Accounting 230 FINAL

In preparing a monthly bank reconciliation, which of the following items would be deducted from the balance reported on the bank statement to arrive at the correct cash balance?

Outstanding checks

financing cash flows:

transactions with lenders, such as borrowing money and repaying debts, and with stockholders, such as issuing stock and paying dividends

What is a sales allowance?

a reduction of partial refund

Activities from acquiring and selling products are classified as

operating activities

Financing activities:

transactions involving external sources of funding (borrowing from the bank, issuing stock)

On December 29th, 2009, Aladdin, Inc. took an order for 1,000 flying carpets for $50 each on credit terms 2/10 net 30 FOB destination point. Aladdin shipped the carpets to their customer on December 30th and the carpets arrived on January 3rd, 2010. The customer paid the invoice on January 12th, 2010. What would have been recorded by year end December 31, 2009 by Aladdin Inc. for this sale?

$0

If a company has $200,000 of revenues, declares and pays $50,000 in dividends, and has net income of $90,000, how much were expenses for the year?

$110,000

Hess Enterprises purchased a building for $2,000,000 in 1997. In 2010, an independent appraiser assessed the value at $4,400,000. At what amount should the building appear on the financial statements in 2010?

$2,000,000

T. Smith Company has assets of $370,000, liabilities of $130,000, and retained earnings of $180,000. How much is total owners' equity?

$240,000

If a company purchases $3,200 worth of inventory with terms of 2/10, n/30 on March 3 and pays March 12, then the amount paid to the seller would be

$3,136

A truck that cost $8,000 and was expected to last 5 years was scrapped after 3 years. If the truck was being depreciated on a straight-line basis (with no salvage value), the entry to record the disposal would include:

$4,800 debit to accumulated depreciation

Hyltone resort incurred the following costs to acquire and prepare land during 2009 for a new parking lot: purchase price for land, $800,000; cost to clear the land to get ready for use, $35,000; cost of paving; $45,000 and lighting for the parking lot, $20,000. How much should Hyltone record in the Land improvements account?

$65,000

Steps to reconcile a bank statement

1. reconciling the bank's cash balance 2. reconciling the company's cash balance 3. adjusting the company's cash balance

Primary functions of accounting?

1. to measure business activities of a company 2. to communicate those measurements to external parties for decision-making purposes

what are the steps of analyzing transactions?

1. what is one account affected? 2. Increasing/Decreasing? 3. What is the second account? 4. Increasing/Decreasing? 5. Do assets still equal liabilities plus stockholders' equity?

The purchase of office equipment on credit has what effect on the accounting equation?

Assets increase and liabilities decrease

You are a potential stockholder and are concerned that a particular company you are ready to invest in might have too much debt. Which financial statement would provide you information needed in order to evaluate your concern?

Balance sheet

How is income from operations determined in a multi-step income statement?

By subtracting the total operating expenses from gross profit

Which is usually NOT considered to be an owners' equity account?

Cash

What type of account is increased with a debit but also decreases retained earnings?

Expense

Perez company received and immediately paid a $1,000 utility bill. Payment of the utility bill would be posted to the general ledger as:

Debit Utility Expense- $1,000 Credit Cash- $1,000

Deposits made by a company but not yet reflected in a bank statement are called:

Deposits in transit

Adjusting entries are made to ensure that:

Expenses are recognized in the period in which they are incurred to produce revenues, revenues are recorded in the period in which they are earned, balance sheet and income statement accounts have correct balances at the end of an accounting period

Which inventory cost flow assumption best reflects the current value of inventory on the balance sheet?

Fifo

types of business activities

Financing activities, investing activities, operating activities

Which one of the following financial statements reports an entity's results of operations over a period of time of one year or less or the operating cycle whichever is longer?

Income statement

Expense and revenue accounts appear on the:

Income statement

What are the four financial statements?

Income statement, statement of stockholder's equity, balance sheet, statement of cash flows

Aster Company sells merchandise to customers. Aster should normally recognize

Revenue and the related expenses in the same accounting period as earned whether payment is received or not

Craig Corp. increased its dollar amount of working capital over the past several years. To further evaluate the company's short-run liquidity, which one of the following measures should be used?

The current ratio

How to calculate the discount and the amount of the invoice paid when within discount terms?

Such as 2/10, n/30 means the customer will get a 2 percent dissent if they pay within 10 days, otherwise due in 30

For a given sum invested at 8% for 4 years, how will the future value be affected if the interest is changed from annual simple interest to annual compounding interest?

The future value will decrease

What is a trade discount?

a reduction in the listed price of a product or service

what is the adjusted trial balance?

a list of all accounts and their balance after we have updated account balances for adjusting entries

what is a sale discount?

a reduction, not in the selling price of a product or service, but in the amount to be paid by a credit customer if the payment is made with a specified period of time

Why do accounts receivables need to be valued?

accounts receivable should be reported at the amount of cash the firm expects to collect, allowing for the possibility that some accounts will be collected at some point in the future

What is a sales return?

after we sales return, we reduce the customer's account balance if the sale was on account or we issue a cash refund if the sale was for cash

Julian Corp. purchased land and a building for a combined cost of $500,000. Julian must:

allocate the $500,000 acquisition cost to separate Land and Buildings accounts based on their respective fair market values

Current accounting standards indicate that the cost of the intangible asset goodwill should:

be reported on the balance sheet only if paid for when purchasing a business

Investing cash flows:

cash transactions for the purchase and sale of investments and productive long-term assets

what can stockholders' equity be broken down into?

