ACC 131 - Final
Coffski, Inc. sold merchandise to customer on credit. The invoice date was June 10th; 1/10, n/30. What should the customer pay?
$1,000 if invoice is paid July 9th
On Jan. 1, a machine with a useful life of 5 years & a residual value of $25,000 was purchased for $75,000. What is the depreciation expense for year 2 under double-declining -balance method of depreciation?
$18,000
A machine with a cost of $240,000 has an estimated salvage value of $15,000 & an estimated useful life of 5 years or 15,000 hours. It is to be depreciated using the units-of-activity method of depreciation. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours?
$75,000
How to calculate depreciation expense using straight-line method?
(cost-residual value) / useful life
Units of activity method
1. (cost - residual value) / units = rate 2. Rate x units used = dep. expense 3. Book value - dep. expense = updated book value 4. Previous book value - updated book value = accumulated depreciation
Double-declining method
1. 1/useful life x 2 = rate 2. Rate x Cost= dep. expense 3. Book value - dep. expense = updated book value 4. Previous book value - updated book value = accumulated depreciation
How is cost of goods sold calculated?
1. beg inventory + purchases = cost of goods available - end inventory 2. units sold x cost per unit (LIFO, FIFO, AVERAGE COST)
What would appear on the balance sheet as a current liability?
A probable loss in the amount of $4 mil from a pending lawsuit
How would the journal entry look if a customers NSF check was $25?
A/R 25 Cash 25
which one of the following adjustments decreases net income for the period?
Accrued expense adjustments
Deposits in Transit
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 ex: Current Balance vs. Available Balance on bank statement
Prepaid (Deferred) Expense
Assets arising from payment of cash which have not been used or consumed by the end of the period
Where is current assets listed?
Balance Sheet
Which financial statement is for a specific date (specific point in time)?
Balance Sheet
Company's face value is $100,000
Cash 100,000 B/P 100,000
$100,000 issued at 96
Cash 96,000 Discount on B/P 4,000 B/P 100,000
What account is used to record the difference between what a cash register shows and what is actually deposited?
Cash over and Short
Outstanding Check
Check issued and recorded by the business that has not been "cashed" by the recipient of the check
NSF Check
Check that has not been returned to the depositor because funds in the issuers account are not sufficient to pay the check (bounced check)
What is a journal?
Chronological record showing the debit and credit effects of transactions on a company
What is the definition of a current asset
Consists of cash and other assets that are reasonably expected to be converted into cash within one year or one operating cycle, whichever is longer.
What is the definition of current liabilities?
Consists of obligations that will be satisfied, through the payment of cash or by providing goods or services within one year or operating cycle, whichever is longer.
Credit Memo
Could result if bank collected a note receivable for the business
How is the current portion of long-term debt shown on the balance sheet?
Current Liability
What are the normal balances?
D.E.A.L.E.R.
Which inventory results in higher ending inventory?
FIFO
$100,000 face value issued at 103
Face Value = $103,000 Cash 103,000 Bonds Payable 100,000 Premium on B/P 3,000
At what value is property, plant, and equipment reported on the balance sheet?
Historical Cost value
When do bonds sell at a discount?
If the bond is issued below face value
How does interest on bond sold at a discount using the effective interest method show up in entry?
Intrest expense 86,499 Cash 80,000 Discount on B/P 6,499
Which inventory method results in higher cost of goods sold when prices are rising?
LIFO
What is a debit?
Left Side
Unearned (Deferred) Revenue
Liabilities arising from receipt of cash but revenue has not yet been earned
A landlord records the collection of tenants security deposit as a(n) _______
Liability
How is the discount of bonds payable account shown on the balance sheet?
Liability; discount is recorded in a separate account called discount on bonds payable. Discount gets subtracted on the balance sheet.
What is a trial balance?
List of all active accounts and each accounts debit or credit balance
How are current liabilities listed on the balance sheet?
Listed in order in which they will be paid
What does the company have to use if the market value of the inventory has declined below its cost?
Lower cost or market rule method (LCM)
Sales Returns
Merchandise returned by customer to seller (record in sales returns and allowances)
Debit Memo
Might result if the bank makes a prearranged deduction from the business account to pay a bill ex: Automatic Pay
What is the definition of long-term debt?
Obligations that extend beyond one year, based on formal agreement or contract; liability
Accrued expense originated from__
Paying off Liabilities
What is posting?
Process of transferring data from the journal to the general journal
A customer returned damaged goods for credit. Under a perpetual system which of the seller's accounts decreases?
Purchased Returns
What is the revenue recognition principal?
Records revenue when revenue has been earned or a collection of cash is reasonably assured
Sales Allowances
Reduction in sales prices for merchandise with minor defects; contra-sales account
Trade Discounts
Reduction in selling price granted by the seller to a particular class of customers
What is historical cost?
Requires that the activities of a company are initially measured at their cost - the exchange price at the time the activity occurs
What is a credit?
Right side
What is a general ledger?
Simply a collection of all the individual financial statement accounts that a company uses
What are the differences between the percentages of sales method and the aging of receivables method of estimating bad debt expense?
The difference is what is being estimated. Percentage of sales method estimates bad debt expense on the I/S. Aging method estimates its net realizable value on the B/S.
T-account
Transactions frequently analyzed using t-charts for different accounts
The method most commonly used to compute depletion is the _______________
Units-of-Activity Method
Accrued Expenses
Unrecorded expenses that have been incurred but not yet paid in cash
Accrued Revenue
Unrecorded revenues that have been earned but no cash recieved
Who is (according to the Sarbanes-Oxley Act) primarily responsible for internal controls in a company?
Upper level managment
When do bonds sell at a premium?
When the stated rate of interest on the bonds is greater then the market rate of intrest
How can you manipulate the accounting equation?
assets = liabilites + contributed capital + retained earnings
What is the accounting equation?
assets = liabilities + stockholders equity
How to calculate interest on bonds sold at a discount using the effective interest method
carrying value x yield rate x time in years
What type of account is allowance for doubtful accounts?
contra asset account
What information is needed to calculate depreciation?
cost of fixed asset, useful (expected) life, and residual (salvage) value
What are the different terms used to describe the interest rate printed on a bond certificate?
interest rate, coupon rate, and contract rate
When do bonds sell at par?
market value = face value; 100% of face value
What is an example of a debit memo?
notice of a bank service charge
What is an example of a credit memo?
notice of interest expense on checking account -- deduct bank balance
Which allowance approach estimates bad debt expense on income statement?
percentage of net credit sales