Financial Accounting Test 1

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Financial Accounting Test 1
2010-07-18 17:49:03
Fin Acct

Long Term Liabilities, Fixed Assets, Payroll, and Partnerships and LLCs Fut
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  1. Fixed-Assets:
    • long term assets such as equipment, machinery, buildings,
    • and land.

    1. Tangible, physical assets

    2.Used in normal operations

    3. Not offered for sale in normal operations
  2. Lease:
    a contract for the use of an asset for a period of time
  3. Capital Lease
    • Accounted as if lessee has purchased asset. Debits an asset account for fair market value and credits
    • long-term liability account
  4. Operating Lease
    • if lessee is renting the asset.
    • Debit Rent expense and credit Cash.
  5. Depreciation:
    periodic recording of cost of fixed assets as an expense

    • Debit Depreciation Expense and Credit Accumulated
    • Depreciation
    • -Include all assets’ initial costs/over useful life/estimate residual
    • value
  6. Straight-Line Method:
    =Cost- Residual Value/Useful Life
  7. Units of Production:
    • Depreciation per unit=
    • cost-residual value/ total units of production
  8. Double Declining Balance
    Step 1: Straight line percentage x 2
  9. Intangible Assets: Do not exist physically
    • Amortization: decline in the usefulness of the intangible
    • assets

    • Debit
    • Amortization Expense and Credit the Intangible Asset
  10. Fixed Asset Turnover Ratio
    • = Revenue/ avg.
    • book value of fixed assets
  11. Long-term-Liabilities
    are debt due beyond one year-paid back in installments
  12. Short –Term Notes Payable
    Note payable with interest on the amount of time.

    • Credit
    • Notes Payable and Interest Expense Debit Cash
  13. Gross-Pay
    Pay including overtime pay before deductions
  14. Net-Pay
    amount after deductions paid to the employee
  15. FICA Tax
    contributions to social security and medicare
  16. Employer Taxes
    SUTA Tax

    FUTA Tax

    • SS Tax
    • Medicare Tax
  17. Employee Taxes
    • Social Security Tax
    • Medicare Tax
    • Federal Witholding Tax
  18. Quick Ratio
    = quick assets/ current liabilities
  19. Partnership
  20. Partnership Agreement includes matters such as
    • amounts to be invested, limits on withdrawals distributions, admission and
    • withdrawal
    • No legal liability
    • Not Taxable
  21. Limited Liability Company
  22. Limited Legal Liability
    • Unlimited Life
    • Not taxable