Intermediate Accounting 1- D103: Units 2-4 Pre-Assessment
Insurance Expense
Administrative Expense-Income Statement
Legal and Professional Services
Administrative Expense-Income Statement
Gross Profit=
Net Sales - COGS
Accounts Receivable
Sales-Income Statement
common stock
Stockholders' Equity, Balance Sheet
Interest on bonds and notes
other expenses and losses-income statement
Gain on sale of land
other revenues and gains- income statement
interest revenue
other revenues and gains- income statement
Rent Revenue
other revenues and gains-income statement
Dividend Revenue
other revenues and gains-income statment
accruals (blank) net income and stockholders' equity
overstate
deferrals understate or overstate liabilities?
overstate
implies that a company can divide its economic activities time periods such as monthly, quarterly, or yearly.
periodicity assumption
Depreciation expense (statement of cash flows)
positive for operating activities
Deferrals
prepaid expenses and unearned revenues
deferrals understate or overstate stockholder's equity?
understate
A $280,000 write-down of equipment leased to others A $160,000 adjustment of accruals on long-term contracts A $240,000 write-off of obsolete inventory In its 2020 income statement, what amount should be reported as total unusual losses?
$680,000 (all of these are unusual or infrequent losses)
Net cash used for financing activities
-retirement of bonds-payment of cash dividends
accruals (blank) liabilities and interest expense
understate
Salaries-Officers
Administrative Expense-Income Statement
Qualitative Characteristics of Accounting Information and elements of financial statements
Bridge level-2nd level
What is the correct order to present current assets?
Cash, accounts receivable, inventories, prepaid items (in order of liquidity)
What are the enhancing qualities of accounting information?
Comparability, Verifiability, Timeliness, and Understandability
Which ingredient supports faithful representation?
Completeness
The accounting period is the calendar year. Employees are paid every Friday for the five-day week ending on that day. Salaries amount to $4,000 per week. The accounting period ends on a Tuesday. Using the information given above, what is the necessary adjusting entry at December 31, 2020?
Debit Salaries & Wages Expense, Credit Salaries & Wages Payable; $1,600
In which section of a statement of cash flows should you report proceeds from issuing equity instruments?
Financing activity
Payment of dividends would come under which activity on the statement of cash flows?
Financing- Financing activities involve owners' equity items including obtaining resources from owners and providing them with a return on their investment (dividends).
net sales=
Gross Billings - Returns & Allowances - Discounts
Are dividends on the balance sheet?
NO
The "why"-purpose of accounting
Objective of financial reporting
Interest payments to lenders and other creditors should be classified in which secton on the statement of cash outflows?
Operating Activity
Which organization enforces appropriate accounting practices for publicly traded companies?
SEC
Sales Discounts
Sales-Income Statement
Sales Revenue
Sales-Income Statement
Sales Returns and Allowances
Sales-Income Statement (revenue section)
Advertising Expense
Selling Expense-Income Statement
Salaries-Sales
Selling Expense-Income Statement
Travel & Entertainment for Sales Personnel
Selling Expense-Income Statement
retained earnings
Stockholder's Equity, Balance Sheet
According to the revenue recognition principle, at which point should revenue be recognized?
When the performance obligation is satisfied
accounts payable is a LIABILITY with a normal...
credit balance
Prepaid Insurance
current asset-balance sheet
Supplies Inventory
current asset-balance sheet
cash
current asset-balance sheet
investments available for sale
current asset-balance sheet
Accounts Payable
current liabilities-balance sheet
Salaries and Wages Payable
current liabilities-balance sheet
Unearned Service Revenue
current liabilities-balance sheet
adjusting entry for accrued revenues
debit asset, credit revenue
adjusting entry for accrued expenses
debit expense, credit liability
an adjusting entry for prepaid expenses
debit expenses, credit assets
an adjusting entry for unearned revenues
debit liability, credit revenue
Purchased supplies on account for $850
debit supplies $850; credit accounts payable $850
economic activity can be identified with a particular unit of accountability
economic entity assumption
Cost of Goods Sold, Salaries & Wages, Depreciation, Utilities, Interest, and Advertising are ALL
expenses
Issuance of common stock
financing activity
Payment of cash dividends
financing activity (negative)
Retirement of notes payable
financing activity (negative)
If $10,000 of salaries was paid in January, what was the balance in Salaries and Wages Payable at December 31, 2020?
he entry in January to record salary expense was: Debit Salaries and Wages Expenses $7,200, Salaries & Wages Payable $2,800, Credit Cash $10,000. Therefore, the beginning balance os salaries and wages payable was: $3,200 (ending balance of salaries and wages payable) plus $2,800 (reduction of salaries and wages payable) = $6,000.
Investing Activities
include making and collecting loans and acquiring and disposing of investments (both debt and equity) and property, plant, and equipment.
