ACCT 307 Midterm

What is the principal reason for converting a customer's account receivable into a note receivable?

The note receivable earns interest and the account receivable does not.

Shares of a firm's previously issued stock that have been reacquired by the firm

Treasury stock

A list of all accounts and their balances at a particular date.

Trial balance

A liability arising from receipt of cash before the related revenue has been earned.

Unearned revenue

What is the process of removing a specific account receivable that is not expected to be collected from the AR account?

Write-off

the date on and after which (up to record date) the buyer of a publicly traded stock will not receive a dividend that has been declared.

ex-dividend date.

Stockholders equity can also be described as

net assets

The number of shares of a class of stock held by stockholders

outstanding stock

the date a dividend is paid

payment date

What time frame is associated with a balance sheet?

A point in time in the past.

An account receivable can best be defined as: A) A resource owned by the company. B) A sale of goods and services. C) An amount owed by the company. D) A payment to the owners.

A) A resource owned by the company.

Accounts receivable are reported at: A) Net realizable value B) Market value C) Historical cost D) Weighted average cost

A) Net realizable value.

Accrual accounting involves recognizing liabilities before they are paid. A) True B) False

A) True

Two common certifications for accountants are the CPA and CMA designations. A) True B) False

A) True

When reporting long-term debt on the financial statements, any portion to be repaid within a year of the balance sheet date should be reclassified from the noncurrent liability section to the current liability section. A) True B) False

A) True

The net book value of a depreciable asset is: A) the difference between the asset's cost and accumulated depreciation. B) the fair value of the asset. C) the amount for which the asset should be insured. D) the difference between the asset's cost and depreciation expense.

A) the difference between the asset's cost and the accumulated depreciation

What is the process of bringing into agreement the balance in the cash account in the company's ledger and the balance reported by the bank on the bank statement?

Account reconciliation

The process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments.

Accounting Definition

A transient document which communicates the details of specific amendments to the FASB Codification, and explains the basis for the Board's decisions. Although ASUs update the FASB Codification, the FASB does not consider Updates as authoritative in their own right.

Accounting Standards Update (ASU)

Liabilities + stockholders equity = assets

Accounting equation

A process for recognizing the cost of an asset that should be matched against revenue earned as a results of using the asset.

Accounting for depreciation

This type of transaction normally results when goods and services are purchased from suppliers on credit.

Accounts Payable

Amounts owed to suppliers for supplies purchased on an account.

Accounts payable

What results from a sale of goods and services to customers on account?

Accounts receivable

Revenues and expenses are recorded when they occur, even though the cash receipt or disbursement may occur before or after the event.

Accrual accounting

The valuation allowance that results in accounts receivable being reduced by the amount not expected to be collected.

Allowance for Uncollectible Accounts

Non-current, intangible assets such as leasehold improvements, patents, and copyrights are all subject to:

Amortization

The process of spreading the cost of an intangible asset over its useful life.

Amortization

What is a check that has been recorded as a cash disbursement by the company but has not been processed by the bank called?

An outstanding check

Cash, Accounts Receivable, Supplies, Merchandise inventory, Equipment, and Land are all considered what type of account?

Assets

What accounts are DECREASED by credits?

Assets, Expenses, Dividends

What accounts are INCREASED by debits?

Assets, Expenses, Dividends

Which of the following is NOT an example of a current asset? A) Merchandise inventory B) Accounts payable C) Accounts receivable D) Cash

B) Accounts payable

The distinction between a current asset and other assets: A) is based on how long the asset has been owned. B) is based on when the asset is expected to be converted to cash, or used to benefit the entity. C) is based on the ability to determine the current fair value of the asset. D0 is based on amounts that will be paid to other entities within a year.

B) Is based on when the asset is expected to be converted to cash or used to benefit the entity.

An estimated expense recognized in the fiscal period of the sale, representing accounts receivable that are not expected to be collected.

Bad Debts Expense

A listing of the organizations assets, liabilities, and stockholders equity at a point in time.

