mba510 - accounting - exam 1
Garza Company had sales of $135,000, sales discounts of $2,000, and sales returns of $3,200. Garza Company's net sales equals:
$129,800
which financial statement reports an organizations financial position at a single point in time?
balance sheet
the difference between the cost of an asset and the accumulated depreciation for that asset is called
book value
acceptable methods of assigning specific costs of inventory and cost of goods sold include all of the following except: a. LIFO method b. FIFO method c. specific identification method d. weighted average e. retail method
d. retail method
the gross margin ratio
indicated the percent of sales revenue remaining after covering the cost of the goods sold
if a company is considering the purchase of parcel of land that was acquired by the seller for $85,000, is offered for sale at $150,000, is assessed for tax purposes at $95,000, is considered by the purchaser as easily being worth $140,000, and is purchased for $137,000, the land should be recorded in the purchasers books at
$137,000
a compant has sales of $695,000 and cost of goods sold of $278,000. its gross profit equals
$417,000
if equity is $300,000 and liabilities are $192,000, then assets equal
$492,000
4 steps of processing transactions
1. identify transactions and source documents 2. analyze transactions using the accounting equation 3. record journal entry 4. post entry to ledger
the credit terms 2/10, n/30 are interpreted as
2% cash discount if the amount is paid within 10 days, or the balance due in 30 days.
a companys gross profit (or gross margin) was $83,750 and its net sales were $347,800. its gross margin ratio is
24.1%
internal controls that should be applied when a business takes a physical count of inventory should include all of the following EXCEPT: a. pre-numbered inventory tickets 2. a manager confirms that all inventories are ticketed only once 3. counters confirm the validity of inventory existence, amounts and quality 4. second counts by a different counter 5. counters of inventory should be those who are responsible for the inventory
5. counters of inventory should be those who are responsible for the inventory
goods in transit are included in a purchasers inventory when the goods are shipped
FOB shipping point
A corporation is
a business legally separate from its owners
is repeated each reporting period and refers to the steps taken in preparing financial statements
accounting cycle
assets created by selling goods and services on credit are
accounts receivable
promises of future payment by the customer are called
accounts receivable
the approach to preparing financial statements based on recognizing when they are earned and matching expenses to those revenues is
accrual basis accounting
what is a shareholder?
an owner of a corporation
physical counts of inventory
are necessary to adjust the inventory account to the actual inventory available
Merchandise inventory that is still available for sale is considered a(n) _________ , and is reported on the _________ and merchandise that is sold during the period is considered a(n) ________ and reported on the _________.
asset balance sheet expense income statement
which of the following lists contains only temporary accounts? a. supplies, land, unearned rent b. wages expense, income summary, dividends c. retained earnings, income summary, dividends d. supplies, wages expense, retained earnings
b. wages expense, income summary, dividends
a financial statement providing information that helps users understand a company's financial status, and which lists the types and amounts of assets, liabilities, and equity as of a specific date, is called a(n)
balance sheet
recording transactions and events is known as
bookkeeping or recordkeeping
the accounting assumption related to separating business transactions from the owners transactions is called the
business entity
the accounting concept that requires every business to be accounted for separately from other businesses entities including its owner or owners is known as the
business entity program
choose the one that contains ONLY assets a. supplies, common stock, cash, accounts receivable b. building, accounts payable, equipment c. cash, building, supplies, accounts receivable d. cash, building, accounts payable, land
c. cash, building, supplies, accounts receivable
which of the following assets is NOT depreciated? a. store fixtures b. computers c. land d. buildings e. equipment
c. land
if a period-end inventory amount is reported in error, it can cause a misstatement in all of the following except: a. cost of goods sold b. gross profit c. net sales d. current assets e. net income
c. net sales
which of the following only contains temporary accounts? a. supplies, land, unearned rent b. supplies, wages expense, retained earnings c. wages expense, income summary, dividends d. retained earnings, income summary, dividends
c. wages expense, income summary, dividends
it is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account
chart of accounts
the dodd-frank act has two notable provisions
clawback and whistleblower
in addition to cost-benefit constraint, two other constraints include
conservatism, materiality
an account with another account that has an opposite normal balance and is subtracted from the balance of the related account is a(n)
contra account
gross profit on an income statement is computed as
cost of goods sold - net sales
merchandise inventory is a
current asset
cash and other resources that are expected to be sold, collected or used within one year
current assets
the usual order for the asset subgroups of a classified balance sheet is
current assets, long-term investments, plant assets, intangible assets
given the following lists of accounts, choose the one that contains only liabilities a. cash, building, supplies, accounts receivable b. equipment, accounts payable, mortgage payable c. accounts payable, dividends, mortgage payable d. taxes payable, accounts payable, wages payable
d. taxes payable, accounts payable, wages payable
a business paid $40 in dividends. dividends would be ______ on the _____ side of the t-account and cash would be ______ on the ______ side of the t-account.
