ACC 201 - Final :(

What are the four financial statements?

1. Income Statement 2. Balance Sheet 3. Statement of Cash Flows 4. Statement of Retained Earnings

24 interest periods, 2% interest 6*4 = 24 = N 8/4 = 2 = I

A $125,000, 8%, 6-year note payable that pays interest quarterly would be discounted back to its present value by using tables that would indicate which one of the following period-interest combinations?

sold for $1,012.50.

A bond issuing at 101.25 means that the bond

corporation

A business owned by stockholders who share in its profits but are not personally responsible for its debts

$720 = principal * interest rate * time period

A company needs to record 6 months of accrued interest on a 4-year, 12%, $12,000 promissory note payable. How much interest expense should be accrued?

Accural Accounting

A type of accounting that recognizes incomes when they are earned and expenses when they are incurred, rather than when they are received or paid.

A/R end: $127,000 A/R beg: $145,000 $127,000 - $145,000 = A/R decrease of $18,000 Current assets = opposite, so +$18,000 NI = +$553,000 +$553,000 +$18,000 = +$571,000

Accounts receivable arising from sales to customers amounted to $145,000 and $127,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $553,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is

inventory.

All of the following accounts have normal credit balances except

Accounting Equation

Assets = Liabilities + Stockholders' Equity

revenue - expenses(depreciation included)

Based on the accrual basis of accounting, what is Marigold's net income for the year ending October 31, 2017?

2019 - $1,000, 2020 - $2,000 Principal * interest * time(/12)

Carlock Systems received a 6-month, 12% note for $50,000 from a customer on November 1, 2019. The note is due on April 30, 2020. Assuming the company's accounting period ends on December 31, how much interest revenue should be recognized during 2019 and 2020?

Accounts receivable (636,000), Sales revenue (600,000), sales tax payable (36,000)

During the first quarter of the current year, the company sold 4,000 batteries on credit for $150 each plus state sales tax of 6%.Refer to General Lighting. Sales taxes are required to be paid to the state taxing authority at the end of the quarter. Which of the following records the sale of the batteries?

assets

Economic resources (things of value) owned by a firm.

$210,000 cost + $9,000 freight + $23,000 foundation = $242,000 total cost $242,000 cost - $41,000 salvage value = $201,000 depreciable value $201,000 depreciable value / 5 years = $40,200 annual depreciation

Equipment was purchased for $210,000. Freight charges amounted to $9,000 and there was a cost of $23,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $41,000 salvage value at the end of its 5-year useful life. Depreciation Expense each year using the straight-line method will be

Net income being understated.

Failure to record the earned portion of unearned revenue would result in which of the following?

$2,000,000 = assets - liabilities

If a company has assets of $5,000,000, liabilities of $3,000,000, and retained earnings of $1,200,000, how much is total stockholders' equity?

$1,600,000 =current assets - current liabilities

If a company has current assets of $2,100,000 and current liabilities of $500,000, calculate its working capital.

$200 beginning balance + purchases - ending balance

If the end-of-year supplies on hand totaled $200, and purchases totaled $300, and supplies on hand at the beginning of the year amounted to $100, how much will be reported as supplies expense for the current year?

Who are the internal and external users of accounting information/financials?

Internal - work inside business Ex. Employees, human resources, managers External - outside of business Ex. Governments, investors, creditors

revenue recognition principle

Record revenue in the period in which it's earned

intangible assets

Rights, privileges, and competitive advantages that result from the ownership of long-lived assets that do not possess physical substance.

Sales with a third-party credit card

Sold inventory that cost $700 to Red Bird for $1,000. Red Bird charged this amount on his Visa First Bank card. The service fee charged Hawk by First Bank is 3% cash 97% - 970 service charge expense 3% - 30 Sales revenue -- 1,000 Cost of goods sold - 700 Inventory -- 700

cash balance + notes and interest - bank charge - NSF check

The adjusted cash balance per books on August 31 is

True

The revenue recognition principle says revenue should be recorded in the period it is earned regardless of when payment is recieved

internal controls

To control employees' activities, management puts in place procedures that collectively are called ____________ also help to protect the company against fraud

$59,713.00 = investment (pv of an annuity, 8 periods, 7%)

Tom liquidates an investment, and his proceeds will be received in 8 annual payments of $10,000 each with interest computed at 7%. What is the Present Value of this Annuity?

$27,500 = net income - retained earnings

What amount will be reported as Retained Earnings on the Balance Sheet at December 31, 2019, assuming this is the first year of operations?

$14,885 = book balance - nsf check - service charge

What is the company's adjusted cash balance at April 30th?

