Intermediate Acct I Final

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Mendenhall Corporation constructed a building at a cost of $10,000,000. Actual interest was $600,000, and avoidable interest was $400,000. If the salvage value is $800,000, and the useful life is 20 years, calculate the depreciation expense for the first full year using the double declining method

$1,040,000; bv = cost + avoidable interest;; bv*2*(100/usefulife) ; (100,000,000+400,000)*2*(100/20)

The Pink Shop shows the following data related to an item of inventory: Inventory, January 1 200 units @ $5.00 Purchase, January 9 600 units @ $5.40 Purchase, January 19 140 units @ $6.00 Inventory, January 31 180 units calculate ending inventory under FIFO

$1,056 = 140*$6+40*5.4

Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $4,800,000 on March 1, $3,000,000 on June 1, and $6,000,000 on December 31. Arlington Company borrowed $2,400,000 on January 1 on a 5-year, 12% note to specifically help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $4,800,000 note payable and an 11%, 4-year, $9,000,000 note payable. What is the actual interest?

$1,758,000 ; all loan amounts * interest amounts ; (2,400,000x0.12)+(4800000x0.10)+(9,000,000x11%)=1,758,000

The company adopted LIFO on December 31, 2011 with a base inventory of $107,000. The following table summarizes data available through December 31, 2014. Inventory at year end cost w/ cost Index 2012 ending inventory $116,600 1.06 2013 ending inventory $128,800 1.12 2014 ending inventory $129,950 1.15 What amount would Conway report as the value of inventory under DV LIFO on its 2012 balance sheet?

$110,180 2012 end inventory = $110,000, break that into base of 107,000 @ 1.00 and 3,000 @ 1.06 equals $110,180

The company adopted LIFO on December 31, 2011 with a base inventory of $107,000. The following table summarizes data available through December 31, 2014. Inventory at year end cost w/ cost Index 2012 ending inventory $116,600 1.06 2013 ending inventory $128,800 1.12 2014 ending inventory $129,950 1.15 what amount would conway report on their 2013 balance sheet?

$115,780 ; 2013 end inventory is 128,800/1.12= 115,000, FISH that; 107,000 base @1.00 + 3,000 2012 layer @ 1.06 + 5,000 2013 layer @ 1.12 equals 115,780

Nenn Co.'s allowance for uncollectible accounts was $180,000 at the end of 2011 and $190,000 at the end of 2012. For the year ended December 31, 2012, Nenn reported bad debt expense of $27,000 in its income statement. What amount was the net write-off for actual bad debts?

$17,000 ADAbeg-BDE-NWO=ADAend 180000+27000-NWO=190,000

As of 2013 Year End before adjusting journal entries, the Colorful Company has accounts receivable in the amount of $255,000 and allowance of doubtful account of $3,050. The $255,000 accounts receivable includes $150,000, $100,000, and $5,000 that has been outstanding for 10 days, 40 days and 75 days respectively. The company's historical records show that for accounts of these ages, the likelihood of collectability is about 99.5%, 98% and 90% respectively. Calculate the bad debt expense for 2013.

$200 Desired ending ADA balance: A/R * probabilities. BDE- ^ - ADA (3050)

$480,000; (10,000,000+400,000-800,000)/20 ; only add avoidable interest to base and subtract salvage value

$644,775; 2,400,000*12+(weighted average expenditures) - 2,400,000)*10.65% = 644775

$900= 180*$5

$914,286 ; sum of digits (20*21)/2 = 210 ; (100,000,000 + 400,000 - 800,000) * 20/210 (add avoidable interest and subtract salvage value to get depreciable base. then multiple by useful life/ sum of useful life digits

under % of completion method, what is revenue recognized to date equation?

% complete * estimated total revenue

issue price equation

(fv*stated rt)/(1+mkt)^y + (fv*stated)/(1+mkt)^2

weighted average interest rate equations?

(note amount * rate) + (note amount * rate) / (all note amounts combined)

4 assumptions of accounting

-economic entity -going concern -monetary unit -periodicity

4 principles of accounting

-measurement -revenue recognition -expense recognition -full disclosure

DV LIFO conversion steps

1- find the ending inventory cost by dividing base year cost by conversion index 2- separate the units into layers (base, then the year, etc) 3- apply conversion price index to each layer 4- add them up 5- find the increase/decrease from FIFO to LIFO

The company adopted LIFO on December 31, 2011 with a base inventory of $107,000. The following table summarizes data available through December 31, 2014. Inventory at year end cost w/ cost Index 2012 ending inventory $116,600 1.06 2013 ending inventory $128,800 1.12 2014 ending inventory $129,950 1.15 what amount would conway report on their 2014 balance sheet?

