ACC 200 EXAM 1 REVIEW QUESTIONS WITH
VERIFIED SOLUTIONS
How is ownership help in a private company?
Privately
Vast majority of companies
Private (smaller in size)
Financial reports are required by the SEC
Public companies (extensive reports)
Private companies may prepare financial reports for
owners/investors, banks, or tax agencies (short and simple report)
Public companies sell what?
ownership rights ("stock") that is traded on the stock exchange
Vast minority of companies
Public companies
10-Q
Quarterly report
10-K
annual report
What is in a 10-K?
general business disclosures, management discussion and analysis, financial statements, notes to
the financial statements
General business disclosures
description of the business, risk factors, opportunities, global economic conditions, etc.
Management discussion and analysis (MD&A)
Management discusses business performance
- an overview of the recent year
- breakdown of performance by geographic region (North America, Europe-Middle east, etc.)
Financial statements
balance sheet, income statement, statement of cashflows, statement of equity
, Notes to the financial statements
Additional disclosures (breakdown)
Four valuation models
Historical Cost, Amortized Cost, Net Realizable Value, Fair Value
Historical cost
original transaction value
- land, inventory, intangibles with an infinite life (trademarks)
Amortized cost
Historical cost with adjustment for cost allocation
- prepaid expenses, PP&E, intangibles with a finite useful life (patents)
Net Realizable Value
Amount of cash that an asset is expected to be converted into
- Accounts receivable (net of allowance for doubtful accounts/amount expected to NOT collect)
How much do you actually expect to collect?
Fair value
price that would be expected to be received if the asset were sold in an orderly market in an
arms-length transaction (if we sold our investment today what is the asset worth?)
- investments, also known as "securities"
Intangible assets developed within the company
they are NOT accounted for on the balance sheet
Accounting equation
Assets = Liabilities + Equity
Asset
a present right of an entity to an economic benefit, generally results in cash inflow
Liability
a present obligation of an entity to transfer or provide an economic benefit. many require a
transfer of cash, some require providing goods and services (I OWE you)
Equity
remaining claim against the assets of a business, after the liabilities have been satisfied (also
known as "Net Assets", E=A-L)
Composition of the balance sheet
VERIFIED SOLUTIONS
How is ownership help in a private company?
Privately
Vast majority of companies
Private (smaller in size)
Financial reports are required by the SEC
Public companies (extensive reports)
Private companies may prepare financial reports for
owners/investors, banks, or tax agencies (short and simple report)
Public companies sell what?
ownership rights ("stock") that is traded on the stock exchange
Vast minority of companies
Public companies
10-Q
Quarterly report
10-K
annual report
What is in a 10-K?
general business disclosures, management discussion and analysis, financial statements, notes to
the financial statements
General business disclosures
description of the business, risk factors, opportunities, global economic conditions, etc.
Management discussion and analysis (MD&A)
Management discusses business performance
- an overview of the recent year
- breakdown of performance by geographic region (North America, Europe-Middle east, etc.)
Financial statements
balance sheet, income statement, statement of cashflows, statement of equity
, Notes to the financial statements
Additional disclosures (breakdown)
Four valuation models
Historical Cost, Amortized Cost, Net Realizable Value, Fair Value
Historical cost
original transaction value
- land, inventory, intangibles with an infinite life (trademarks)
Amortized cost
Historical cost with adjustment for cost allocation
- prepaid expenses, PP&E, intangibles with a finite useful life (patents)
Net Realizable Value
Amount of cash that an asset is expected to be converted into
- Accounts receivable (net of allowance for doubtful accounts/amount expected to NOT collect)
How much do you actually expect to collect?
Fair value
price that would be expected to be received if the asset were sold in an orderly market in an
arms-length transaction (if we sold our investment today what is the asset worth?)
- investments, also known as "securities"
Intangible assets developed within the company
they are NOT accounted for on the balance sheet
Accounting equation
Assets = Liabilities + Equity
Asset
a present right of an entity to an economic benefit, generally results in cash inflow
Liability
a present obligation of an entity to transfer or provide an economic benefit. many require a
transfer of cash, some require providing goods and services (I OWE you)
Equity
remaining claim against the assets of a business, after the liabilities have been satisfied (also
known as "Net Assets", E=A-L)
Composition of the balance sheet
