Accounting 201 Final Review UTM

Costs included in the merchandise inventory account can include:

All of the following: Invoice price minus any discount Freight-in Storage Insurance

Account - Allowance for Doubtful Accounts 1. List nature of account 2. normal balance of account (debit or credit)

Allowance for Doubtful Accounts - contra asset - credit

A company had a sales of $695,000 and its cost of goods sold of $278,000. It's gross profit equals:

$417,000 $695,000 - $278,000 = $417,000

The interest accrued on $3,600 at 7% for 60days is: (360days)

$42 3600 x 7% = 252 12/252 21x2= 42

A company's balance sheet shows: Cash $22,000, accounts recievables $16,000, office equipment $50,000 and accounts payable $17,000. What is the amout of equity?

$71,000 Cash+accounts recievable+office equipment-accounts payable = equity

A company issued 10-year, 8% bonds with a par value of $200,000. The company recieved $190,000 for the bonds. Using the straight line depreciation method, the amount of interest expense for the first semiannual interest period is:

$8500

On December 31 of the current year, a company's unadjusted trial balance included the following: accounts recievable, debit balance of $88,790; Allowance for doubtful acounts, credit balance of $1,245. What amount should be debited to Bad Debts expense, assuming 4% of outstanding accounts recievable at the end of the current year are considered uncollectible?

$88,790 x .04 = $3,551.60

On December 31 of the current year, a company's year end balances if accounts include the following: accounts recievable, debit balance of $100,000; allowance for doubtful accounts, credit balnce of $1000 and Bad Debts Expense, debit balance of $4000. what amount is estimated to be collectible at the end of the current year?

$99000 100000 - 1000 = 99000 not bad debts

Annual Depreciation (Straight line method)

(Equipment purchased - salvage value) / Useful life (yrs) Example: ($500,000 - $0) / 5yrs = $100,000

Total depreciation method

(Equipment purchased - salvage value) / Useful life (yrs) Example: ($500,000 - $50,000) / 5yrs = $90,000 a year $90,000 x 5yrs = $450,000

When two clerks share the same cash register it is a violation of which internal control principle?

Apply technological controls

Equipment purchased $500,000 Depreciated for 5 years assuming 5yr life Salvage value $50,000 Equipment sold for a gain of $50,000 Determine dollar effect of the cost of the sale

Assets = $50,000 increase Liabilities = $0 no effect Equity = $50,000 decrease $500,000 - $450,000 = $50,000 book value

Photometer company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation?

Assets, $30,000 decrease Liabilities, $30,000 decrease Equity, no effect

Sales less both sales discounts and returns and allowances equals:

net sales

A written promise to pay a definite sum of money on a specific mature date is called:

notes payable

A discount on bonds payable

occurs when a company issues bonds with a contract rate less than the market rate

Retinal scans to obtain access to secured areas

physical, mechanical, and electronical control devices

The bond issue price is determined by calculating the

present value of all future cash payments provided by a bond

Revenue is properly recognized:

upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price

The total cost of an asset less its accumulated depreciation is called

Book Value

Annual Depreciation $70,000 equipment Equipment purchased for $500,000 at the beginning of the year Compute book value of the equipment at the end of 3rd year

Bought it - $500,000 Year 1 - $70,000 $430,000 Year 2 - $70,000 $360,000 Year 3 - $70,000 $290,000

The priciple prescribing that financial statements reflect the assumption that the business will continue operating unless evidence shows that it will not continue is the:

Going-concern principle

Account - Interest Earned 1. List nature of account 2. normal balance of account (debit or credit)

Interest Earned - Revenue - credit

The inventory valuation method that results in the lowest taxable income in a period of inflation is:

LIFO Method

Revenue expenditures:

are an additional costs of plant assets that do not materially increase the assets life or its productive capabilities

Physical counts of inventory:

are necessary to measure and adjust for inventory shrinkage

Which of the following is a correct expression of the accounting equation?

assets = liabilites + stockholders equity

Bonds that have an option exercisable by the issuer to retire them a stated dollar amount prior to maturity are known as:

callable bonds

A company recieved csah proceeds of $206,948 on a bond issue with a par value of $200,000. The difference between par value and issue price for this bond is recorded as:

credit to premium on bonds payable

A company has bonds outstanding with a par value of $100,000. The unamortized discount on these bonds is $4500. The company retired these bonds by buying them on the open market at 97. What is the gain or loss on this retirement?