113,540 ; 2014 ending inventory = 129,950/1.15 = 113,000 to FISH; 107,000 base @1.00 + 3,000 2012 layer @ 1.06 + 3,000 2013 layer @ 1.12 equals 113,540

April 1, 2012, Green Company finished consultation services and accepted in exchange a note receivable with a face value of $600,000, a due date of April 1, 2015, and a stated rate of 6%, with interest receivable at the end of April 1. The note of this type of risk is considered to have an appropriate market rate of interest of 10%. Provide journal entry for year 1

4/1/12 dr N/R $600,000 cr service rev $540316 cr discount on NR $59684 12/31/12 dr int rec 27000 (36,000 interest rec * 9/12 bc u used it for 9 months). dr discount on NR 13,524 cr interest rev 40524 (54032*9/12 bc u used it for 9 months)

star inc.'s year worth of rent is received in advance anually on april 1. the following AJE was made on 12/31/2018: dr unearned rev $4,245 cr rent rev $4,245 What was original journal entry on april 1, 2018?

4/1/18 dr cash $5660 cr unearned rent rev $5660 12/31/18 dr unearned rent rev $4245 cr rent rev $4245 **bc 4245 is how much they have left to collect. on april 1 the customers will have used 3 months/ 12 total months of that, which is (0.75x4245) which equals $5660 rent paid on the due date

on sept 1, 2018 you paid $10,000 tuition for full academic yea. provide all necessary journal entries for you in 2018

9/1/18 dr prepaid tuition $10,000 cr cash $10,000 12/31/2018 dr tuition expense $5,000 cr prepaid tuition $5,000

debt rate

= end ada/ end A/R

total current liab equation

A/P +unearned rev+current portion of N/P+salaries payable+interest payable

net accounts receivable equation

A/R - allowance for uncollectibles

CIP balance equation

CIP balance = cumulated cost + cumulated profit

True or False (circle one): As the discount on a note receivable is amortized, the carrying value (i.e., the net balance) of the note decreases.

False; it increases

Billing on Contract formula

Cumulative billings

4. True or False: Whether a project is expected to have a profit or a loss overall, under the percentage-of-completion method, the expected total loss should always be recognized over time as progress is being made.

False, recognizing loss is different

Income Statement Format

Income from continuing ops (income tax) income from continuing op (net tax) discountinued operations: income from discountinued operations (less tax) loss on operations (less tax) -- net income

amortization table elements

N/R, beg discount, Net N/R, interest rec, interest rev, amortization, end disc

cip formula

cumulative cost + cumulative profit

2. True or False: The net amount reported for accounts receivables remains unchanged when a firm makes a journal entry to write-off actual bad debt.

True ; net remains unchanged because your write off is what youre adding or subtracting to get to net

main event records $10,000 salary expense. does this affect the balance sheet?

Yes, because salary expense decreases net income, which in turn decreases retained earnings, which is an equity account on the balance sheet

Falcon Company purchased a depreciable asset for $125,000, and paid an additional $1,000 for insurance during shipping. The estimated salvage value is $10,000, and the estimated useful life is 10 years. The straight-line method will be used for depreciation. What is the depreciation base of this asset? a. $116,000 b. $11,600 c. $115,000 d. $125,000

a. $116,000; depreciable base: cost of asset - salvage value ; 125000+1000-10000

Red Carpet Company sells product 2005WSC for $30 per unit. The cost of one unit of 2005WSC is $27, and the replacement cost is $26. The estimated cost to dispose of a unit is $6, and the normal profit is 40% of sales price. At what amount per unit should product 2005WSC be reported, applying lower-of-cost-or-net-realizable-value (LCNRV)? a.24 b. 26 c. 27 d. none of the above

a. $24 ; take cost, selling price, and selling cost to find NRV which is selling price minus cost. compare NRV to cost

for mort co. following info is available: COGS $120,000 Dividend rev $5,000 Tax Exp $12,000 Operating Exp $46,000 Sales Rev $200,000 Multi Step I/S, gross profit = a. $80,000 b. $27,000 c. $154,000 d. $33,000

a. $80,000 (revenue 5,000+200,000) - COGS (120,000) = $80,000 **gross profit would just be revenues minus expenses. after gross profit subtract operating expenses to get EBIT, then subtract interest expense and revenue to get EBT, then taxes to get net income.

