date |
| _____ _____ _ ____- when interest is not paid back this is calculated | Carrying value of note |
| Carrying Value of note=____+_____ (2 equations one for borrower, one for lender) | Borrower: Notes Payable+interest Payable Lender: Notes Recievable+Interest Recievable |
| When payments are made towards a note the payment is ALWAYS first applied towards ____ and the balance reduces the _____. | interest, principal |
| Interest is paid on the _______ ______ (declining). | outstanding balance |
| Balance Outstanding= _____-_______. | Current Principal-Paydown on Principal |
| Paydown on Principal=_____-_______. | payment-interest expense |
| For business->interest is ____ ____. For person->only ___ ___ _____ _____ by home are ___ _____. | tax deductible, interest on loans collateralized, tax dedductible |
| Total Payments over life of loan=____ ___. | Cash outflow |
| What is total interest expense over life of loan? | Subtract principal (cash inflow prin) Total int exp over life of loan |
| On the IS interest is classified as "_________________" after NOI. | "other revenues and expenses" |
| Interest is a _____ activity. | Operating |
| Borrowing and repaying Notes Payable (current and long-term) is _____ activity. | financing |
| Lending and collecting Notes recievable (current and long-term) is ______ activity. | Investing |
| ____ ____ r restrictions that r at times placed on a borrower from a lender that states that they must have certain financial statement ratios or they restrict dividend payouts or other items. | loan coventants |
| if loan covenants are not maintened what can happen? | the loan could be called an would have to be paid back in full immediately |
| _____-are loans where the consumer does not need to prove income or have a good credit report. | low-doc or no-doc |
| When people do not have enough money to pay off their "balloon payments" on their house they loose all equity which results in _____/ | foreclosure-default on the mortgage move out and bank forecloses on the house |
| for private individuals, interest paid on mortgages are _____ _____. (but interest paid on cars, and credit cards, and loans are not) | tax dedductible |
| ___________ _______-are potential liabilities that depend on a future event but arise out of a past transaction. | contingent liabilites |
| What are some examples of contingent liabilities? | 1. Discounting notes receivable with recourse. 2. Loan guarantees 3. Pending lawsuits |
| When are contingent liabilities recorded? | when FASB conditions are met- liability must be probable and must be reasonably met |
| _______ leases have no interest expense but a rent expense. | operating |
| ____ or ____ leases- treat as if owed - thus have an asset and related liability. | capital or financing |
| As for GAAP and IFRS liabilites are ____/ | similar. |
| When are bonds issued? | Issued by companies only when large amounts of money is needed to be raised for acquisition of long term assets. |
| Thus, the risk of the loan is spread amongst many ____________ (like issuing common stock) rather than one bank or a consortium of banks taking on the entire risk. | investors/creditors |
| What happens after the corporation recieves the cash from bonds after initial issuance? | bonds are publicly traded amongst investors and the coorporation does not play a role in this |
| As for bonds interest is typically paid ___ _____- based on interest rate stated on bonds- often referred to as contractual, nominal, etc. | semi-anually |
| Interest expense is tax deductible for the ____. | borrower |
| ______ do NOT accrue. | dividends |
| Must ________ premium and discount so that these accounts are eliminated by the maturity date. | amortize |
| Formula for amortization on premium or discount? | total premium or discount/useful life (will be zero at maturity aka amortized) |
| Face or Par: Interest Expense = _____ Premium: Interest Expense = __________ Discount : Interest Expense =________ | 1)cash paid for interest 2, cash paid for interest minus premium amortization 3. cash paid for interest + discount amortization |
Created by:
megrosec
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