Completeness
ingredient of faithful representation
Free from error
ingredient of faithful representation
Neutrality
ingredient of faithful representation
Confirmatory Value
ingredient of relevance
Materiality
ingredient of relevance
predictive value
ingredient of relevance
Trademark
intangible asset-balance sheet
sale of investments
investing activities
purchase of land
investing activities (negative)
Financing Activities
involve liability and owners' equity items. They include (a) obtaining resources from owners and providing them with a return on their investment, and (b) borrowing money from creditors and repaying the amounts borrowed.
Operating Activities
involve the cash effects of transactions that enter into the determination of net income
Equity Investment
long-term asset-balance sheet
Notes Payable (due more than a year from now)
long-term liabilities-balance sheet
bonds payable (due more than a year from now)
long-term liabilities-balance sheet
Which approach does income reporting follow?
modified all-inclusive concept where companies record most items, including unusual or infrequent ones, as part of net income. In addition, companies are required to highlight these items in the financial statements so that users can better determine the long-run earning power of the company.
Accounts Receivable (statement of cash flows)
negative for operating activities
Gain on Sale of Investments
negative for operating activities-statement of cash flows
Cash debt coverage
net cash provided by operating activities/average total liabilities
Net cash from operating activities
net income+depreciation expense-increase in accounts receivable+decrease in inventory-decrease in accounts payable
The last item on the income statement is
net sales/losses
What is included in an owners' equity section reported in the balance sheet?
noncontrolling interest (Capital Stock, Additional Paid-in Capital, Retained Earnings, Accumulated Other Comprehensive Income, Treasury Stock, and Noncontrolling interests are reported in the Stockholders' Equity section of the balance sheet)
Accumulated Depreciation - Equipment
property, plant, and equipment-balance sheet
equipment
property, plant, and equipment-balance sheet
net cash used for investing activities
sale of land-purchase of equipment
merchandise inventory balance is used to calculate
the Cost of Goods (not a selling expense)
Faithful Representation
the numbers and descriptions match what really existed or happened
deferrals understate or overstate net income?
understate
The conceptual framework for financial reporting consists of how many levels?
3
What organization provides implementation guidance within the framework of the Codification to reduce diversity in practice on a timely basis?
AAA (American Accounting Association)
What entity requires that members prepare financial statements in accordance with GAAP?
AICPA's Code of Professional Conduct
The supplies inventory on January 1, 2020 was $5,000. Supplies costing $16,000 were purchased during 2020 and debited to the asset account. A count on December 31, 2020 revealed supplies on hand of $3,000. Which is the adjusted journal entry prior to preparing the December 31 financial statement?
Debit Supplies Expense $18,000; Credit Supply Inventory $18,000 The supplies purchased were posted to the inventory account. Therefore an adjusting entry for both the purchases and the difference in inventory must be made. $5,000 (beginning inventory) plus $16,000 (purchases) minus $3,000 (ending inventory) = $18,000; The correct adjusting journal entry: Debit Supplies Expense $18,000; Credit Supply Inventory $18,000
received cash of $36,000 on September 1, 2020, for one year's rent in advance and recorded the transaction with credit to Unearned Rent Revenue. What is the correct representation of the December 31, 2020 adjusting entry?
Debit Unearned Rent Revenue and credit Rent Revenue, $12,000
Report a $3500 sale on account
Debit: Accounts Receivable $3500; Credit: Service Revenue $3500
Journalize depreciation for the equipment that is $5,000
Debit: Depreciation Expense $5000; Credit: Accumulated-Depreciation Equipment $5000
Calculate and journalize the annual adjusting entry to be made after a six-month insurance policy was purchased on September 1, 2020, for $3,600. Period ending Dec 31.2020
Debit: Insurance Expense $2400; Credit: Prepaid Insurance $2400
Journalize the adjusting entry for an employer that owes $1300 for payroll on Jan 10, 2021, for the payroll period ending December 31, 2020.
Debit: Salaries and Wages Expense $1300; Credit: Salaries and Wages Payable $1300
Which basic objective is associated with the conceptual framework for financial reporting?
Decision-Usefulness
Comparability
Enhancing quality
Timeliness
Enhancing quality
Understandability
Enhancing quality
Verifiability
Enhancing quality
What is addressed in Rule 203 of the Code of Professional Conduct?
Financial statements being based on generally accepted accounting principles
Receipts from sales of property, plant, and equipment and other productive assets should generally be classified in which section on the statement of cash inflows?
Investing Activity
What is the current cash debt coverage often used to assess?
Liquidity- Liquidity refers to the "nearness to cash" of assets and liabilities - how quickly can they get and use their cash
"the how" - the implementation of accounting
Measurement, recognition and disclosure concepts such as assumptions, principles, and constraints
Relevance
a fundamental quality of useful information: accounting information is considered relevant if it would make a difference in a business decision
accruals
accrued revenues and accrued expenses
Statement of Financial Position
balance sheet