On May 5, Clear Crystal sold $10,000 of inventory items on credit with the terms 1/10, net 30. The customer made all payment on May 8. Assuming Clear Crystal uses the net method of accounting for sales discounts, the entry recorded on May 8 would include a:

a. debit to Cash for $9,900 ; net assumes they will pay with discount time

In accounting for a long-term construction-type contract using the percentage-of-completion method, the percentage of the completion is calculated as the ______ to the estimated total costs. a. total costs incurred to date. b. billed portion of the contract price. c. unbilled portion of the contract price. d. total contract price.

a. total costs incurred to date % of completion: total cost incurred to date/estimated total cost

Which of the following statements related to intangible assets is true? a.Impairment loss would decrease a firm's net income. b.Firms should capitalize any and all costs incurred to develop or produce an intangible asset. c.The cost of an intangible asset is systematically allocated to expense over each year of the assets' legal life. d.All intangible assets except goodwill are tested for impairment annually

a.Impairment loss would decrease a firm's net income. ; impairment loss is basically getting rid of a division thats causing loss; it lowers your net income bc its a loss

what amount of interest should be charged to expense?

actual minus avoidable

which of the following are permanent accounts: dividends, trading securities, div payable, rent revenue

anything on B/S is permanent - trading securities and dividends

examples of permanent accounts

assets, liabilities, owner's equity (anything from balance sheet)

Clear Blue Company buys eyeglasses at $197 a pair from a supplier. At the end of 2018, the company discovers that the supplier's products have quality issues and can now be sold at $200 a pair only. Each pair costs Clear Blue Company $8 to sell. Which of the following is true under LCNRV: a. Clear Blue does not need to write down its inventory until sold. b. Clear Blue needs to write down its inventory by $5. c. Clear Blue needs to write down its inventory by $8. d. Clear Blue needs to write up its inventory by $3

b) . write fown its inventory by $5 ; selling price (197) - selling cost (200) = NRV ($3) ; cost is $8, youre making $3 for what youre spending $8 on, so increase your price by $5.

Which inventory costing method most closely approximates current (i.e., most recent) cost for each of the following: Ending Inventory Cost of Goods Sold a. FIFO FIFO b. FIFO LIFO c. LIFO FIFO d. LIFO LIFO

b. end inventory: FIFO and COS LIFO = most recent cost represented

What of the following is not true about the double-declining balance method a. depreciation expense is decreasing over time. b. salvage value is deducted in computing the depreciation base. c. the book value should not be reduced below salvage value. d. it is an accelerated depreciation method.

b. salvage value is deducted ; salvage value is not in equation at all. book value *2*(100/useful life)

end balance of RE? (BEG = $55000)

beg RE (55,000) + NI (81,000) - div (0) = $136,000

A/R T account with transaction types (credit sales, etc)

beg balance| credit sale | cash col | NWO ------------|--------- end balance

Ending Retained Earnings Equation

beginning retained earnings + net income - dividends

Comet Inc. has a credit balance of $350 on Allowance for Uncollectible Accounts and a balance of $15,000 on Accounts Receivable on 12/31/2015 before adjusting journal entries. The firm estimates that 3% of its Accounts Receivable is uncollectible. How much bad debt expense should the firm report?

c. $100

The Jindal Company's 12/31/12 balance sheet reports assets of $12,000,000 and liabilities of $5,000,000. All of Jindal's assets' book values equal to their fair value, except for land, which has a fair value that is $800,000 greater than its book value. On 12/31/12, the Comet Corporation paid $12,200,000 to acquire Jindal. What amount of goodwill should Comet record as a result of this purchase? a. $800,000 b. $200,000 c. $4,400,000 d. $0

c. $4,400,000 ; $12,200,000 acquire cost - $800,000 greater fair value - (12,000,000 assets -5,000,000 liab)

On December 1, 2014, Hogan Co. purchased a tract of land as a factory site for $750,000. The old building on the property was razed, and salvaged materials resulting from demolition were sold. Additional costs incurred and salvage proceeds realized during December 2014 were as follows: Cost to raze old building $70,000 Legal fees for purchase contract and to record ownership 10,000 Title guarantee insurance 16,000 Proceeds from sale of salvaged materials 8,000 In Hogan's December 31, 2014 balance sheet, what amount should be reported as land? a. $776,000. b. $812,000. c. $838,000. d. $846,000.

