241 final
what impact does write off have on NRV
none
Interest is normally shown as a(n) ______.
nonoperating item on the income statement and operating item on the statement of cash flows.
The cost of shipping inventory to customers after it has been sold will ______ the cost of inventory.
not affect
applying payments to principal and interest steps
1) Identify the unpaid principal balance. 2) Unpaid principal balance × Interest rate = Amount of interest this year 3) Total payment - amount applied to interest in 2 = Amount applied to principal 4) Unpaid principal balance in 1 - amount applied to principal in 3 = Updated Unpaid principal balance 1. UPB 2. UPB x IR = int exp 3. CP - IE=Amount applied to principal 4. UPB-Amount applied to principal=new UPB
how are intangible assets with infinite useful lives expensed
The cost of these assets isn't expensed unless it can be shown that there has been an impairment in value. Intangible assets with indefinite useful lives must be tested for impairment annually.
patent
The exclusive legal right to produce and sell a product that has one or more unique features. The legal life of a patent is 20 years.
franchises
The exclusive right to sell products or perform services in certain geographic areas.
Bonds are sold at a premium if
The market rate of interest was less than the bond rate at the time of issue.
Goodwill
The value attributable to favorable factors such as reputation, location, and superior products.
Recognized uncollectible account expense for the year using percent receivable method journal entry
UAE ADA amount is whatever it takes to get the ending ADA to be the % of receivable
What distinguishes contingent liabilities from general uncertainties?
Whether they arise from a past event.
16. Which of the following is not typically recorded as an end-of-period adjustment? a. Payment for insurance coverage b. Recognition of uncollectible accounts expense c. Depreciation of equipment d. Accrual of interest expense e. None of the above (i.e., all are end-of-period adjustments)
a
units of production formula
((Cost - salvage Value) / Estimated Total Production)= depreciation cost per unit of production. -> x actual units of production
Double Declining Balance formula
((number of assets/lifespan of asset)% x 2)
straight line formula
(cost - salvage value) / useful life
payee
- to whom the note is payable; creditor or lender
· Return of merchandise inventory (from a customer) - requires reversal of two steps for recording the sale of goods
1) Record the decrease in revenue and associated decrease in assets 2) Record the increase in inventory and the associated reversal of the expense (decrease COGS, which INCREASES retained earnings)
discount amortization steps
1. Determine the cash payment for interest by multiplying stated rate of interest x face value of the bonds 2. Determine interest expense by multiplying effective rate of interest x carrying value of bond liability 3. Determine amount of bond discount amortization by subtracting cash payment from interest expense 4. Update carrying value of liability by adding the amount of the discount amortization to carrying value at beginning of period 1. FV x SR = cash pay 2. CV x IR = int exp 3. int exp - cash pay = discount amortization 4. CV + discount amortization = new CV
Amortizing the premium steps
1. Determine the cash payment for interest by multiplying stated rate of interest x face value of the bonds 2. Determine interest expense by multiplying effective rate of interest x carrying value of bond liability 3. Determine amount of bond premium amortization by subtracting interest expense from cash payment 4. Update carrying value of liability by subtracting the amount of the premium amortization from carrying value at beginning of period 1. FV x SR = cash pay 2. CV x IR = int exp 3. cash pay - int exp = premium amort 4. CV - premium amort = new CV
On May 1, 20X1 Maymont Company acquired a new machine for $100,000. Its estimated useful life is five years and its estimated residual value is $10,000. Assuming straight-line depreciation is used, how much depreciation expense should be recorded on December 31, 20X1?
12k
The general journal entry to record depreciation expense on a delivery truck would include:
A debit to depreciation expense and a credit to delivery truck.
Amortization of bond discount results in
A decrease in equity.
trademarks
A name or symbol that identifies a company or a product. The cost of a trademark may include design, purchase, or defense of the trademark.
NRV formula
Accounts Receivable - Allowance for Doubtful Accounts
basket purchase
Acquiring a group of assets in a single transaction is known as a basket purchase. The total price of a basket purchase must be allocated among the assets acquired using the relative market value of those assets.
double declining balance definition
Depreciation method that provides for a higher depreciation charge in the first year of an asset's life and gradually decreasing charges in subsequent years
Effective Annual Rate
Discount rate x (365/term of loan)
gain on sale is what type of cash flow
IA
when is impairment recognized
If the fair value of the intangible asset is less than its book value, an impairment loss is recognized.