Balance sheet

A long-term liability with a stated interest rate and maturity date, usually issued in denominations of $1000.

Bond

The procedures that are used to keep track of financial transactions and accumulate the results of an entity's financial activities.

Bookkeeping

Which of the following is not a stockholders' equity account? A) Paid-in-capital in excess of par. B) Common stock. C) Accumulated depreciation. D) Capital stock. E) Retained earnings.

C) Accumulated depreciation

A controller is usually responsible for: A) Only managerial accounting functions. B) Only financial accounting functions C) Both financial and managerial accounting functions D) None of the above.

C) Both financial and managerial accounting functions.

Which of the following is NOT an example of a liability? A) short term debt B) long term debt C) common stock D) accounts payable

C) Common stock

At times, businesses require advance payments from customers that will be applied to the purchase price when goods are delivered or services provided. These customer advances represent: A) Revenue upon receipt of the advance payment. B) Long-term assets until the product or service is provided. C) Liabilities until the product or service is provided. D) A component of stockholders' equity.

C) Liabilities until the product or service is provided.

The balance sheet valuation of inventories is: A) lower of selling price or cost. B) cost, regardless of the cost of replacing the inventory. C) lower of cost or market. D) lower of realizable value or selling price.

C) Lower of cost or market

The declaration of a cash dividend by the directors results in: A) a decrease in cash and a decrease in retained earnings. B) a decrease in net income and a decrease in cash. C) a decrease in retained earnings and an increase in current liabilities. D) a decrease in net income and an increase in current liabilities.

C) a decrease in retained earnings and an increase in current liabilities.

Expenditures capitalized as long-lived assets generally include those expenditures that: A) are for items that have a physical life of more than a year, regardless of their cost. B) are material in amount and that have an economic benefit to the entity only in the current year. C) are material in amount and that have an economic benefit to the entity that extends beyond the current year. D) are made for normal repairs to maintain the usefulness of the asset over a number of years.

C) are material in amount and that have an economic benefit to the entity that extends beyond the current year.

A bond that may be paid off before the scheduled maturity date.

Callable bond

This type of lease has the effect of financing the acquisition of an asset.

Capital lease

Recording an expenditure as an asset as opposed to expensing the expensiture is called

Capitalizing

This type of record is recorded as an asset. Depreciation will also be recorded on balance sheet. This makes the net income look more favorable.

Capitalizing

What is the balance of the ledger account of an asset, liability, or stockholders' equity account called?

Carrying value

The allowance for uncollectible accounts is a(n)

Contra current asset

A group authorized by the U.S. Congress to establish cost accounting standards for government contractors.

Cost Accounting Standards Board (CASB)

Liabilities normally carry a __________ balance and are shown in the __________.

Credit; Balance sheet

An organization who lends to the entity.

Creditor

When a depreciable asset is sold: A) any cash received results in a gain. B) a loss arises if the sales proceeds exceed the net book value. C) depreciation expense is adjusted so there is no gain or loss. D) a gain arises if the sales proceeds exceed the net book value.

D) A gain arises if the sales proceeds exceed the net book value.

An annual report includes: A) Notes to the financial statements B) Management's discussion and analysis C) Financial statements D) All of the above.

D) All of the above

Which of the following is(are) a true statement(s) pertaining to bonds? A) The issuing firm sets the price of a bond. B) Bonds can be sold at a discount, par, or payable. C) The SEC sets the market price of a bond. D) Bonds can be sold at a discount, par, or premium.

D) Bonds can be sold at a discount, par, or premium.

Common payroll deductions include A) federal income tax withholdings B) state income tax withholdings C) FICA tax withholdings D) all of these items

D) all of these items

The left side of an account is known as the ___________ side.

Debit

Expenses normally carry a __________ balance and are shown in the __________.

Debit; Income Statement

The date on which the board of directors declares a dividend is referred to as the:

Declaration date

A process that results in spreading the cost of an asset over its useful life to the entity.