c. $838,000 ; land+costs and insurance and fees - proceeds) ; 750,000+70,000+10,000+16,000-8,000

Marle Construction enters into a contract with a customer to build a warehouse for $850,000 on March 30, 2014 with a performance bonus of $50,000 if the building is completed by July 31, 2014. The bonus is reduced by $10,000 each week that completion is delayed. Marle commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by Probability 7/31/14 65% 8/7/14 25% 8/14/14 5% 8/21/14 5% Based on the most likely outcome method, the transaction price for this transaction is a. $895,000 b. $850,000 c. $900,000 d. $585,000

c. $900,000 as week increases, bonus decreases by $10,000. Multiple the probability x bonus price of that week. add those estimates together and add to contract price

When computing the amount of interest cost to be capitalized, the concept of "avoidable interest" refers to a. the total interest cost actually incurred. b. a cost of capital charge for stockholders' equity. c. that portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made. d. that portion of weighted-average accumulated expenditures on which no interest cost was incurred

c. that portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made. ; literally the avoidable portion

The cost of land does not include: a.costs of grading, filling, draining, and clearing. b.costs of removing old buildings. c.costs of improvements with limited lives. d.title transfer fees

c.costs of improvements with limited lives. ; improvements are not necessary

Seasons' Fun Corp. spent $20,000 to add a spa room in its hotel in downtown. The $20,000 should be expensed or capitalized (circle one).

capitalized ; its a building addition

total current assets equation

cash+A/R-ADA+inventory+prepaid rent

shareholders equity equation

common stock + retained earnings

Floyd Company purchases Haeger Company for $1,600,000 cash on January 1, 2015. The book value of Haeger Company's net assets, as reflected on its December 31, 2014 balance sheet is $1,240,000. An analysis by Floyd on December 31, 2012 indicates that the fair value of Haeger's tangible assets exceeded the book value by $120,000, and the fair value of identifiable intangible assets exceeded book value by $90,000. How much goodwill should be recognized by Floyd Company when recording the purchase of Haeger Company? a. $0 b. $360,000 c. $240,000 d. $150,000

d. $150,000 ; goodwill= purchase prive - fv ; 1600000-(1240,000-120000-90000)

Which of the following most accurately reflects the concept of deprecation as used in accounting? a. The process of charging the decline in fair value of an economic resource to income in the period in which the benefit occurred b. A method of allocating asset cost to an expense account in a manner which closely matched the physical deterioration of the tangible asset involved c. An accounting concept that allocates the portion of an asset used up during the year to the contra asset account for the purpose of properly recording the fair market value of tangible assets d. The process of allocating the cost of tangible assets to expense in a systematic and rational manner to whose periods expected to benefit from the use of the asset

d. The process of allocating the cost of tangible assets to expense in a systematic and rational manner to whose periods expected to benefit from the use of the asset.

Which of the following requires capitalization of a cost: a. The useful life of an asset is increased. b. The quantity of assets is increased. c. The quality of assets is increased. d. Any of these answers are correct.

d. all are correct

Revenue from a contract with a customer a. is recognized when the customer receive the rights to receive consideration. b. is recognized even if the contract is still wholly unperformed. c. can be recognized even when a contract is still pending. d. cannot be recognized until a contract exists

d. cannot be recognized until the contract exists

A sales transaction of $5,000 provides the customer a cash discounts of 2/15, n/30. If the firm adopts the net method to account for the transaction initially and the customer did not take advantage of the discount within 15 days, the journal entry on the date of payment involves ______________ (a) A debit of 100 to Sales Discount (c) A credit of 100 to Sales Discount (b) A debit of 100 to Sales Discount Forfeited (d) A credit of 100 to Sales Discount Forfeited

d. credit of 100 to sales discount forfeited **dr cash cr a/r cr sales discount forfeited

Container Corporation purchased computer equipment, installation and training for a total cost of $120,000 on March 15, 2014. Estimated standalone fair values of the equipment, installation and training are $75,000, $25,000 and $25,000 respectively. The journal entry to record the transaction on March 15, 2014 will include a a. credit to Sales Revenue for $120,000. b. debit to Unearned Service Revenue of $24,000. c. credit to Unearned Service Revenue of $25,000. d. credit to Service Revenue of $24,000.

