accounting 7-8

double declining equation

(cost-acc. depreciation)x2/useful

units of production equation

(cost-residual value)/total expected usage, natural resources

straight-line method equation

(cost-residual value)/useful life, intangible assets

A manufacturing company's weekly payroll is $80,000 for a 5-day work week beginning each Monday and ending each Friday. The last time salaries and wages were recorded was Friday, December 26. What adjustment is needed on December 31, the last day of the company's fiscal period?

1. 80k/5 day= 16 per day 2. for first year, have salary expense of 16k*3 for the 3 days before the year ends 3. debit salary expense 48k, credit salary payable 48k 4. year 2, take orignial 80k and subtract 48k to get 32k which is the salary expense for year 2 5. debit salary payable 48k and salary expense 32k, credit cash of total 80k

steps to revising depreciation

1. get book value of the asset at the date of revision 2. compute depreciation expense using revised amounts for book value, useful life, and/or residual value

impact on equation of recording payment to a supplier

1. purchase of supplies on account= debit supplies, credit accounts payable 2. payment to the supplier= debit account payable, credit cash

A cookie company includes one premium coupon in every cookie package. Upon returning 10 such coupons to the company, the customer will be sent a free cookie jar. In a recent year, the company sold 200,000 packages of cookies for $1 per package. It is estimated that 20% of the coupons will be redeemed. If the cookie jars cost the company $3 each, what amount of liability should be recorded?

200k packages/10coupons*20%=4000 recommended, 4k recommended*3 dollars each=12k warranty liability

tax expense (employer) includes

FICA- social security and medicare, federal unemployment tax(FUTA), state unemployment tax(SUTA)

salary expense (employee) includes

FICA-social security and medicare, income tax-federal and state, health insurance, net pay

the cumulative amount of plant and equipment already expensed is reported in an account

accumulated depreciation

average age of fixed assets equation

accumulated depreciation/depreciation expense

calculating fixed assets

adding building, land

straight-line includes

amortization and intangible assets

current liability: current portion of long-term debt

amount of long-term debt principal due within the next year

current liability payable: withholding and payroll taxes

business required to withhold taxes from employee's earnings

book value equation

cost-account depreciation

journal entry for sale of gift cards

debit cash, credit accounts payable (unearned)

depreciation journal entry

debit depreciation expense, credit accumulated depreciation

impact on equation of recording the accrual of interest expense

debit interest expense, credit interest payable

journal entry for retirement of note on maturity date

debit notes payable and interest expense, credit cash

journal entry for redemption of gift cards

debit unearned sales revenue, credit sales revenue (earned)

calculate depletion expense for natural resources, equations

depletion rate: (cost-residual value)/recoverable units depletion: depletion rate x units recovered

current liability: accounts payable

do not need contract, when a business purchases a good or service on credit

difference between units, double, and straight

double-declining: highest depreciation in early year and lowest in later years straight line: constant amount of depreciation expense in eahc period units: depreciation based on asset's use and rises and falls with use

intangible assets (amorization): always pick the greater or less useful life?

less

on January 1, a company sold a machine for $5,000 that it had used for several years. The machine cost $11,000, and had accumulated depreciation of $4,500 at the time of sale. What gain or loss will be reported on the income statement for the sale of the machine for the year ended December 31?

loss of $1500, 11,000-4000=6500, 6500-5000=1500

units of production includes

natural resources

fixed asset turnover ratio equation

net sales/average net fixed assets

current liability payable: sales tax

not an addition to revenue, liabilities until paid to the taxing authority

current liabilities are

obligations that require the firm to pay cash or another current asset, create a new current liability, or provide goods or services within the longer of 1 year or one operating cycle

contingent liabilities

only recognized if 1. the event on which it is contingent is probable and 2. if a reasonable estimate of the loss can be made

current liability: accrued liability

recognized by adjusting entries, represent the completed portion of acitivites that are in process at the end of the period

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%.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?

sales revenue= 4k*150=600k, sales tax=600k*6%=36k, 600+36=636k=accounts receivable, debit accounts receivable 636k, credit sales revenue 600k and sales tax payable 36k

depreciation is a process by which...

the decline in market value of plant and equipment is determined and recorded

current liability: note payable

when business borrows money or purchases goods or services from a company, requires contract

current liability payable: unearned revenue

when customers pay for goods or services in advance, discharged by providing goods or services purchased