What creates lowest ending inv
Lifo
Investors generally prefer ______.
Lifo for lower taxes
copyrights
Protection of writings, musical composition, work of art, or other intellectual property. The protection extends for the life of the creator plus 70 years.
Dover Company began 20X5 with a $4,000 balance in warranties payable. During the year, Dover paid $2,800 to satisfy warranty claims. During the year, Dover recorded $250,000 in sales. On December 31, 20X5, Dover estimated future warranty costs totaling 2% of sales. Based on this information, which of the following is a true statement? a. Dover will report $5,000 in warranty expense in 20X5. b. Dover will report $2,800 in warranty expense in 20X5. c. Dover will report $5,000 in warranties payable on its December 31, 20X5 balance sheet. d. Dover will reduce revenue by $2,800 in 20X5.
a
A warranty is ______.
a contingent liability reported in financial statements
A creditor that holds a subordinated debenture has ______ level of security as a general creditor.
a lower
Payments on installment notes include
a payment for interest a repayment of a portion of the principal balance
The amount interest earned, but not yet collected, is called _____ interest.
accrued
principal
amount of money loaned by payee to maker of note
Going Concern Assumption
companies expect to pay their obligations in full.
intagible assets
assets that can't be touched (patents, copyrights, and goodwill)
The Allowance for Doubtful Accounts appears on the ______.
balance sheet
Cost of goods available for sale is the amount of ______.
beginning inventory plus all purchases made during an accounting period
if the stated rate = market rate
bond price = FV there is not difference to be accounted
With respect to a bond liability, the lender or buyer is called the ___________ while the seller or ______________ is the borrower
bondholder issuer
A convertible provision in a bond certificate normally allows the
bondholder to convert the bond investment into a common stock investment.
In a note containing the terms of a lending transaction, the party borrowing the money may be called the ______.
borrower issuer of the note maker of the note
FOB shipping point
buyers pays
Book value per share is ______.
calculated by dividing total stockholders' equity by the number of shares of stock owned by investors measured in historical dollars
The issuing company is allowed to to redeem (pay off) the bond debt before the maturity date when bonds are
callable
Goodwill formula
cash paid + liabilities assumed - FV
A balance sheet that displays assets and liabilities into current versus noncurrent categories is commonly called a
classified balance sheet.
what type of account is discount on bonds payable
contra liability
exclusive right to produce and sell the content contained in a textbook?
copyright
Book Value Formula
cost of asset - accumulated depreciation
Under the perpetual inventory system, the journal entry to recognize the return of inventory previously purchased on account includes a _______ to inventory and a ___________ to accounts payable.
credit debit
The journal entry to recognize a cash payment for interest on a line of credit includes
credit to cash debit to interest expense
The journal entry to recognize payment for goods shipped FOB destination includes a ______.
credit to cash debit to transportation-out
14. Which of the following is presented on a statement of changes in owners' equity? a. Assets b. Revenues c. Expenses d. Net income e. All of the above.
d
maturity date
date which maker must pay principal and final interest
Under the allowance method, the journal entry to recognize uncollectible accounts expense includes a ______________ to uncollectible accounts expense and a _________________ to allowance for doubtful accounts
debit credit
journal entry for write off
debit ADA credit AR
journal entry for When a company accepts a credit card with a fee for services rendered
debit to Credit Card Expense credit to Service Revenue
The journal entry to record a payment on an installment notes includes
debit to interest expense debit to installment note payable credit to cash
The journal entry to recognize a cash payment to repay amounts borrowed on a line of credit includes
debit to notes payable credit to cash
A corporation becomes legally obligated to pay a cash dividend on the _____ date
declaration
Amortizing the premium over the term of the bond __________ Interest Expense each interest payment period.
decreases
If stated rate < market rate
discount
bond price < face value
discount
The journal entry to record the cash payment for a previously declared dividend includes a debit to _____________ and a credit to _______
div pay cash
When the allowance method is used, the write-off of uncollectible accounts receivable ______ total assets.
does not change
interest
economic benefit earned by payee for loaning principal
line of credit formula
end of month balance x (i/12)=interest expense
Bonds Payable is always
face value
bond interest cash payment
face x stated rate x time
In a period of rising prices, net income would be highest.
fifo
Which inventory cost flow method will produce the highest income and asset values in an inflationary environment?
fifo
in a period of rising prices, ending inventory would be highest.
fifo
callable bond provides an option....
for the issuer to repay the bond liability before the maturity date.