d. credit to service rev of $24,000 ** march 15 is just equipment, so its 120* $25,000/ total fvs (125,000) = $24,000. this is day of so you would credit service rev bc your installation is earned, if it was training it would be unearned

according to GAAP, net income: a. same as other comprehensive income b. includes certain gains and losses that are excluded from comprehensive income c. excludes all irregular items d. none of above

d. none of the above. imagine a circle which is net income. then another circle encompassing that which is other comp income, than one around both those which is comp income.

revenue from sales should be recognized at a point when a. management decides it is appropriate to do so. b. the product is available for sale to the ultimate consumer. c. the entire amount receivable has been collected from the customer. d. performance obligation is satisfied.

d. when performance obligation is satisifed. - you recognize revenue after you have performed the obligation itself

If a firm increases its estimate of salvage value for a machine (with other things unchanged), the annual depreciation will increase, decrease, or remain constant (circle one) under the straight-line method.

decrease ; if you increase salvage value, itll decrease the amount of depreciation you divide by useful life, making the number greater

When a firm records an impairment loss for a machine, its net income increases, decreases, or is not affected (circle one), and its total assets increases, decreases, or is not affected (circle one).

decreases, decreases.; bc impairment is a loss, your net income will decrease and as will your assets (losing an asset)

write off journal entry

dr ADA cr A/R

Aventine Corporation made sales on credit in 2013 totaling $80,000. Management estimates a bad debt expense rate of .5% percent of credit sales. Provide AJE on 12/31/13

dr BDE $400 cr ADA $400 ** 80,000 * .5% = 400

provide AJE on 12/31 for estimated bad debts 1% of sales rev (280,000)

dr BDE 2800 cr ADA 2800

provide year end entry to record revenue on long term contract

dr const exp cr CIP cr construc rev

provide AJE on 12/31 for deprec on equipment, 5% per year on original cost (110,000)

dr dep exp 5500 cr accum dep 5500

On January 1, 2013, Darline Trucking Corp. purchased equipment for $160,000. The equipment has an 8-year useful life and no estimated residual value. Straight-line depreciation is used. AJE on 12/31/13?

dr dep expense $20,000 cr accumulated dep $20,000 *** 160,000/8 yr = $20,000 per year since this was bought on jan 1 we use full $20,000

provide AJE on 12/31 for insurance expired during year $2,000

dr insurance expense 2000 cr prepaid insurance 2000

On October 1, 2013, S&P Company borrowed $100,000 from the bank. The note requires principal and interest at 11% to be paid on April 30, 2014. Provide AJE on 12/31/13

dr interest exp $2750 cr interest payable $2750 *** $100,000 * 11% * 3 mo/ 12 mo = $2750. our expense was $2750 and the amount we still have to pay decreases by $2750

provide AJE on 12/31 for interest of 5% receivable on note (10,000) for full year

dr interest rec 500 cr interest rev 500

on 9/1/13, carlisle inc paid $10,200 for 2 year insurance and debited entire amount to insurance expense. what is AJE on 12/31/13?

dr prepaid insurance $8500 cr insurance exp $8500 ** bc the $10,200 was for 2 years, technically we only want the 4 months they used it (sep-dec) so we multiply it by (4/24 for 2 years worth) and get $1,700 which we SHOULD have reported. therefore you decrease the $10,200 by $8500 to get to $1700

provide AJE 12/31 for rent paid in advance for last year $5400 (originally charged to expense)

dr prepaid rent 5400 cr rent expense 5400

provide AJE 12/31 for accrued salaries and wages paid on 12/31 $5800

dr salaries expense 5400 cr salages payable $5400

at wiki co. all supply purchases are recorded as supplies expense. on 12/31/2017, the b/S reports a balance for supplies in the amount of $800. during the year, the firm purchased $2,000 supplies. on 12/31/18, actual supplies on hand equal $1250. provide AJE on 12/31/2018.

dr supplies 450 cr supplies exp 450 beg inventory (800)+ bought during year (2000) - end inventory (1250)= $1550 is supplies expense for the year. we reported $2000 for the year and now we must adjust that so we take the excess of 2000-1550, or $450 and use that number

On March 1, 2013, the Star Printing Company received a $45,000 payment for annual magazine subscriptions (the subscriptions run from the March, 2013 edition through the February 2014 edition). Upon receipt of the payment, Star Printing credited the amount to sales revenue. provide AJE on 12/31/13

dr unearned rev $37500 cr sales rev $37,500 **only 10 months of sales rev was earned so (45,000/12 months * 10 month used) = $37,500. You decrease your rev by that much and increase your unearned rev by that much

weighted average accumulated expenditure equation?

