ACC210 Test Two
Weighted average COGS
# of units sold x cost/unit you calculated
Double declining balance deprecation
(Cost - Accumulated Deprecation) x (200%/service life)
Straight line depreciation
(Cost - residual value) / Service Life
Activity Based Depreciation method
(Cost-residual value)/ units expected to be produced
Weighted cost average
(cost of goods available for sale)/ # of units available for sale
Average collection period
365/ Receivables turnover ratio
Average days in inventory
365/ inventory turnover ratio
What factors play into a bank reconciliation/cash balance adjustment, and do you add or subtract them?
Add deposits in transit, subtract outstanding checks
What two things increase a company's cash balance?
Bank collections and interest earned
Loss on Impairment
Book Value - Fair value
Inventory turnover ratio
COGS/ average inventory
Which company asset is most commonly involved in fraudulent activity?
Cash
Book Value
Cost - accumulated depreciation
What items should be included under "Cash and Cash Equivalents"?
Currency and coins, checking account balances, savings account balances, short term investments with a purchase date less than three months, checks received but not yet deposited
Write off journal entry
Debit Allowance for UA, credit Accounts receivable
Journal entry for uncollectible accounts allowance
Debit Bad Debt expense, credit Allowance for UA
LIFO adjustment
Debit COGS (+E) , credit Inventory (-A)
Depreciation journal entry
Debit Depreciation Expense, credit Accumulated depreciation (contra asset)
Journal entry for collecting notes with interest
Debit cash, credit notes receivable and interest REVENUE
What is the most common means of detecting employee fraud?
Employee tips
The process of estimating bad debts and recording the estimate in the same period as sales associated is an application of which accounting principle?
Expense recognition principle
T or F: A company is regularly permitted to change its inventory costing method from year yo year
False
T or F: The direct write off method is an application of GAAP?
False
True or False: After a company specifically writes off a customer's account receivable as being uncollectible, it may not subsequently collect the cash from the customer.
False
Operating Income
Gross profit - operating expenses
Gross Margin
Net Sales - COGS
Receivables turnover ratio
Net credit sales/ Avg. accounts receivable
Return on asset ratio
Net income/ Average total assets
Profit margin
Net income/ net sales
Gross Profit
Net sales - COGS
Asset turnover
Net sales/ avg. total assers
As a customer's account receivable balance is written off due to being uncollectible, what is the effect on the company's net accounts receivable amount?
No effect
Income before taxes
Operating Income + nonoperating revenue - nonoperating expenses
Which element of the fraud triangle does a company have the greatest power to eliminate?
Opportunity
What are preventative control activities (as opposed to detective control)?
Proper authorization, separation of duties, employee management, physical controls, commerce controls
Goodwill
Purchase price - fair value of net assets (add liabilities to this)
Net Purchases
Purchases + Freight In - Purchase Discounts - Purchase Returns and Allowances
Companies should have internal control procedures in place to:
Safeguard the company's assets, improve the accuracy and reliability of accounting information
Gain or Loss on Sale/ Retirement of an asset
Sale/trade price - book value
If a customer returns an item, what account do you debit?
Sales Returns
What are examples of contra revenue accounts?
Sales discounts, sales returns and allowances, allowance for uncollectible accounts
Do you add or subtract NSF checks from a company's cash balance?
Subtract
COGS (EXPENNSE)
Total cost - ending inventory
True or False: One of the major provisions of the Sarbanes-Oxley Act (SOX) requires a company's audit committee to hire the outside auditors.
True
True or False: The Sarbanes Oxley Act applies to all companies required to file their financial statements within the SEC.
True
Ending Inventory
Units of ending inventory x cost (determined by LIFO, FIFO, WA)
A higher inventory turnover ratio means
a company is better at managing its inventory
Gross profit ratio
gross profit / net sales
