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Accounting207 T3

Test 3 study cards

QuestionAnswer
______- 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