Depreciation

If a bonds stated rate was lower than the prevailing market rate of interest on similar bonds on the date of issue, would it be issued at a discount or a premium?

Discount

Advertising costs, wages, supplies, rent, internet, utilities, and costs of goods sold are all considered what type of account?

Expenses

This type of record is recorded as an expense on the income statement. This makes net income go down.

Expensing

An advanced user-accessible computer application that systemized and reorganized many divergent elements of U.S. GAAP into one composite structure permitting users to review, study, and research topics

FASB Accounting Standards Codification

A group authorized by the U.S. Congress to establish cost accounting standards for government contractors.

Financial Accounting Standards Board (FASB)

Accounting that focuses on reporting an entity's financial position at a point in time and/or its results of operations and cash flows for a period of time.

Financial accounting

Cost of goods, sold, gross profit, income from operations, and earnings per share of common stock outstanding all appear on which financial statement?

Income statement

Financial statement that summarizes the entity's revenues, expenses, gains, and losses for a period of time and thereby reports the entity's results of operations for that period of time.

Income statement

The financial statement whose purpose is to show net income or net loss for the period covered by the statement.

Income statement

Which financial statement must be prepared first?

Income statement

An organization or individual who has an ownership interest in the firm. For corporations, referred to as stockholder or shareholde

Investor

Why do many companies use accelerated depreciation for tax purposes?

It results in lower taxable income than straight-line depreciation.

Where do accountants record transactions in a chronological listing?

Journal

What is the correct chronological order of the accounting cycle?

Journalize, post, prepare trial balance, adjustments, prepare adjusted trial balance, prepare financial statement.s

The inventory cost flow assumption that the last costs in to inventory are the first costs out to goods sold is

LIFO (last in first out)

Accounts payable, notes payable, and wages payable are all considered what type of account?

Liabilities

The classification of accounting that is most concerned with the use of economic and financial information to plan and control many of the activities of the entity.

Managerial accounting

Total Revenues - Total Expenses =

Net income

Shares of stock issued - Treasury stock =

Outstanding stock

An arbitrary value assigned to a share of stock when the corporation is organized.

Par value

The process of transferring the debit and credit information from the journal to the individual accounts in the general ledger is known as:

Posting

The class of stock representing an ownership interest with certain preferences compared to common stock.

Preferred stock

Future Value X Factor (PV Table) = Present Value

Present Value Calculation

the date used to determine the stockholders who will receive a dividend

Record date

1. Firm must have retained earnings. 2. Board of Directors must declare the dividend, and the firm must have enough cash to pay the dividend. 3. If the firm must be able to pay their loans and bonds indenture.

Requirements to declare dividends

Beginning Retained Earnings + Net income - Dividends =

Retained Earnings

The portion of the profits of a business that have not been distributed to shareholders.

Retained Earnings

The cumulative net income of the firm since its beginning that has not been distributed to its stockholders in the form of dividends is

Retained earnings

Service revenues and sales revenues are considered what type of account?

Revenues

What accounts are DECREASED by debits?

Revenues, Retained Earnings, Common Stock, Liabilities

What accounts are INCREASED by credits?

Revenues, Retained Earnings, Common Stock, Liabilities

The income statement shows amounts for:

Revenues, gains, expenses, and losses

What accounts are DECREASED on the DEBIT side and INCREASED on the CREDIT side?

Revenues, retained earnings, common stock, liabilities, and stockholders' equity.

The financial statement that explains why cash changed during a fiscal period. Cash flows from operating, investing, and financing activities are shown.

Statement of Cash Flows

Dividends are reported on which financial statement?

Statement of Changes in Stockholders Equity

The financial statement that summarizes the changes during a fiscal period in capital stock, additional paid-in capital, retained earnings, and other elements of stockholders equity is:

Statement of Changes in Stockholders' Equity

Cost - Salvage Value/Estimated Useful Life = Depreciation Expense Per Year

Straight line method of depreciation

Which depreciation method results in equal depreciation expense amounts for each year of the asset's useful life?

Straight-line