$1500 Gain 100,000 - 4,500 = 95,500 97000 - 95,500 = 1500 Gain

During the month of February, Hoffer Company had cash receipts of $7,500 and cash disbursements of $8,600. The February 28 cash balance was $1,800. What was the February 1 beginning cash balance?

$2,900 Disbursements - receipts = 1100 + 1800 remaining balance

On December 1, Martin Company signed a $5,000 3 month, 6% note payable, with the principal plus interest due on March 1 of the following year. What amount of interest expense is accrued at December 31 on the note? (assume 360days yr)

$25 $5000 x .06 = $300 12/300 = 25x 1=25

An employee earned $47000 during the year working for the employer. The FICA tax for social security is 6.2% and the FICA tax for Medicare is 1.45%. The employers share of FICA taxes for social security and medicare is:

$3,595.50 47,000 x 6.2% = 2914 47,000 x 1.45%= 681.50 2914+681.50 = $3595.50

A company sold $4,000 worth of merchandise. The company collected cash within the 2% cash discount period.The total amount recieved for the merchandise is:

$3,920 $4,000 x 2% = $80 $4,000 - $80 = $3,920

A company used the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: Accounts recievable $245,000 debit Allowance for uncollectible accounts $300 credit Net Sales $900,000 credit All sales are made on credit. Based on past experience, the company estimates 0.5% of credit sales to be uncollectible. What amount should be debited to Bad Debts Expense when the year end adjusting entry is prepared?

.005 x $900,000 =$4,500

The credit terms 2/10, n/30 are interpreted as:

2% discount if paid within 30 days

The accumulated depreciation on equipment $500,000 totaled $425,000 at the time of its sale. Equipment sold for $60,000. Compute dollar amount of the gain or loss on the sale and state clearly whether the amount represents a gain or loss.

500,000 - 425,000 = 75,000 book value 75,000 - 60,000 = 15,000 loss

headings in financial statements? Balance Sheet

Balance Sheet - December 31, 2009

The contract between the bond issuer and the bondholders, which identifies the rights and obligations of the parties is called a

Bond indenture

Account - Cost of Goods Sold 1. List nature of account 2. normal balance of account (debit or credit)

Cost of Goods Sold - Expense - Debit

Assume tha the custodian of a $450 petty cash fund has a $62.50 in coins and currency plus $382.50 in receipts at the end of the month. The entry to replenish the petty cash fund will include:

Credit to Cash Over Short for $5.00 $382.00 + $62.50 = $445 so he is short $5 to replenish

Advance ticket sales totaling $6,000,000 cash would be recognized as follows:

Debit Cash Credit Unearned Revenue

Unearned revenues are:

Liabilities created when a customer pays in advance for products or services before the revenue is earned

On January 1 a company purchased a 5 yr insurance policy for $1800 with coverage starting immediately. If the purchase was recorded in the Prepaid insurance account and the comapny records adjustments only at year end, the adjusting entry at the end of the first year is:

Debit Insurance Expense $360 Credit Prepaid Insurance $360

Account - Equipment 1. List nature of account 2. normal balance of account (debit or credit)

Equipment - Asset - Debit

When a petty cash fund is in use:

Expenses paid with petty cash are recorded when the fund is replenished

if the terms of shipping goods from seller to buyer indicates that the seller owns the goods until delivered to the buyer, this arrangement is known as:

FOB destination

Account - Notes Payable 1. List nature of account 2. normal balance of account (debit or credit)

Notes Payable - Liability - Credit

Account - Notes Recievable 1. List nature of account 2. normal balance of account (debit or credit)

Notes Recievable - asset -debit

A company had no office supplies available at the beginning of the year. During the year, the company purchased $250 worth of office supplies. On December 31, $75 worth of oofice supplies remained. How much should the company report as office supplies expense for the year?

