BUS EXAM 1 REVIEW QUESTIONS

the partnership agreement for Wilson, Pickett & Nelson, a general partnership, provided that profits be shared between the partners in the ratio of their financial contributions to the partnership. Wilson contributed $100,000, Pickett contributed $50,000 and Nelson contributed $50,000. In the partnership's first year of operation, it incurred a loss of $110,000. What amount of the partnership's loss, rounded to the nearest dollar, should be absorbed by Nelson?

27,500= (Contributed amount by Nelson) ÷ (Firm contribution amount) × (loss incurred) = ($50,000) ÷ ($200,000) × ($110,000)

WHEN CLOSING ENTREES ARE MADE:

All temporary accounts are closed but not the permanent accounts.

Furniture World is required by law to collect and remit sales taxes to the state. If Furniture World has $78,000 of cash sales that are subject to a 6% sales tax, what is the journal entry to record the cash sales?

Debit Cash $82,680; credit Sales $78,000; credit Sales Taxes Payable $4,680.

Springfield Company offers a bonus plan to its employees and the amount of the employee bonuses for the current year is estimated to be $32,500 to be paid during January of the following year. The journal entry on December 31 to record the bonuses is

Debit Employee Bonus Expense $32,500; credit Bonus Payable $32,500.

Flagg records adjusting entries at its December 31 year end. At December 31, employees had earned $12,000 of unpaid and unrecorded salaries. The next payday is January 3, at which time $30,000 will be paid. Prepare the January 1 journal entry to reverse the effect of the December 31 salary expense accrual.

Debit Salaries payable $12,000, credit Salaries expense $12,000.

MATERIALITY CONTRASINT AS APPLIED TO BAD DEPTS

Materiality constraint states that an amount can be ignored if its effect on the financial statements is unimportant to users' business decisions. It permits the use of the direct write-off method when bad debts expenses are very small in relation to a company's other financial statement items

Accounts Receivable Turnover

Measure of both the quality and liquidity of accounts receivable; indicates how often receivables are received and collected during the period; computed by dividing net sales by average accounts receivable.

COST PRINCIPLE

The accounting principle that requires accounting information to be based on actual cost and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange, is the