Gross Margin (Profit): Revenue - Cost of Goods Sold (CGS)

Sales = Revenue, Cost of Goods Sold = Sales. Gross Margin (profit): Revenue - Cost of Goods Sold (CGS) Operating Income: Gross Margin – Operating Expense Return on Sales: Net Income Divide Sales Gross Profit Percent: Gross Profit Divide Sales

FOB Shipping Point: Buyer responsible FOB Destination: Seller Responsible Net Sales: Sales – Sale Returns – Sales Discount

Net Purchases: Purchases – Purchase Returns – Purchase Discounts Goods Available for Sale (GAS): Beginning Inventory + Net Purchases Common Good Sold (CGS): Goods Available for Sale (GAS) – Ending Inventory Gross Margin (Profit): Net Revenue – Cost of Goods Sold (CGS) Net Income: Operating Income – Loss – Interest Expense + Gain Return on Equity: Net Income Divide Assets, Net Income Divide Equity, Net Income Divide Sales = GM$ Divide Revenue $, FIFO: First Cost In First Cost Out

LIFO: Last Cost In First Cost Out Perpetual: Record Every time it happens Periodic: Record Later, at end of the month

Inventory Turnover: Cost of Goods Sold (CGS) Divide Inventory Average # of days to sell Inventory: 365 Divide Inventory Turnover

Total Assets: Current Assets + Long term Assets Is the Inventory Turnover Good or Bad: Depends or Don’t know, unless we have information to compare with competitors Is the Gross Profit % Good or Bad: Depends or Don’t know, unless we have information to compare with competitors Total Liabilities: Current Liability + Long term Liability Ending Retained Earnings: (Retained Earnings + Sales) – Cost of Goods Sold (CGS) – Selling Exp – Rent Exp – Depreciation Exp – Interest Exp Ending Owner’s Equity: Common Stock + Retained Earnings Gross Profit in $’s: Revenue – Cost of Goods Sold (CGS) *Operating Income: Gross Profit – Selling Exp – Retained Earnings – Depreciation Exp *Net Income: Operating Income – Interest Exp Gross Profit %: Gross Profit Divide Net Sales (Revenue) Operating Profit %: Operating Income Divide Revenue Return on Sales %: Net Income Divide Net Sales Return on Equity %: Net Income Divide Total Equity Return on Assets %: Net Income Divide Total Assets Earnings Per Share (EPS): Net Income Divide Shares (outstanding) Debt/Asset Ratio: Total Debt Divide Total Asset, Liability Divide Assets Debt/Equity Ratio: Total Debt Divide Total Equity Current Assets: Cash + Accounts Receivable + Inventory Current Liabilities: Accounts Payable + Wages Payable + Unearned Revenue Long Term Assets: (Office Equipment – Accumulated Depreciation) + (Building – Accumulated Depreciation) + (Land) Long Term Liabilities: Notes Payable Tangible Long Term Assets: Classified as Property, plant, and equipment, Natural Resources, and land, can be seen or touched, physical presence Intangible Long Term Assets: Have no physical form while they may be presented by physical documents, right or privileges, cannot be seen or touched, Fall into 2 categories Identifiable Useful Lives, and Indefinite Useful Lives Calculating Cost of Long Term Assets: Buildings-Purchase price, sales taxes, title search and transfer documents costs, realtor’s and attorney’s fees and remodeling costs. Land-Purchase price, sales taxes, title search and transfer document costs, realtor’s and attorney’s fees, cost for removal of old buildings and grading costs. Equipment-Purchase price (less discount), sales taxes, delivery costs, installation costs, and costs to adapt for intended use. The Cost of an Asset: does not include payments for fines, damages, and so on that could have been avoided. Current Ratio: Current Assets Divide Current Liability

Straight Line Depreciation: (Cost – Salvage Value) Divide useful life = Depreciation Exp Units of Production/Activity: (cost – salvage value divide Total estimated units of production) x units of production in current accounting period = Annual depreciation expense

Double Declining Balance Depreciation: Depreciation computations that produce larger amounts of depreciation in the early years of an asset’s life and progressively smaller amounts as the asset ages Depletion Method: (cost – salvage value divide Total estimated units of production) x Units of production in current accounting period = Annual depreciation expense (Same as units of Production)

Amortization Method: (Cost – Salvage Value) Divide Useful Life = Depreciation Exp (Same as Straight Line) Three Different Types of Long Term Debt: Amortized Loan – Equal (same) payments made over the same time period (monthly, yearly, etc.) are made that reduce the loan to zero, Amount Borrowed increases then payment increases, amount borrowed decreases then payment decreases, # of payments increase then $ amount of payment decreases, # of payments decrease then $ amount of payment increases, Interest rate increases then payment amount increases, interest rate decreases then payment amount decreases. Line of Credit – Preapproved financing arrangement with a lending institution in which a business can borrow money up to the approved limit by simply writing a check. Bonds - are a formal kind of note which allows a firm to divide a large borrowing into many smaller parts. Amortization Schedule for long term Note: Loan balance x % = Interest, Payment – interest = Principal Reduction, Previous Balance – Principal reduction = current loan balance Journal Entries and Horizontal for Amortized Loan: Borrow $20,000 to be repaid with yearly payments for next 3 years at 10% Debit Cash $20,000 Credit Notes Payable $20,000 AU IIN/NNN/I FA, make first payment Debit Notepayable $6042 Debit Interest Exp $200 Credit cash $8042 AU DDD/NID/D FA OA