Financial Accounting (Wild) Ch 5 Vocab, Financial Accounting: Chapter 1 Quiz Questions, Chapter 2 Review, Chapter 5: Financial Accounting: Connect Assignments, Chapter 7: Financial Accounting: Accounting Info Connect Assignment, Chapter 9: Accounting...

Review the following credit terms and identify the one that states that the buyer will receive a 3% discount if the payment is made within 15 days. Otherwise, full payment is expected within 45 days of the invoice date.

3/15,n/45

Trial balance: debits equal credits Identify which error will cause the trial balance to be out of balance

A $100 collection of an account receivable was enormously posted as a debit to accounts receivable and a credit to cash

Trial balance: debits equal credits Identify which error will cause the trial balance to be out of balance

A $140 cash receipt from a customer in payment of her account posted as a $140 debit to cash and a $14 credit to accounts receivable.

Trial balance: debits equal credits Identify which error will cause the trial balance to be out of balance

A $15 cash receipt from a customer in payment of her account posted as a $15 debit to cash and a $15 credit to cash.

Trial balance: debits equal credits Identify which error will cause the trial balance to be out of balance

A $20 cash purchase of office supplies posted as a $20 debit to office equipment and a $20 credit to cash

Trial balance: debits equal credits Identify which error will cause the trial balance to be out of balance

A $25 cash salary payment posted as a $25 debit to cash and a $25 credit to salaries expense

4 steps of processing transactions

Identify transactions and source documents Analyze transactions using the accounting equation Record the journal entry Post entry to the ledger

cash + accounts receivable + equipment -equity=liabilities

cash + accounts receivable + equipment -equity=liabilities

analyzing transactions: alexander company receives $10,000 from a client billed in a previous month for services provided

cash-debit $1000. accounts receivable-credit $1000

inventory/merchandise turnover

cost of goods sold/average inventory -# of times a company's average inventory is sold during a period

interest payable

credit

owner capital

credit

unearned revenue

credit

accounts payable

debit

cash

debit

equipment

debit

land

debit

note receiveable

debit

office equipment

debit

office supplies

debit

owner, withdrawals

debit

prepaid insurance

debit

prepaid rent=

debit

utilities expense

debit

clawback provisions and whistleblower provisions are components of which legislation?

Dodd-frank act

Determine which statements below are correct regarding merchandise available for sale during a period.(Check all that apply.)

Ending inventory + Cost of goods sold = Merchandise available for sale, Beginning inventory + Net purchases = Merchandise available for sale

If the seller is responsible for the shipping costs of merchandise sold, the shipping terms will be specified as:

FOB destination

FIFO (first-in, first-out)

method to assign cost to inventory that assumes items are sold in the order acquired -earliest items purchased are the first sold

net income=revenues-expenses

net income=consulting revenue-employee salaries expense-interest & rent expense

gross profit method

net sales x (1 - gross profit ratio) = estimated cost of goods sold cost of goods available for sale - estimated cost of goods sold = cost of estimated ending inventory -procedure to estimate inventory

consignor

owner of goods held by another party who will sell them for the owner

An example of an operating activity is:

paying wages

Merchandise inventory can be described as: (Check all that apply.)

products that a company owns and intends to sell, an account increased with a debit, an account appearing on a balance sheet of a merchandiser, an asset account.

consignee

receiver of goods owned by another who holds them for purposes of selling them for the owner

Technology

reduces the time, effort and cost of recordkeeping

expense

rent

lower of cost/market (LCM)

required method to report inventory at market replacement cost when that market cost is lower than recorded cost

return on assets=net income/average total assets

return on assets=net income/average total assets

Cragmont has beginning equity of $277,000, net income of $63,000, withdrawals of $25,000 and no additional investments by owners during the period. Its ending equity is?

$315,000. Beginning equity+investments by owners+net income-withdrawals=ending equity. $277,000+$0+$36,000-$25,000=$315,000

The assets of a company total $700,000, the liabilities, $200,000. What is the amount of equity?

$500,000, $700,000-$200,000=$500,000. Assets=liabilities + Owner's Equity.

Rico's taqueria had cash inflows from operating activities of $27,000, cash outflows from investing activities of $22,000,and cash outflows from financing activities of $12,000. Calculate the net increase or decrease in cash.

$7,000 decrease. Net increase(decrease) in cash=cash flows from operating activities+cash flows from investing activities+cash flows from financing activities.=$27,000+$22,000+$12,000=(subtract all gives you a -balance of $7,000.