$572,500

What is the cost of the land?

debit unearned rent revenue, 1,320; credit rent revenue, $1,320 =7,920/6 = 1,320 per month

Whispering Winds Corp. received a check for $7,920 on July 1, which represents a 6-month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credited for the full $7,920. Financial statements will be prepared on July 31. Whispering's should make the following adjusting entry on July 31:

recognizing salaries expense

accused an expense needs to be increased

Account normal balances

assets on the left increase with a debit and have a debit normal balance l & se on the right increase with a credit and have a credit normal balance

COGS

beginning inventory + purchases - ending inventory

recognizing deferred unearned revenue

cash received before service are performed

stockholder's equity

common stock and retained earnings

working capital

current assets - current liabilities

current ratio

current assets divided by current liabilities

recording depreciation

debit depreciation expense, credit accumulated depreciation decreases net income and has no effect on cash flows.

Prepaid Insurance

decreased with a credit.

what gets subtracted on the retained earnings statement

dividends

what two accounts do you see on the income statements

expenses and revenues

expense recognition principle

matches expenses with revenues in the period when the company makes efforts to generate those revenues.

gross profit

net sales - cost of goods sold

Book value formula

original cost - accumulated depreciation

Under which method do you estimate bad debt and how? What does that number represent?

percentage off credit sales method

plant assets

physical assets that will be used for a number of years in the operation of a business

Calculating net income under the accrual basis

revenue minus expenses

calculate outstanding shares of stock

told number of stocks sold

average unit cost

total manufacturing cost / total units produced

None of these choices are correct. (deferred revenues and liabilities, accrued expenses are NOT)

Which of the following adjusting entries involves the cash account?

Recording backdated revenue

Which of the following is NOT an accrual accounting adjusting entry?

$24,500 = sales - sales returns * percent

Refer to AT&U Company. If the company estimates its bad debts at 1% of net credit sales, what amount will be reported as bad debt expense?

$113,000

If the indirect method is used to prepare the operating activities section of the statement of cash flows, what amount will be reported as net cash inflow from operating activities for 2020?

$39,604.50 = cash flow (pv of single amount, 4 periods, 6%)

Manatee Manufacturing sells a piece of equipment to make room for new machinery. Manatee will receive the sales price of $50,000 at the end of 4 years. Assuming interest at a rate of 6% per year, the Present Value of this future cash flow is how much?

What is financial accounting?

Process of identifying, measuring, recording, and communicating financial information about a company's business activities so decision makers can make informed decisions.

Earnings per share

= (Net Income - Preferred Dividends)/ Average Common Shares Outstanding

Average unit cost (rounded) = total cost / total units = $3,176.10 / 543 units = $5.85

A company purchased inventory as follows: ▪ 227 units at $5.50 ▪ 316 units at $6.10The average unit cost for inventory (rounded) is

Beginning book value x rate = depreciation expense year 1 $520,000 x [(100/4)x2=50%] = $260,000 Ending book value = beginning book value - depreciation expense $520,000 - $260,000 = $260,000 Beginning book value x rate = depreciation expense year 2 $260,000 x [(100/4)x2=50%] = $130,000

A company purchased factory equipment for $520,000. It is estimated that the equipment will have a $52,000 salvage value at the end of its estimated 4-year useful life. If the company uses the double-declining-balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be

purchase discounts

A contra-purchases account used to record reductions in purchase price for early payment to a supplier

decrease by $945,000 =21,000* 45

A corporation purchases 21,000 shares of its own $30 par common stock for $45 per share, recording it at cost. What will be the effect on total stockholders' equity?

Debit to Bad debt expense for $6,700 9,300 - 2,600

An aging of a company's accounts receivable indicates that 9,300 are estimated to be uncollectible. If allowance for Doubtful accounts has a $2,600 credit balances, the adjustment to record bed debts for the period will require a

$1,340,000 = total - treasury stock

Assume that all of the 20,000 shares of stock that was issued as of December 31, 2019, was issued for $42 per share. On March 1, 2020, the company reacquired 4,000 shares of its common stock for $50 per share.Refer to Ladder Distributors. What is the total amount of stockholders' equity that will be presented on the company's March 31, 2020, balance sheet?

$600 decrease = service charges + nsf checks + interest earned

Refer to Dreammaker Kitchens. As a result of the bank reconciliation process, what is the net increase or decrease in cash which must be recorded on the company's books?

$6,000

Refer to Fabian Woodworks. If the company uses the straight-line method of depreciation, what is the book value at December 31, 2021?

