Acc300 Review Essay

Submitted By michaelwatson93
Words: 473
Pages: 2

What impacts income statement

What impacts balance sheet



Annuity repeated amount year after year. Purchase initial amount to get the repeated payment. Payments that are going to occur in the future and what is the present value. Net present value on balance sheet.

11.6

Two interest rates

• Stated interest rate – 0%, 6%, 8%

o Used to calculate cash payments

• Effective interest rate - 8%

o Used to calculate interest expense

Stated rate = effective rate Simple from an accounting perspective

$10,000 note, making $800(8% of 10k) for 4 years

$10,000=payment of 1 time payment of $10k in 4yrs = X

800(8% of 10k) = Present Value of $800/year for 4 years = Y

X+Y = 10,000

8%

Dr Interest Expense $800 (8% effective rate x 10,000 Carrying)

Cr Cash $800 (8% Stated Rate x $10,000 Face)

6%

Dr Interest Expense XX (8% effective rate x Carrying Value) carrying value changes value every year. Every payment changes the value

Cr Cash $600 (6% stated x 10,000 face value)

Cr Disc on Notes Payable XX-$600

If semi-annual payments, Halve the percentage



11-2 if you make a payment at the first day of loan, it is an annuity due.

14-13

Indirect Method

Name of company

Statement of cash flows

For Y/E XXXX

Operating Cash Flows

Net Income $11,000

Adjustments to reconcile Net Income to Cash flow from operating activities

Depreciation $2,000

(No amortization or stock based compensation)

(No Gains or Losses)

Changes to current assets or current liabilities

Decrease in accounts receivable $1,000

Decrease in Deferred revenue ($3,000)

Decrease in Inventory $2,000

Decrease in Accounts Payable ($1,000)

Increase in wages payable $900

Increase in pre-paid advertising ($1,800)

Cash flow of activities $11,100


Direct Method

Name of company

Statement of cash flows

For Y/E XXXX

Collections from customers $46,000…