If the long-term asset sold for more than its cost, the difference would be call a ___________. If the long-term asset is sold for less than its cost, the difference would be called a _________.
gain loss
what to do to goodwill when you have an impairment
goodwill-impairment=new goodwill
land
has an infinite life and is not subject to depreciation
how does the reinstatement of a previously written off accounts receivable (allowance method) effect financial statements
has no net effect on the financial statements
tangible assets
have a physical presence; they can be seen and touched
Product costs are normally expensed in the period ______.
in which inventory is sold
Selling and administrative costs are normally expensed in the period ______.
in which they are incurred
Amortizing the discount over the term of the bond ____________ Interest Expense each interest payment period.
increases
Contingent Liability
is a potential obligation arising from a past event
In a note containing the terms of a lending transaction, the maker of the note is called the
issuer
Which of the following entities receives cash when a company borrows money through a bond issue?
issuer
what type of account is premium on bonds payable
liability
In a period of falling prices, net income would be highest.
lifo
In a period of rising prices, cost of goods sold would be highest.
lifo
Which inventory cost flow method will produce the highest income and asset values in an deflationary environment?
lifo
Assets are reported on the balance sheet in order of their
liquidity
collateral
maker's assets assigned as security
Retail Company
merchandise businesses that sell merchandise directly to consumers, such as Target and Walmart.
Wholesale Company
merchandise businesses that sell merchandise to other businesses, such as Sysco Foods.
The depreciable cost of an asset is the cost of the asset ______.
minus salvage value
Normally companies sell stock for an amount that is
more than the par value.
how are intangible assets with identifiable useful lives expensed and what is it called
on a straight-line basis using a process called amortization. An intangible asset should be amortized over the shorter of two possible time periods: (1) its legal life or (2) its useful life.
A payment on an installment loan will be shown in the ______ activities section of the statement of cash flows.
operating financing
what are the intangible assets with identifiable useful lives
patents and copyrights
Advertising costs
period cost
Insurance on the office building.
period cost
Interest on a note payable
period cost
Office supplies
period cost
Salary of the company president.
period cost
Transportation-out.
period cost
Salaries of salespersons
period costs
bond price > FV
premium
stated rate > market rate
premium
Interest Formula
principal x rate x (months/12)
3 methods of reporting contingent liability
probable and estimable- recognize in financial statements reasonably probable but not estimable- disclose in footnotes of financial statements remote- no need to show in financial statements
All other things being equal, using debt financing instead of financing with equity will ______ level of retained earnings.
produce a higher level
units of production definition
produces varying amounts of depreciation in different accounting periods depending upon the number of units produced
Costs incurred to improve the quality of goods available for sale.
product cost
Goods purchased for resale
product cost
Transportation-in.
product cost
capitalized cost of land
purchase price salex taxes title search and transfer costs realtor and attorney fees cost of removal of old buildings grading costs
capitalized cost of buildings
purchase price sales taxes title search and transfer documents realtor and attourney fees remodeling costs
capitalized cost of equipment
purchase price (less discount) sales tax delivery costs installation costs costs to adapt to intended use
what needs to happen when you find goodwill has decreased
record an impairment loss
what are the intangible assets with infinite useful lives
renewable franchises, trademarks, and goodwill.
if item is sold for 100 with 10% tax what happens to revenue, assets and liabilities
revenue +100 cash+110 liabilities +10
FOB destination
sellers pays
Common stockholders have the right to ______.
share in the distribution of profits vote on significant matters that affect the corporate charter participate in the election of directors
after tax cost of debt formula
stated rate × (1 - tax rate)
An arbitrary amount established by the board of directors of a corporation assigned to no-par stock is called
stated value
what will happen to the carrying value of a bond that is issued at premium
the carrying value of the bonds will decrease over time.
maker
the person responsible for making payment on due date; (also borrower or debtor)
Current Liabilities
those that are payable within one year or the operating cycle, whichever is longer.
When goods are shipped under the terms FOB shipping point, the freight-cost is referred to as ______.
transportation-in
When goods are shipped under the terms FOB destination, the freight-cost is referred to as ______.
transportation-out
In a period of falling prices, the unit cost of goods would be the same for ending inventory and cost of goods sold.
weighted average
Warranty expense is recognized ______.
when the guaranteed merchandise is sold
is training added to capitalize cost for equipment
yes
Are land improvements depreciated?
yes over their useful lives