$1,641.75

Refer to the information provided for Klump Co. If the company uses the FIFO inventory costing method, the amount of ending inventory reported on the balance sheet is:

$2,732.50

Refer to the information provided for Klump Co. If the company uses the LIFO inventory costing method, cost of goods sold for the month of June is:

$86,600 Cost + sales tax + logo + testing

Sheridan Company purchases a new delivery truck for $79,000. The sales taxes are $6,000. The logo of the company is painted on the side of the truck for $1,200. The truck's annual license is $150. The truck undergoes safety testing for $400. What does Sheridan record as the cost of the new truck?

supplies expense (30,000), Supplies (30,000)

The asset account, Supplies, has a balance of $10,000 on January 1. During January, $22,000 of supplies were purchased on account and the liability was appropriately recorded. A count of supplies at the end of January indicates a balance of $2,000. What adjusting entry is necessary at January 31?

liabilities

what a company owes

Journal entry to record issue of bond at a discount

•If the bond is issued below face value, this difference is called a discount. •If $100,000 face value bonds were issued at 96, the bond proceeds would be $96,000 (96% x face value = $96,000) with a discount of $4,000. •The $4,000 discount would be recorded in Discount on B/P account. •The balance sheet presentation would be as follows:

=$376,000 37,000 + 712,000 - 316,000 - 57,000

Blossom Company started the year with total assets of $211,000 and total liabilities of $174,000. During the year the business recorded $712,000 in revenues, $316,000 in expenses, and dividends of $57,000. Stockholders' equity at the end of the year was

Stated value

•Stated capital (legal capital) is the amount of capital that, under law, cannot be returned to the corporation's owners unless the corporation is liquidated. •Even when state law permits the issuance of no-par stock (stock without a par value), it frequently requires that no-par stock has a stated (legal) value. • •Stated value, like par value, is recorded separately in the Common (or Preferred) Stock account. •Any excess paid over its stated value is recorded in Additional Paid-In Capital—Common (or Preferred) Stock.

Journal entry to record issue of bond at a premium

•The market price for debt is typically quoted as a percentage of face value. •If $100,000 face value bonds are issued at 103, their selling price is 103% of face value, or $103,000 in bond proceeds. •In this case, there is a $3,000 premium on the bonds to be recorded in a Premium on B/P account. •The balance sheet presentation would be as follows:

Bond selling at premium, discount, or face value

•When the yield = stated interest rate, the bonds will sell for face value, (also called selling at par). •If the yield < stated rate, the bonds represent good investments because contractual interest payments are higher than the market. •Demand for bonds will bid up the price above face value. •Bonds sell at a premium. •If the yield > stated rate, the contractual interest payments are below the market. •Selling price will fall below face value. •Bonds will sell at a discount.

bank reconciliation

help to ensure that the company's and bank's records are consistent. An outstanding check is a check issued and recorded by the business that has not been "cashed" by the recipient of the check (a vendor) The business has made an entry to lower their cash account to show they've spent money. The bank has not yet recorded the decrease to cash - so outstanding checks are subtractions on the bank side of a bank reconciliation A deposit in transit is an amount received and recorded by the business, but which has not been recorded by the bank in time to appear on the current bank statement Deposits in transit arise because many banks post any deposit received after 2:00 or 3:00 p.m. into their records on the next business day while businesses often make deposits on weekends or holidays when the bank is not open for business. The business has made an entry to increase their cash account to show they've received money. The bank has not yet recorded the increase to cash - so deposits in transit are additions on the bank side of a bank reconciliation

Lower of cost or market

using the lower of cost or market price to calculate the cost of ending merchandise inventory

When the interest rate on the bond is above or below market - what is it selling at? (Premium or discount?)

•Bonds issued at a premium will also record the amount paid above face value in a Premium on Bonds Payable account which has a normal credit balance. *It adds to the bond • •Bonds issued at a discount will also record the amount paid below face value in a Discount on Bonds Payable account which has a normal debit balance. *It takes away from the bond • •You can see this as the same account - and just depending on if there is a current Premium or Discount on Bonds Payable, the normal balance will change •Premium (Discount) on Bonds Payable •Discount (Premium) on Bonds Payable

Par value

•Par value is an arbitrary amount printed on each share of stock - establishes a minimum price for the stock when issued but is unrelated to market value. •The par value multiplied by the number of shares sold is recorded in an account that describes the type of stock, for example "Common Stock" or "Preferred Stock". •The amount received in excess of the par value is recorded in an account called "Additional Paid-in Capital". •The above are the first accounts shown in the stockholders' equity section of the balance sheet in a category called "Capital Stock".

· Statement of Cash Flows format o Three main sections

•Role of statement of cash flows is to provide relevant information about a company's cash receipts and cash payments. •Complements other financial statements. •Income statement = performance on an accrual basis, but does not tell how cash was generated or used as result of operations. •Balance sheet = changes in net assets, but it doesn't provide information on how much cash was used or received in relation to these changes.

Authorized shares vs. issued shares vs. outstanding shares

•Shares of stock are sold, or issued, when a corporation is formed. •The maximum number of shares the business may issue in each class of stock is referred to as the number of authorized shares. •The number of issued shares is the number of shares actually sold to stockholders. •The number of outstanding shares is the number of issued shares actually in the hands of stockholders. •When firms reacquire their own stock, called treasury stock, the reacquired shares are not considered to be outstanding.