Accounting Exam 2- Quick Term

_______system: inventory account is updated perpetually after each sale or purchase of merchandise

perpetual

in a periodic inventory system, the cost of purchases is recognized as

an integral part of the calculation of COGS

an estimate of the asset's life or residual value must be _______ after the depreciation process has begun

depreciation

FOB ________ point: seller pays for transportation costs

destination

The bank reconciliation purpose is to reconcile, or resolve, any ______ between the bank's recorded balance and the balance that appears on the company's books

differences

cost of goods sold is not necessarily _________ to the cost of purchases of merchandise during the period

equal

Cash _________: limited to investments that are readily convertible to known amounts of cash and that have an original maturity to the investor of three months of less

equivalent

the amount of bad debts are ___________ before these debts actually occur

estimated

the value assigned to an asset determines the amount eventually recognized as an ______ on the income statement

expense

throughout this course, we have treated the interest on borrowed money as an ________ of the period

expense

Most retail establishments accept one or more major credit cards. In return for a ________, the merchant passes the responsibility for collection on to the credit card company

fee

the inventory account a manufacturers uses to record the cost of products completed and available for sale is called

finished goods inventory

no system of internal control is totally

foolproof

LIFO will provide the ______ cost of goods sold amount. This is because it uses the most recent costs, which tend to be higher, to arrive at this amount. Leads to ______ net income.

highest, lowest

under the percentage of net credit sales approach, the balance in the allowance account is ____________

ignored

under the direct write-off method, a bad debt expense is _____________

increased

ideally, the reconciliation should be performed or reviewed by someone ________

independent

all cash receipts should be deposited ____daily

intact

accounts receivable do not bear __________

interest

Over the life of the note, the maker incures interest expense on its note payable and the payee earns _______ on its note receivable

interest revenue

the choice of inventory costing method must also consider the LIFO ____ Rule

Conformity

which is not included in cash

a bank certificate for one year

the primary determinant in selecting an inventory costing method should be the ability of the method to _____ reflect the net income of the period

accurately

we will reconcile bank balance and hte book balance to an _______

adjusted balance

_______ costs necessary to prepare an asset for its intended use should be included in its cost

all

a company fails to record one storeroom full of inventory in its year-end inventory records. As a result, this will cause

an overstatement of COGS for current year

weighted average cost method _______ the average cost of goods available for sale to cost of goods sold

assign

Sarbanes-Oxely requires that the audit committee be composed of

at least 50% of key officers who are on the board of directors

Some corporations have excess cash during certain times of the year and invest this idle cash in various highly liquid financial instruments. These investments are listed on the _________ as assets

balance sheet

a __________ expenditure is a cost that is added to the acquisition cost of an asset

capital

one way an asset may be disposed is to sell teh asset for _________

cash

the CEO and CFO must ____ that the information in financial statements fairly presents the financial condition and results of operations of the company

certify

all cash payments should be made by _____

check

US GAAP allows companies to _____ among FIFO, LIFO, and weighted average inventory methods

choose

the company needs to contact its customer to ______ the amount due

collect

companies sell products/ services on credit to remain ___________

competitive

Work in process (WIP) inventory: goods that are partway through the manufacturing process but not yet _______

complete

trade-off for using the periodic system is that it reduces record keeping, but at the expense of a certain degree of _______(loss of merchandise due to theft, breakage, spoilage)

control

the installation and maintenance of controls can be _____

costly

companies using the periodic system must physically ______ the units of inventory on hand at the end of the period

count

If deposits are made on the last few days of the month, the deposits may not yet be reflected on the bank statement. This is called a ______

deposit in transit

after the bank reconciliation is completed, the company must prepare a number of adjustments in the form of ______ on its records

journal entries

acquisition cost of intangible assets includes all necessary costs, such as _____________ costs incurred at the time of acquisition

legal

Some companies use a refinement of the percentage of accounts receivable approach to estimate bad debts. This variation considers the __________ of time that the receivables have __________.

length, outstanding

There are situations where a departure from the cost basis of accounting may be necessary because the market value of the inventory may be _______ than its cost to the company

less

FIFO will provide the _____ cost of goods sold amount. This is because its uses the older costs, which tend to be lower, to arrive at this amount. Leads to _______ net income.

lowest, highest

______ the party that agrees to repay money

maker

checking accounts at banks allow a company to carefully _____ and control cash receipts and cash payments

monitor

under the percentage of accounts receivable approach, the balance in the allowance account ______ be considered

must

acquisition cost should include all of the costs that are _______ and _______ to acquire the asset and prepare it for its intended use

normal, necessary

research and development costs are __________ intangible assets

not

The company that makes or gives a promissory note to another company has a liability, a ________

note payable

merchandise's balance sheet has just _______ inventory accounted called "inventory" or "merchandise inventory"

one

the direct write-off method ignores the possibility that not all of its outstanding accounts receivable will be collected. This will ___________ the value of accounts receivable.

overstate

the direct write-off method ignores the possibility of bad debts on sales. This violates the matching principle and results in an ___________ of net income

overstatement

an ________ of ending inventory leads to a corresponding ______ of net income

overstatment, overstatement

Equity securities: securities issued by corporations as a form of _________ in the business

ownership

_________ the party that receives the money in the future

payee

__________system: inventory account is updated only at the end of the period, when the cost of goods sold is also determined

periodic

intagible assets are long-term assets with no __________ properties

physical

in the units-of-production method, the asset's life is expressed in terms of the number of units that the asset can _____

produce

operating assets constitute the major ______ assets of many companies

productive

International Financial Reporting Standards (IFRS) currently _______ the use of LIFO

prohibits

allowing only certain employees to order goods and services for the company is an example of what internal control procedure

proper authorization

LIFO assumes that the most _______ purchases goods are sold first

recently

under the allowance method, the allowance for doubtful account is ____________

reduced

accounting controls are concerned with safeguarding assets and ensuring the _______of the financial statements

reliability

Section 404 requires the annual report to include an internal control ___

report

companies have standard policies that allow the customer to _________ merchandise within a stipulated period of time

return

a __________expenditure is not treated as part of the cost of the asset, but as an expense on the income statement

revenue

The credit card issuer assumes the ________ of nonpayment

risk

an internal control system consists of the policies and procedures necessary to ensure the ____ of an entity's assets, the reliability of its accounting records, and the accomplishment of its overall objectives.

safe guarding

it is important to measure the acquisition cost of the assets ______

separately

a key feature for source documents is a ________ number system

sequential

FOB ________ point: buyer pays for transportation costs

shipping

the number of years used should be the legal life or the useful life, which is ___________

shorter

a certificate of deposit (CD) has a ______ maturity date and carries a _____ for early withdrawal and is not included in cash if the maturity date is more than three months

specific, penalty

the mechanism that companies use to track the balance owed by each customer is called a ______________

subsidiary ledger

sometimes depreciation is referred to as a _____

tax shield

purchases are the _______ account used in the periodic inventory system to record acquisitions of merchandise

temporary

discrepancies occur occasionally due to _______ by dishonest employees and to human error

theft

all depreciation methods result in the same _____ depreciation amount during the life of the asset

total

a company prepares adjusting entries for debit memorandums but not credit memorandums

true

companies are able to use _____ depreciation methods for the same asset: one for financial reporting purposes and one for tax purposes

two

all the adjustments made to the book balance need to be recorded because these items that the company was _______ of before receiving the bank statement

unaware

bed debt expenses are unpaid accounts receivables that are ____________

uncollectible

land has an ____ life

unlimited