debited left credited right
the closing process takes place at the _____ of an accounting period, after the ______ trial balance is prepared and _____ the financial statements are prepared
end adjusted after
on a classified balance sheet where would retained earnings appear?
equity
sales returns and allowances, sales discounts, & cost of goods sold are closed with the ____ accounts
expense
GAAP wants information to have
faithful representation, relevance
the principle that states that a company should report the details behind the financial statements which would impact users decisions is called the
full disclosure principle
expenses that support the overall operations of a business and include the expenses relating to accounting, human resource management, and financial management are called
general and administrative expenses
it is a collection of all accounts with their activity and balances that exist in a business
general ledger
consignment goods are
goods shipped to the owner to the consignee who sells the goods for the owner
the financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called the
income statement
financial statements are typically prepared in the following order
income statement, statement of retained earnings, balance sheet
what are the financial statements of a merchandiser?
income statement, statement of retained earnings, balance sheet
statements prepared for period of less than one year
interim financial statements
users of accounting information can be divided into two main groups. these groups include
internal and external
the total amount of depreciation recorded against an asset over the entire time the asset has been owned
is referred to as accumulated depreciation
complete record of each transaction in one place and includes the debit and credit of each transaction
journal
The LIFO cost flow assumption assumes that the cost of items purchased ______ are the costs that will be transferred first to cost of goods sold on the ______ ______.
latest, income statement
creditors claims on the assets of a company are called
liabilities
the area of accounting that serves the decision-making needs of internal users is referred to as _________ accounting
managerial
identify the broad opportunity areas of accounting (select all that apply) sales managerial public financial taxation
managerial, financial, taxation
another name for the expense recognition principle is
matching principle
the principle which states that accounting information is based on actual cost is called the
measurement principle
beginning inventory plus net purchases is
merchandise (goods) available for sale
asset reported on the balance sheet and contains the cost of products purchased for sale
merchandise inventory
earns net income by buying and selling merchandise
merchandiser
profit margin =
net income / net sales
Sparky's incorrectly included inventory that was on consignment in its ending inventory count. Consequently, the ending inventory was overstated on the balance sheet. Explain how this error will affect this year's income statement.
net income too high, cost of goods sold too low
which equation identifies the cost flow of a merchandising company?
net purchases + beginning inventory = merchandise available for sale
how to compute net income for a merchandiser
net sales - cost of goods sold - other expenses
if a company uses $1,300 of its cash to purchase supplies the effect on the accounting equation would be
one asset increases $1,300 and another asset decreases $1,300, causing no effect
a company made no adjusting entry for accrued and unpaid employee wages of $28,000 on december 31. this oversight would
overstate net income by $28,000
the majority of accounting opportunities are in the area of ____ accounting
private
the majority of accounting opportunities are in the area of
private accounting
the primary objective of financial accounting is to
provide accounting information that serves external users
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
purchase return
current assets & current liabilities are listed in order of how ______ they will be converted to, or paid in, cash
quickly
dividends account is closed with to
retained earnings
sales is closed as a ______ account
revenue
the accounting principle that requires revenue to be recorded when earned is the
revenue recognition principle
the principle which says that revenue is recognized when goods or services are provided to customers at an amount expected to be received from the customer is known as the
revenue recognition principle
identifies and describes transactions and is the basis for entering an event into the accounting system
source document
represents a ledger account and is a tool used to understand the effects of one or more transactions
t-account
the assumption that assumes that an organizations activities may be divided into specific reporting time periods including months, quarters, fiscal years, calendar years.
time period assumption
what does "closing" mean
to bring an account balance to zero
it is a list of each account and its balance at any given time and is used to verify that debits=credits
trial balance
sheet is one whose items are broadly grouped into assets, liabilities, and equity
unclassified
at end of accounting period we forgot to record: 1. $4,100 of insurance coverage that had expired (this $4,100 cost had been initially debited to the Prepaid Insurance account). 2. $2,450 of accrued salaries expense. as a result, the financial statements for the reporting period will:
understate expenses by $6,550
purpose of a post-closing trial balance
verify that total debits equal total credit for permanent accounts verify that all temporary accounts have zero balances