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