Doc's ribhouse had beginning equity of $52,000, net income of $35,000, and withdrawals by the owner of $12,000. The owner made no investments during the year. calculate the ending equity

$75,000. Ending equity=beginning equity+net income-withdrawals=$52,000+$35,000-$12,000=$75,000.

Gross profit is computed as net ____________ minus cost of goods sold.

*SALES

posting reference

A posting reference column is a column in journals and ledger accounts that is used to cross reference journal and ledger entries.

A purchase return refers to merchandise a ________________(buyer/seller/creditor) purchased, but then returns to the ___________________(buyer/seller/creditor) for a refund of the purchase price or reduction in the amount owed.

A purchase return refers to merchandise a *BUYER purchased, but then returns to the *SELLER for a refund of the purchase price or reduction in the amount owed.

What is a purchase return?

A purchase return refers to merchandise a buyer acquires, but then returns to the seller.

T account

A tool that represents a ledger and is used to show the effects of transactions is called a t-account

trial balance

A trial balance is a list of all ledger accounts and their balances at a point in time

Trial balance: debits equal credits Identify which error will cause the trial balance to be out of balance

An $500 prepayment from a customer for services to be rendered in the future was posted as an $500debit to unearned revenue and an $500 credit to cash.

account

An account is a record of the increases and decreases in a specific asset, liability, equity, revenue, or expense

capital account

An account is used to record an owner's investment in a business is called a capital account

Types of accounts:

Cash-asset Owner withdrawals-equity Accounts payable-liability Unearned revenue-liability**** Supplies-asset Expenses-equity Accounts receivable-asset Land-asset owner capital-equity

Congress passed the the Dodd-Frank Wall Street reform and consumer protection act. Which of the following are 2 of the important provisions of Dodd-Frank?

Clawback and whistleblower

balance column

The balance column in a ledger is column for showing the balance of the account after each entry is posted

Cost of goods sold is characterized by which of the following statements? (Check all that apply.)

Cost of goods sold includes the expenses of buying and preparing an item for sale. Cost of goods sold is used to figure gross profit. Cost of goods sold is also called cost of sales. Cost of goods sold is an expense reported on the income statement.

Which of the statements below are correct regarding cost of goods sold?

Cost of goods sold is the expense of buying and preparing merchandise.

X-Mart purchased $300 of merchandise and paid immediately. Demonstrate the journal entry to record this transaction, assuming the perpetual inventory system is used.

Debit Merchandise Inventory $300; credit Cash $300.

X-Mart purchased $300 of merchandise on account. Demonstrate the journal entry to record this transaction, assuming the perpetual inventory system is used.

Debit Merchandise Inventory $300; credit Accounts Payable $300.

Show your understanding of what merchandise is by completing the following sentence. Merchandise consists of __________ that a company acquires to resell to ____________.

Merchandise consists of *GOODS that a company acquires to resell to *CUSTOMERS.

Merchandise inventory can be described as: (Check all that apply.)

Merchandise inventory is an asset reported on the balance sheet and contains the cost of products purchased for sale.

Complete the following statement. Merchandise inventory that is still available for sale is considered a(n) (asset/expense/revenue) and is reported on the (balance sheet/income statement) and merchandise that is sold during the period is considered a(n) (asset/expense/liability) and reported on the (balance sheet/income statement).

Merchandise inventory that is still available for sale is considered a *ASSET and is reported on the *BALANCE SHEET and merchandise that is sold during the period is considered *EXPENSE and reported on the *INCOME STATEMENT

Determine which of the following statements about merchandise is correct.

Merchandise is acquired for resale to customers.

Merchandisers earn net income by__________(buying/manufacturing) and ______________ (selling/purchasing) merchandise.

Merchandisers earn net income by *BUYING* and *SELLING merchandise.

Sales is a(n) __________ (expense/revenue/asset) account and is reported on the ____________(income/balance) _____________(statement/sheet).

Sales is a *REVENUE account and is reported on the *INCOME *STATEMENT.

The buyer and seller of merchandise must agree on who is responsible for paying freight terms. Show your understanding of freight terms by selecting all of the correct statements below. (Check all that apply.)

Revenue for the sale will be recorded after the goods reach their destination, if the goods are shipped FOB destination, Terms FOB destination means that the seller is responsible for shipping costs, Terms FOB shipping point means the buyer accepts ownership when the goods depart the seller's place of business, When the shipping costs are the responsibility of the buyer, then the Merchandise Inventory account is debited for the freight charges.

Trial balance: debits equal credits Identify which error will cause the trial balance to be out of balance

The cash payment of 750 accounts payable was posted as a debit to accounts payable and a debit to cash.

