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LUC - Bus 201 - ACCT 201 Final study guide - Study Guide

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LUC - Bus 201 - ACCT 201 Final study guide - Study Guide

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background image Final Study Guide Chapters 8,9,10 Chapter 8:
Characteristics of liabilities: 
1. Probable future sacrifice
2. From present obligation
3. Obligation from a past event
Current: paid within one year
Long term: not current
Notes Payable – separate legal document, accounts payable doesn’t have 
this
1. Stronger legal claim
2. Usually has interest
Events: 1. Get cash, sign note
2. Adjusting entry at period end
Interest expense Interest payable 3. Pay back  Notes payable 
Interest expense
Interest payable (only if previous adj. entry)
Cash Possible Deductions from paycheck (withholdings): Income taxes  Retirement plans Charity Garnishment Uniforms Union dues Many more… Payroll journal entry: Salaries expense Income tax payable
United way payable
FICA payable
Salaries payable
Fringe benefits entry: (XX meaning whatever benefit it is) Salary expense XX payable
background image Employer payroll taxes:
Ex: FICA, unemployment taxes
Entry:  Payroll tax expense
XX payable Pay payable: XX payable Cash FICA –
Federal insurance contribution act 
Social security and medicare
    Why there is a social security funding issue;
1. Baby boomers – more of them than there are working people
2. Longer life expectancy – so each person gets money for a longer 
time FICA is a matching tax Employee contribution = employer contribution
Social security – limited to about 119,000 a year, has a “ceiling”
Medicare – no ceiling
Sales Tax:
 
Ex: Company sells something for a dollar and charges 5% tax
Cash 1.05 Sales Revenue 1.00 Sales tax payable  0.05 Current/Long term on Balance Sheet:
Ex: owe $5000 payable    $1000/year for 5 years
Notes payable $5000 On balance sheet:
 
1000 = current liability
4000 = long term liability 
(no journal entry)
Contingencies: a. Loss
background image 1. “probable and estimated” Ex: warranty
Warranty expense
Warranty liability 2. “possible” Disclose it in a footnote
Ex: lawsuit
3. “remote”  Do nothing b. Gain – nothing is recorded Must be CERTAIN to be recorded Ratios:
Working capital
Current assets – current liabilities
How much you can cover liabilities
Current Ratio Current assets/current liabilities
How much covered as a %
Acid-test Ratio Quick assets (cash, current investments, A/R) / Current liabilities Chapter 9: Financing: debt (borrow) or equity(stocks) Ratios:
Debt to equity
Total liabilities/total stockholders’ equity
Ex: if two is the answer… twice as many liabilities as stockholders’ 
equity *small is good because its less risky Times interest earned Income before taxes and interest deducted/interest expense
Ex:  Net income = 92                    Numerator = 92 + 6 +2 = 100 
Tax = 6
Interest expense = 2
100/2 = 50
*Big is good
Bond: loan from the market place Issued at face: market place is giving company exact amount of bond

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School: Loyola University Chicago
Department: Business
Course: Economic Principles 1
Professor: A. Johnson
Term: Fall 2016
Tags:
Name: ACCT 201 Final study guide
Description: study guide for the final
Uploaded: 12/10/2016
8 Pages 47 Views 37 Unlocks
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