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Accounting – Final Review.docx

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McMaster University
Emad Mohammad

Accounting – Final Review Breakdown is same as 2012 final 10 T/F (one mark each) Chapter 9: 3 questions  Book value equation: BV = Cost – Accumulated Depreciation  How does a loss or gain come about: o Gain (loss) = Cash from sale – BV o Cash > BV = Gain o Cash < BV = Loss  Definition of depreciation: an allocation of cost of asset over its useful life (not a cash flow)  Splitting of basket purchase using relative market values (split land vs. building when bought together)  Capital vs. revenue expenditures (chart)  Definitions of methods, how they work, how to select (accelerated methods) o Double-declining and SYD  Effect on income, expense, accumulated amortization  Double declining balance method short cut calculation o 80% x 80% x 80% x 80% for 4 years  Composition of asset cost (everything spent to acquire the asset and prepare it for it’s intended use) Chapter 10: 2 questions  Conditions (definition, estimate able objectively, one year, refinancing of debt)  Contingent liabilities (if the payout is likely and can be estimated, accrue and record in the notes)  Examples of current liabilities  Blended interest and principal payments and how they work Chapter 11: 2 questions  Calculating issue price of bonds in theory (present value of future cash flows)  Annual interest expense of semi-annual bonds (in-class problem)  Issuance at par, premium or discount (in-class problem)  Trending of columns under premium or discount (in-class example)  Using the straight line method to calculate carrying values or interest expense  Definition of premium or discount and relation to interest expense vs. issue price  Capital lease criteria Chapter 12: 3 questions  Effect of cash dividends on financial statements (in-class example)  Theory of cash dividends  Theory of secondary market, stock splits, cash dividends, stock
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