Bond Amortization, Uncollectible Accounts, and Depreciation
Bond Issuance and Amortization
Ashley Addison Company issued $600,000 of 10%, 5-year bonds at 108. Interest is paid annually, and the effective interest method is used for amortization. The market rate is 8%. The bonds are issued on the date of the bonds.
- Amount received for the bonds? $648,000 (600,000 * 1.08)
- Interest paid each interest period? $60,000 (600,000 * 0.10)
- Premium amortization for the first interest period? $8,160 [60,000 – (648,000 * 0.08)]
- Bond interest expense recorded on first interest
Understanding Financial Statements: Assets, Liabilities, and Equity
T.12 The Balance Sheet
The balance sheet reflects the assets and rights that constitute the assets of the company and the funding sources that comprise the net patrimony and liabilities. It is a static document that refers to the situation of the company at the date of financial close. This document is made from the balance sheet accounts, the first five groups of the General Accounting Plan (PGC). Systematized information is included in the closing entry accounting made in the journal.
Companies
Read MoreKey Economic Indicators and Market Forces Explained
Shifters of Aggregate Supply
The aggregate supply is a model that shows what determines the total supply for the economy and how total demand and total supply interact at the macroeconomic level.
Factors that shift aggregate supply include:
- Capacity and number of producers
- Economic expectations for producers
- Cost of factors of production
- Technology and R&D
Shifters of Aggregate Demand
The aggregate demand is a model that shows what determines total supply or total demand for the economy and how total
Read MoreKey Accounting Principles and Financial Reporting
Fundamental Accounting Principles and Financial Reporting
Types of Businesses
- Service Businesses: Provide services to customers, relying on human knowledge or talent. They do not sell tangible goods.
- Merchandising Businesses: Buy finished goods and sell them to customers (e.g., Walmart, Target).
- Manufacturing Businesses: Make the products they sell (e.g., Ford, Microsoft, Apple).
Financial Resources
Businesses need capital to establish and operate. This capital comes from:
- Investors: Provide capital in
Key Accounting Principles and Financial Statement Analysis
★ The Public Reform…furnish to clients. (True)
★ Balance sheet…always changing. (False)
★ Some companies prefer…the prepayment. (True)
★ The single-step…continuing operations. (True)
★ Revenues and expenses…operating activity. (True)
★ One meaning…future earnings. (True)
★ When interest…rate of interest. (False)
★ If you put $200 // 8% per year // two years later // earn interest of $32. (False)
★ Other things being…ordinary annuity. (True)
★ Sellers should…is cancelled.
Key Financial Statements: Income, Balance Sheet, Cash Flow
Key Financial Statements
The Income Statement
Also known as the profit and loss account, the profit statement, the income and expenditure statement, or the receipts and payments account.
The Balance Sheet
Also known as the statement of financial position.
The Cash Flow Statement
Shows what cash came in and what cash went out over a period of time.
- Two accounting elements which appear in the income statement:
- Expenses
- Income
- Three accounting elements which appear in the balance sheet:
- Assets
- Liabilities
- Equity