each expenditure * # of months for which it was applicable / 12 months

ups allocates cost of trucks as depreciation expense over five years during which firm uses trucks to make deliveries. what principle/ assumption?

expense recognition princple

two fundamental qualities that make accounting useful for decision making

faithful representation and relevence

3. True or False: The interest revenue recognized on 2013 income statement for a non-interest bearing note receivable of $10,000 issued on 1/1/2013 is zero because the note does not bear interest

false ; all notes have interest, even if not explicitly stated

True or False (circle one): The first step in the revenue recognition process is to identify the separate performance obligations in the contract

false ; first step is identifying the contract

True or False (circle one): In calculating the issue price of a note receivable, one should use the stated rate to discount future cash flows

false ; use market discount

True or False (circle one): Whether an intangible asset is purchased or internally developed, it should be capitalized as an asset on balance sheet based on the cost incurred to purchase or to develop.

false ; way to record depends on type, way of acquiring, etc

5. True or False: The first step in the new revenue recognition standard is to find out the total contract price.

false, first step is identifying the contract, then performance obligations, then price

True or False (Circle One): Under the percentage-of-completion method, the Construction in Process account includes only the amount of construction costs.

false;

T/F - all research and development costs must be expensed as soon as they occur

false; capitalized

True or False (circle one): Land is always classified as Property, Plant, and Equipment on a company's balance sheet regardless of its purpose

false; depends on purpose of land, may not be ppne

true or False (circle one): The three factors involved in the depreciation process are the depreciation base, the useful life, and the risk of obsolescence

false; deprec base, period, and method

True or False (circle one): When a company exchanges nonmonetary assets and a gain results, the company always defer recognition of the gain

false; immediately recognize gain or loss

true/ false: gains and losses that are unusual or infrequent should be reported net of tax

false; normal gains and losses should be net of tax but unusual gains/ losses are pretax

T/F: interest cost in connection with purchase should be capitalized to land account

false; only avoidable

True or False (circle one): When a company exchanges nonmonetary assets and a gain results, the company always recognizes the loss immediately regardless of the commercial substance of the transaction.

false; only recognize immediately if there IS commercial subtance

liquidation values are not normally reported in financial statements even though many companies do go out of business. what principle or assumption?

going concern assumption

comet co purchased truck at $50,000 and recorded the $50,000 on its book. what principle/ assumption?

historical cost principle - measurement, providing info for historical needs

Income from continuing operations equation

income from continuing operations (given) - loss on land or equipment + depreciation expense

company records revenue from selling product and also records COGS on sale. what principle/ assumption?

matching (expense should be recognized in same period as revenue)

parker corp does not adjust the valuation of assets and liab to reflect changes in purchase power of dollar. what principle/ assumption?

monetary assumption

Cash Flows operations format

net income adjustments to reconcile: impairment loss decr in net ppne decr in net AR (decr in AP) --- net cash from operating activities

at end of 2011, ABC co did NOT make AJE to record accrued interest expense. indicate the effect on the error on net income, assets, liab, and owners equity.

net income: overstated bc an expense would decrease my net income assets: no effect bc expense is a liab acct and has no impact on asset liab: understated bc exp increases the amount of liab owners equity: overstated bc net income is overstated and that impacts RE

at end of 2011, ABC co did NOT make AJE to record depreciation. indicate the effect on the error on net income, assets, liab, and owners equity.

net income: overstated bc dep exp will lower net income. assets: overstated because exp decreases assets and deprec is an asset acct liab: no impact bc dep is not a liab owners equity: overstated bc net income was overstated and net income impacts RE

under % of completion method, what is percent complete equation?

percent complete = costs incurred to date/ total costs estimate

2 fundamental qualities of accounting info?

relevance and faithful rep

under % of completion method, what is current period revenue?

revenue recognized to date - revenue recognized in prior periods

examples of temporary accounts

revenues, expenses, dividends (anything from income statement)

avoidable interest

the amount of interest cost during the period that a company could theoretically avoid if it had not made expenditures for the asset - specific to the asset

T/F: internally generated goodwill should not be recognized

true

True or False (circle one): LIFO liquidation (i.e., when a LIFO firm liquidates its old inventory) usually results in lower cost of goods sold and higher income.

true

true/false: expense recognition principle dictates that costs are expensed immediately in period incurred if there is little to no association between cost and revenue

true; *little to no association*

true or False (circle one): For the FIFO method, more recent costs are reported in the inventory account on the balance sheet.

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