ACC 131 - Final

Coffski, Inc. sold merchandise to customer on credit. The invoice date was June 10th; 1/10, n/30. What should the customer pay?

$1,000 if invoice is paid July 9th

On Jan. 1, a machine with a useful life of 5 years & a residual value of $25,000 was purchased for $75,000. What is the depreciation expense for year 2 under double-declining -balance method of depreciation?

$18,000

A machine with a cost of $240,000 has an estimated salvage value of $15,000 & an estimated useful life of 5 years or 15,000 hours. It is to be depreciated using the units-of-activity method of depreciation. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours?

$75,000

How to calculate depreciation expense using straight-line method?

(cost-residual value) / useful life

Units of activity method

1. (cost - residual value) / units = rate 2. Rate x units used = dep. expense 3. Book value - dep. expense = updated book value 4. Previous book value - updated book value = accumulated depreciation

Double-declining method

1. 1/useful life x 2 = rate 2. Rate x Cost= dep. expense 3. Book value - dep. expense = updated book value 4. Previous book value - updated book value = accumulated depreciation

How is cost of goods sold calculated?

1. beg inventory + purchases = cost of goods available - end inventory 2. units sold x cost per unit (LIFO, FIFO, AVERAGE COST)

What would appear on the balance sheet as a current liability?

A probable loss in the amount of $4 mil from a pending lawsuit

How would the journal entry look if a customers NSF check was $25?

A/R 25 Cash 25

which one of the following adjustments decreases net income for the period?

Accrued expense adjustments

Deposits in Transit

Amount received and recorded by the business, but which has not been recorded by the bank in time to appear on the current bank statement ex: Current Balance vs. Available Balance on bank statement

Prepaid (Deferred) Expense

Assets arising from payment of cash which have not been used or consumed by the end of the period

Where is current assets listed?

Balance Sheet

Which financial statement is for a specific date (specific point in time)?

Balance Sheet

Company's face value is $100,000

Cash 100,000 B/P 100,000

$100,000 issued at 96

Cash 96,000 Discount on B/P 4,000 B/P 100,000

What account is used to record the difference between what a cash register shows and what is actually deposited?

Cash over and Short

Outstanding Check

Check issued and recorded by the business that has not been "cashed" by the recipient of the check

NSF Check

Check that has not been returned to the depositor because funds in the issuers account are not sufficient to pay the check (bounced check)

What is a journal?

Chronological record showing the debit and credit effects of transactions on a company

What is the definition of a current asset

Consists of cash and other assets that are reasonably expected to be converted into cash within one year or one operating cycle, whichever is longer.

What is the definition of current liabilities?

Consists of obligations that will be satisfied, through the payment of cash or by providing goods or services within one year or operating cycle, whichever is longer.

Credit Memo

Could result if bank collected a note receivable for the business

How is the current portion of long-term debt shown on the balance sheet?

Current Liability

What are the normal balances?

D.E.A.L.E.R.

Which inventory results in higher ending inventory?

FIFO

$100,000 face value issued at 103

Face Value = $103,000 Cash 103,000 Bonds Payable 100,000 Premium on B/P 3,000

At what value is property, plant, and equipment reported on the balance sheet?

Historical Cost value

When do bonds sell at a discount?

If the bond is issued below face value

How does interest on bond sold at a discount using the effective interest method show up in entry?

Intrest expense 86,499 Cash 80,000 Discount on B/P 6,499

Which inventory method results in higher cost of goods sold when prices are rising?

LIFO

What is a debit?

Left Side

Unearned (Deferred) Revenue

Liabilities arising from receipt of cash but revenue has not yet been earned

A landlord records the collection of tenants security deposit as a(n) _______

Liability

How is the discount of bonds payable account shown on the balance sheet?

Liability; discount is recorded in a separate account called discount on bonds payable. Discount gets subtracted on the balance sheet.

What is a trial balance?

List of all active accounts and each accounts debit or credit balance

How are current liabilities listed on the balance sheet?

Listed in order in which they will be paid

What does the company have to use if the market value of the inventory has declined below its cost?

Lower cost or market rule method (LCM)

Sales Returns

Merchandise returned by customer to seller (record in sales returns and allowances)

Debit Memo

Might result if the bank makes a prearranged deduction from the business account to pay a bill ex: Automatic Pay

What is the definition of long-term debt?

Obligations that extend beyond one year, based on formal agreement or contract; liability

Accrued expense originated from__

Paying off Liabilities

What is posting?

Process of transferring data from the journal to the general journal

A customer returned damaged goods for credit. Under a perpetual system which of the seller's accounts decreases?

Purchased Returns

What is the revenue recognition principal?

Records revenue when revenue has been earned or a collection of cash is reasonably assured

Sales Allowances

Reduction in sales prices for merchandise with minor defects; contra-sales account

Trade Discounts

Reduction in selling price granted by the seller to a particular class of customers

What is historical cost?

Requires that the activities of a company are initially measured at their cost - the exchange price at the time the activity occurs

What is a credit?

Right side

What is a general ledger?

Simply a collection of all the individual financial statement accounts that a company uses

What are the differences between the percentages of sales method and the aging of receivables method of estimating bad debt expense?

The difference is what is being estimated. Percentage of sales method estimates bad debt expense on the I/S. Aging method estimates its net realizable value on the B/S.

T-account

Transactions frequently analyzed using t-charts for different accounts

The method most commonly used to compute depletion is the _______________

Units-of-Activity Method

Accrued Expenses

Unrecorded expenses that have been incurred but not yet paid in cash

Accrued Revenue

Unrecorded revenues that have been earned but no cash recieved

Who is (according to the Sarbanes-Oxley Act) primarily responsible for internal controls in a company?

Upper level managment

When do bonds sell at a premium?

When the stated rate of interest on the bonds is greater then the market rate of intrest

How can you manipulate the accounting equation?

assets = liabilites + contributed capital + retained earnings

What is the accounting equation?

assets = liabilities + stockholders equity

How to calculate interest on bonds sold at a discount using the effective interest method

carrying value x yield rate x time in years

What type of account is allowance for doubtful accounts?

contra asset account

What information is needed to calculate depreciation?

cost of fixed asset, useful (expected) life, and residual (salvage) value

What are the different terms used to describe the interest rate printed on a bond certificate?

interest rate, coupon rate, and contract rate

When do bonds sell at par?

market value = face value; 100% of face value

What is an example of a debit memo?

notice of a bank service charge

What is an example of a credit memo?

notice of interest expense on checking account -- deduct bank balance

Which allowance approach estimates bad debt expense on income statement?

percentage of net credit sales