Explain what the credit terms of 2/10,n/30 mean. (Check all that apply.)

The full payment is due within a 30-day credit period., the buyer can deduct 2% of the invoice amount if payment is made within 10 days of the invoice date.

owner's withdrawal account

The owner's withdrawal account is the account used by business to record the transfer of assets from a business to its owner for personal use

Trial balance: debits equal credits Identify which error will cause the trial balance to be out of balance

The purchase of office equipment for 2500 was posted to debit to office supplies and a credit to cash for 2500

Trial balance: debits equal credits Identify which error will cause the trial balance to be out of balance

The purchase of office supplies on account for $325 was recorded in the journal as 235 debit to office supplies of a service was not recorded at all

analyzing transactions: Company paid $500 for this month

Utilities expense for debit, cash credit

You will always have 2 things one credit and the other debit because they have to balance each other, debit goes first

You will always have 2 things one credit and the other debit because they have to balance each other, debit goes first

expense recognition

a company records the expenses it incurred to generate the revenue reported, alexander Co. received a $500 utility bill for the current month's electricity. It is not due until the end of the next month which is when they intend to pay it. Expense and a payable which means an account payable, your debiting the utilities expense increasing them. utilities expense-debit $500. Accounts payable-credit $500

A sales return refers to merchandise that ____________ (customers/sellers/creditors) return to the ___________ (customer/seller/creditor) after a sale for a refund of the purchase price or reduction in the amount owed.

a sales return refers to merchandise that *CUSTOMERS return to the *SELLER after a sale for a refund of the purchase price or reduction in the amount owed.

amounts receivable-money you are going to receive vs accounts payable-pay cash later on

amounts receivable-money you are going to receive vs accounts payable-pay cash later on

analyzing transactions

analyzing transactions

Resources a company owns or controls that are expected to yield future benefits are?

assets

If a company receives $12,000 from the owner to establish a proprietorship, the effect on the accounting equation would be?

assets increase $12,000 and equity increases $12,000

If a company has excess space in its building that it rents to another company for $700, what is the effect on accounting equation during the first month?

assets would increase $700 and equity would increase $700. assets and equity both increase at the time the rent is earned.

effects of inventory errors

beginning inventory + net purchases = goods available for sale goods available for sale - ending inventory = CGS ex) understate ending inventory -CGS: overstated -net income: understated

Jo's Market makes a credit sale for $1,000 with terms of 2/10,n/30. The cost of the merchandise is $400. The required journal entry to record the sale and cost of the sale is:

debit Accounts Receivable $1,000; credit Sales $1,000; debit Cost of Goods Sold $400; and credit Merchandise Inventory $400

retail inventory method

method for estimating ending inventory based on amount of goods for sale at cost/amount of goods for sale at retail

days' sales in inventory (days' stock on hand)

ending inventory/cost of goods sold x 365 -estimate # of days one can sell inventory if no new items are purchased

net realizable value

expected selling price (value) of an item - the cost of making the sales -damaged, obsolete, and deteriorated goods that are included in inventory are reported at net realizable value

True or False: Ethics is defined as maximizing personal wealth, regardless of the cost.

false

True or False: The cost-benefit constraint prescribes that only information with benefits of disclosure less than the costs of providing it, need be disclosed.

false

True or False: The measurement principle prescribes that accounting information is based on subjective opinion rather than cost

false

interim financial statements

financial statements covering periods of less than one year

amounts payable

increased by buying items on credit decreased by business making a payment on its account liability account

accounts receivable

increased by credit sales to customers or billing to customers decreased by customer making a payment on their account asset account

LIFO (last-in, first-out)

method for assigning cost to inventory that assumes costs for the most recent items purchases are sold first and charged to cost of goods sold

specific identification (SI)

method for assigning cost to inventory when the purchase cost of each item in inventory is identified and used to compute cost of goods sold and/or cost of inventory

average cost/weighted average (WA)

method for assigning inventory cost to sales cost of available-for-sale units/number of units available --> determines per unit cost to each sales that is then multiplied by the units sold to yield the cost of that sale

True or False: A partnership is a business owned by 2 or more people.

true

True or False: financial accounting is the are of accounting aimed at serving external users by providing them with general-purpose financial statements.

true

True or False: objectives, qualitative characteristics, elements, and recognition and measurement are components of the FASB conceptual framework.

true

True or False: opportunities in accounting include auditing, consulting, market research, and tax planning.

true

True or False: the 3 types of business activities are operating, financing, and investing

true

True or False: the statement of cash flows separated into operating, investing, and financing activities over a period of time.

true