Only what was used 250-75 = $175

Account - Retained Earnings 1. List nature of account 2. normal balance of account (debit or credit)

Retained Earnings - Stockholders Equity - Credit

Account - Salaries Expense 1. List nature of account 2. normal balance of account (debit or credit)

Salaries Expense - Expense - Debit

Account - Sales 1. List nature of account 2. normal balance of account (debit or credit)

Sales - Revenue - Credit

Income Statement Accounts

Sales Revenue Cost of Goods Sold - Expenses Income Gain on Equipment Sale Income before taxes Income Taxes Net Income Outstanding shares (income divided by shares cost)

Account - Supplies 1. List nature of account 2. normal balance of account (debit or credit)

Supplies - Expense - Debit

A bond that was traded at 102 1/2 means that:

The bond traded at !1025 per $1000 bond

A debit is:

The left hand side of a t account

The current period's ending inventory is:

The next periods beginning inventory

In comparing the canceled checks on the bank statement with the entries in the accounting records. It is found that check number 2889 for December utilities was correctly written and drawn for $970 but was incorrectly entered in the accounting records as $790. The journal entry to adjust the books for the bank reconciliation would include?

Written correctly $970 Entered wrong $790 $180 Decrease to Cash $180 increase to Utility expense

A depreciation method that produces larger depreciation expense during the early years of an assets life and smaller expense in the later years is an

accelerated depreciation method

Adjusting Entries:

affect both the income and the balance sheet

Contingent liabilities must be recorded if:

all of the following: future event is probable and the amount owed can be reasonably estimated future event is remote future event is reasonably possible amount owed cannot be reasonably estimated

When bonds are issued by a company, the accounting entry shows

an increase in assets increase in liabilities

An overstatement of ending inventory will cause

an overstatement of assets and equity on the balance sheet

the entry to record the annual lease payment on a capitalized lease includes a:

debit to interest expense

If accrued salaries were recorded on December 31 with a credit to salaries payable, the entry to record payment of these wages on the following January 5 would include

debit to salaries payable credit to salaries expense

A company wrote a check on September 30 that did not appear on the bank statement dated September 30. In preparing the Spetember 30 bank reconciliation, the company should:

deduct the check from the bank statement balance

Distributions of assets by a business to its stockholders are called:

dividends

all customers are given receipts for their purchases

documentation procedures

only one person opens the vault in the morning

establishment of responsibility

Secured bonds

have specific assets of the issuing company pledged as collateral

Financial Statements aretypically prepared in the following order:

income statement statement of retained earnings balance sheet

Cash shortages are not discovered because there are no daily cash counts by supervisors

independent internal verification

The maturity date of a note recievable:

is the day the note is due to be paid in full

Net income:

is the excess of revenues over expenses

The record in which transactions are first recorded is the:

ledger

an unearned revenue account is usually considered to be a

liability

Depletion

process of allocating the cost of natural resources to periods in which they are consumed

A company uses the perpetual inventory system and recorded the following entry: Accounts Payable $2,500 Merchandise Inventory $50 Cash $2,450 This entry reflects:

purchase

A company sold $12,000 worth of MP3 players with an extended warranty. It estimates that 2% of these sales will result in warranty work. The company should:

recognize warranty expense and liability in the year of the sale

The person who is authorized to sign the checks approves purchase orders for payment

segregation of duties

Depreciation is the process of allocating the cost of a plant asset over its useful life in a

systematic and rational manner

Amortization

the systematic allocation of the cost of an intangible asset to expense over it estimated useful life

If the debit and credit column totals of a trial balance are equal, then:

the total debit entries and total credit entries are equal

The matching principle requires:

the use of the allowance method of accounting for bad debts