ACTG 210 Ch.4

Balance sheet equation

Total assets = Liabilities + Owners Equity

Debt to assets ratio equation

Total liabilities / total assets

From an accounting standpoint, the acquisition of long-lived assets is a...?

prepaid expense

What do closing entries cause?

the revenue and expense accounts to have zero balances

Amos real estate signed a 4-month note payable in the amount of $20,000 on 9/1. The note requires interest at an annual rate of 9%. The amount of interest to be accrued at the end of september is?

$150

Fleet services company purchased equipment for $12,000 on 1/1/17. The company expects to use the equipment for 5 years. It has no salvage value. What balance would be reported on 12/31/17 balance sheet for Accumulated Depreciation?

$2,400

A/R has a beginning balance of $52,000 and an ending balance of $74,000. If $42,000 was sold on account during the year, what were the total collections on account?

$20,000

Employees at Biquell Corporation are paid $15,000 cash every Friday for working M-F. The calendar year accounting period ends on Wednesday, 12/31. how much salaries and wages expense should be recorded two days later on 1/2?

$6,000

3 similarities between IFRS and GAAP

1) Basic recording techniques are the same 2) both emphasize transparency and meeting the needs of investors 3) Proprietorships, partnerships, and corporations are in countries with international standards

4 assumptions in Financial statements

1) Going Concern Assumption: we assume business will last forever 2) Monetary Unit: items in financial statements can be reported based on local currency 3) Economic Entity: business is a separate entity from its owners 4) Periodicity assumption: business is indefinite.

Walton company collected $14,400 in may 2016 for 4 months of service which would take place from 10/16-1/17. The revenue reported from this transaction during 2016 would be?

10,800

Darting company purchased equipment for 9000 for 1/1/17, the company expects to use the equipment for 3 years, it has no salvage value. What is the monthly depreciation expense on the asset?

250

During 2016: Sales of 9,000 on account collected 4000 for services performed in 2017 Paid 2650 cash in salaries Purchased plane tickets for 500 in december for a trip for 2017 What is the 2016 net income using cash basis actg?

850

Is a week an accounting time period?

A week

Which trial balance will consist of the greatest number of accounts?

Adjusted trial balance

If a resource has been consumed but a bill has not been received at the end of the actg period, then?

An adjusting entry should be made recognizing the expense

ACTG cycle

Analyzing --> Journalize --> Ledger/Posting --> Trial Balance--> adjustments --> adjusted trial balance --> financial statements --> closing --> post closing trial balance

What is the diff. b/w the balance of a plant asset account and the related accumulated depreciation account is termed?

Book value

The different b/w the cost of a depreciable asset and its related accumulated depreciation is referred to as the?

Book value of the asset

Stockholder Equity Equation

Beginning Stockholder Equity + Revenues - Expenses - Dividends = Ending Stockholder Equity

Current ratio equation

Current ratio = CA / CL

Working capital equation

CA - CL = working capital

Cash: 300 A/R: 522 Prepaid Insurance: 82 Supplies: 180 Equipment: 4,000 Salaries/Wages Expense: 1,000 Rent expense: 500 Total = 6,584 Accumulated Depreciation, Equipment: 600 A/P: 384 Common Stock: 1,200 Retained Earnings: 1,400 Service Revenue: 3,000 Total= 6,584 If, on 12/31/17, supplies on hand were $40, the adjusting entry would contain?

Debit to supplies expense for $140

Adjustments for unearned revenue?

Decrease liabilities and increase revenues

Equiptment was purchased by Noland Manufacturing on 1/1/17, for $125,000. Noland's policy is to adjust its account at year-end. Which is the appropriate journal entry to record depreciation at year-end if the company expects to use the equipment for 5 years?

Depreciation Expense - Equipment = $25,000 Accumulated Depreciation - Equipment = $25,000

Earnings per share equation

EPS = (Net Income - Preferred Dividends) / Avg. common shares outstanding

On 4/1/17, nPropel Corporation paid $48,000 cash for equipment that will be used in business operations. The equipment will be used for four years. nPropel records depreciation expense of $48,000 for the calendar year ending 12/31/17. Which actg principle has been violated?

Expense recognition principle

(T/F?) Both IFRS and GAAP allow revaluation of items such as land and buildings to fair value

False

What does GAAP mean

Generally accepted Actg Principles by Financial actg standards boards

Baden industries borrows $20,00 at 7% annual interest for 6 months on 10/1/17. Which is the appropriate entry to accrue interest if Baden employs on 12/31/17 fiscal year?

Interest Expense $350 Interest Payable $350

What does IFRS mean

International Financial Reporting Standards by International ACTG standards Board

Net Income = ?

Net Income = Revenues + Expenses

Free cash flow equation

Net cash flow from operating activities from SCF - capital expenditures - cash dividends

is recording the collection of an advance customer payment as revenue an application for the revenue recognition or expense recognition principle?

No

What is an example of a deferral adjusting entry?

Prepaid expense

What are goods purchased for future use in the business, like supplies, called?

Prepaid expenses

Is IFRS principles based or rules based?

Principles

Whats the purpose of an adjusted trial balance?

Prove the equality of the total debit balances and total credit balances in the ledger

Quick Ratio equation

Quick ratio = (CA - Inventory) / CL

What account balance will change between the adjusted trial balance and the post-closing trial balance?

Retained Earnings

Is GAAP principles based or rules based?

Rules

Merando industries employs a five-day workweek and a september 30 year-end. Normal weekly wages amount to $35,000. If september 30 ends on a wednesday, what is the appropriate journal entry on 10/2, the next payday for Merando?

Salaries and Wages Expense: $14,000 Salaries and Wages Payable: $21,000 Cash: $35,000

Which account will have a zero balance after closing entries have been journalized and posted?

Service Revenue

(T/F?) Revenues and Expenses are closed to the income summary account

T

Can an adjusting entry include a debit to an asset and a credit to a revenue?

Yes

Oakville Inc. purchased a 12-month insurance policy on 3/1/17 for $2,400. On 3/31/17, the adjusting journal entry to record expiration of this asset will include?

a debit to Insurance Expense and a credit to Prepard Insurance for $200

Adjusting entries can be classified as?

accruals and deferrals

Why was apple required to spread their iPhone revenues over a two year period?

because they were required to provide software updates over that two year period

The primary difference between accrued revenues and unearned revenues is that accrued revenues have?

not been recorded and unearned revenues have

Adjusting entries affect at least?

one income statement account and one balance sheet account

What will a post-closing trial balance show?

only balance sheet accts

The purpose of the post-closing trial balance is to?

prove the equality of the permanent account balances that are carried forward into the next actg period

The revenue recognition principle dictates that revenue should be recognized in the actg records when?

the performance obligation is satisfied

The accounts of a business, before an adjusting entry is made to record accrued revenue, reflect an?

understated asset and an understated revenue