common stock + retained earnings

inventory in merchandising companies

companies purchase inventory from manufacturing or wholesalers and then sell this inventory to ends users.

how to calculate cost of goods sold

cost of goods sold = goods available - ending inventory

what does weighted average cost method include?

cost of goods sold divided by number of units available for sale gives you the unit amount you use for each number of inventories sold

Liabilities, stockholders' equity, common stock, retained earnings increase on the....

credit side

assets, expenses, dividends decrease on the....

credit side

Under the perpetual inventory system, in addition to making the entry to record a sale, a company would:

debit cost of goods sold and credit inventory

assets, expenses, dividends increase on the....

debit side

What does a bank's cash side include on a reconciliation?

deposits and checks outstanding

A trial balance is a(an)

device used to prove the equality of debits and credits in the general ledger

How are financial statements connected?

events that occur in one are normally affected in another statement

Which of the following statements is true concerning external users of financial information?

external users rely on the financial statements to help make informed decisions

Activities from issuing and repurchasing stock or issuing and repaying (retiring) debt are classified as:

financing activites

What does FIFO cost method include?

first units purchased are first ones out

time period for Statement of stockholders' equity

for month ended (interval of time)

Time period for Income statement

for the month ended

time period for statement of cash flows:

for the month ended

how to calculate goods available for sale

goods available for sale = beginning inventory + additional purchases in the year

Operating cash flows:

include cash receipts and cash payments for transactions involving revenues and expenses

investing activities

include the purchase and sale of long-term resources such as land, buildings, equipment, and machinery and any resources not directly related to a company's normal operations (trucks, land, equipment)

Two main users of financial accounting

investors and creditors

what is a trial balance?

is the balance of all accounts at the exact date

What does a company's cash balance include on a reconciliation?

notes received, interest earned, NSF checks, fees, and expenses

time period for balance sheet

on the certain date (point in time)

what does LIFO cost method include?

last units purchased are the first out

trial balance and its role in financial statement preparation?

list all the accounts and make sure the debits and credits equal, helps us prepare adjusting entries

inventory in manufacturing companies

make the inventories they sell, rather than buying them in finished form from suppliers. manufacturing includes raw materials, work in progress, finished goods

What does specific identification cost method include?

matches each unit of inventory with its actual cost

What does the statement of cash flows measure?

measures activities involving cash receipts and cash payments over an interval of time.

benefits of specific identification

most logical, uses the actual amounts

revenue - expenses =

net income

The gross profit is

net sales minus cost of goods sold

What is a classified balance sheet?

normal balance sheet but has long-term assets and liabilities are below the normal ones separately

what are prepaid expenses?

paid cash for the purchase of an asset before we incurred the expense

Examples of operating activities:

pay rent, purchase supplies, golf training, pay salaries

What does a balance sheet do?

presents the financial position of the company on a particular date. List the assets and total them. List the liabilities, total them, list stockholders' equity, total it, then add Liabilities and stockholders' equity. Total assets should equal total liabilities and stockholders' equity

examples of investing activities:

purchase equipment

when do we record revenues and expenses with the matching principle?

recognize expenses in the same period as the revenues will help generate

When do we record revenues with the revenue recognition principle?

record revenues when we earn it

What does an income statement do?

reports the company's revenues and expenses over an interval of time. It shows if there was enough revenue to cover the expenses. If so, there is a net gain, if not there is a net loss. List the revenues, total them list the expenses, total them, list either net income/net loss

what are temporary accounts?

revenue, expenses, dividends

What can retained earnings be broken down into?

revenues - expenses - dividends

Examples of financing activities:

sell common stock, borrow money from the bank, pay dividends

what are the four inventory cost methods?

specific identification, Fifo, Lifo, and weighted-average cost

Stoneware Corp. issued a 10-year, 8%, $100,000 bonds paying interest on an annual basis, for $105,200. Which of the following statements is true?

stoneware's annual interest expense on the bonds will be less than the amount of interest payment to bondholders each year

What does a statement of stockholder's equity do?

summarized the changes in stockholders' equity over an interval of time. Two primary components are Common Stock and Retained Earnings

how to apply the percentage of receivables method to calculate the allowance for doubtful accounts to determine net cash resizable value

take the percentage that is given and multiply it by accounts receivable and then debit bad debt expense and credit allowance for uncollectible accounts

any transaction that affects the income statement always have affects on which financial statement?

the balance sheet, through balance of retained earnings

Operating activities:

transactions that relate to the primary operations of the company, such as providing products and services to customers and associated cost of doing so (utilities, taxes, advertising, wages, rent, maintenance)

The allowance for doubtful accounts represents:

the difference between the accounts receivable account balance and the net (cash) realizable value of accounts receivable

A credit means that

the event has an effect on the right side of the account

Factors that would impact net revenues:

trade discounts, sale discounts, and sales returns and allowances

what is accrued expenses?

we paid cash after we incurred the expense and recorded a liability

what is accrued revenues?

we received cash after we earned the revenue and recorded an asset

What is unearned revenue?

we received cash and recorded a liability before we earned the revenue

when do we record revenue and expenses in accrual accounting?

we record revenue and expense transactions at the time the earnings-related activities occur

when do we record revenue and expenses in cash-basis accounting?

we record revenues at the time we receive cash and expenses at the time we pay cash

what is accrual accounting?

we record the revenues when we earn them and then record expenses with related revenues

Does the accounting equation always have to remain in balance?

yes

What is done in the closing process?

you sort out the temporary and permanent accounts. All temporary accounts are closed out to retained earnings. Revenue, expenses, and dividends are temporary accounts