Accouting 201 Final Prep

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Flash cards based on the correct test answers, tests 1-3 from Morris.

Entry Assumption

The accounting theory which states that each organization stands apart from other organizations or individuals is the:

Note Payable

A written promise to pay a definite sum of money on a specific future date is:

Income Statement and statement of retained earnings

Net income appears on which financial statements?

The dividend account

The account used to record the transfers of assets from a business to its owner is:

Common stock account

An account used to record the owner's investments in the business is called:

Account

A record of the increases and decreases in a specific asset, liability, equity, revenue or expense is:

Sales Tickets
--> Ledgers
Checks
Purchase orders

Source documents include all of the following except:

The revenue has been earned

According to generally accepted accounting principles, revenue should be recorded when:

Analysis of business transactions and events

The accounting process begins with

Debit, equity

The normal balance of dividends is a ___ because it decreases ____

Outsider claims
--> Investments by owners
Debts to creditors
Economic obligations to creditors

All of the following terms describe a liability except

An information and measurement system that identifies, records and communicates relevant, reliable, and comparable information about an organization's business activities

Accounting is:

Assets = Liabilities + Equity

The accounting equation can be stated as:

Accounting Cycle (Process)

The recurring steps performed each accounting period, starting with analyzing and record transactions in the journal and continuing through the post-closing trial balance, is referred to as the:

Going-concern principle

The assumption that a business will continue operating instead of being closed or sold is the:

The difference between the total debits and total credits for an account including the beginning balance

An account balance is

The normal balance of accounts receivable is a debit
The normal balance of dividends is a debit
The normal balance of unearned revenues is a credit
-->The normal balance of an expense account is a credit

Which of the following statements is incorrect?

The left-hand side of a T-account

A debit is:

Chart of accounts

A list of all accounts used by a company, and the identification number assigned to each account, is called:

The ride side of a T-account and an increase in a liability account

A credit refers to:

LIFO Method

During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is:

Specific Identification
First in, First out
-->Last in, First in
Last in, First out

Which of the following is not an inventory costing method permitted by GAAP?

Conservatism

The lower-of-cost-or-market rule is an example of which accounting principle

It is sometimes said to be Self-Correcting

An error in the period-end inventory causes an offsetting error in the next period and therefore:

The most recently purchased unites

When the LIFO method of inventory valuation is used, cost of goods sold consists of:

The most recently purchased units

When the FIFO method is used, ending inventory consists of the:

Requires that when more than one etiolate of amounts to be received or paid in the future are equally likely then the less optimistic amount should be used.

The conservatism principle:

Is a contra account to Sales

The account Sales Returns and Allowances:

A purchase return involves the return of inventory to the vender

The difference between a purchase return and a purchase allow is that:

Current replacement cost

In applying the lower of cost or market method to inventory valuation, market is defined as:

Cost of Goods Sold, Sales Discounts, and Sales Returns and Allowances

Closing entries are being prepared for Sailing Co. for the ear ended September 30th, 2002. Which accounts would be credited?

Title passes at the shipping point and freight is an expense of the buyer

FOB shipping point means:

Weighted Average

The inventory valuation method that tends to smooth our erratic changes in costs is:

Income Summary Account

The special account used only in the closing entries process to temporarily hold the amounts of revenues and expenses before the net difference is added to( or subtracted from) the owner's capital account is the:

Goods (Merchandise) available for sale

Beginning inventory plus net cost of purchases is:

2% cash discount if the amount is paid in 10 days, with the full balance due in 30 days

The credit terms 2/10, n/30 are interpreted as:

A term used by a seller to describe a cash discount granted to customers for prompt payment

A sales discount

Invoice price minus any discount
Freight-in
Insurances Costs

Costs included in the Merchandise Inventory account can include:

Gross Margin (gross profit) divided by net sales

The gross margin (gross profit) percent (ratio) is equal to:

To prepare revenue, expense, and dividend accounts for the start of the next accounting period

The purpose of closing entries is to:

Cost minus salvage value

Depreciable cost equals

Architect's fees
--> Clearing and grading the land prior to construction
Cost of repairs made to an old building to get it ready for occupancy
Construction Costs

The cost of a building would include all of the following except:

The book value exceeds the selling price

A loss is recorded on the disposal of plant assets when:

Depreciation should be recorded through the date of disposal

When a plant asset is disposed of:

Principal plus total interest

The maturity value of a bet receivable equals:

$16,875

Florida Co. purchased office furniture on Jan 3, 1998 for $250,000. The estimated residual value was $25,000 and the estimated useful life was 5 years. Florida Co. uses straight-line depreciation. On Jan 2, 2000, the company revised its original estimate and now believes the useful life of the furniture will be a total of 10 years. The estimated salvage value remains unchanged. What is the depreciation expense for this furniture for 2002.

Current market value

In order to calculate depreciation expense, all of the following must be known except:

Double-decling balance

The depreciation method that initially ignores residual value is:

Debit: Accounts receivable, Credit: Allowance for Doubtful Accounts

Under the allowance method, the entry to record the recovery of a previously written-off account receivable would be:

A contra asset account

The account Allowance for Doubtful Accounts is:

Net credit sales

Under the income statement approach, bad debt expense is recorded based on a % of:

Less likely to be collected than accounts 30 days old.

Accounts receivable which are 90 days old are:

Accounts receivable - allowance for uncollectible accounts

Net accounts receivable is equal to:

$3,500

The balance in Allowance for Doubtful Accounts before adjustment is $658 (credit balance). An aging schedule reveals $3,500 of uncollectible accounts. The ending balance in Allowance for Doubtful Accounts should be:

A debit

If write-offs of uncollectible accounts during the year exceed the beginning balance in Allowance for Doubtful Accounts, and there are no recoveries of previous write-offs, then the balance in Allowance for Doubtful Accounts before year-end adjustment will be:

Maker

The person who signs a note and promises to pay the amount specified by the note is called for:

$108, 660

Harvest Co.'s October 31, 1999 Balance Sheet reported net accounts receivable of $105,460. The Allowance for Doubtful Accounts had a balance of $3,200 at October 31, 1999 (after adjustment). What is the October 31, 1999 balance in Accounts Receivable?

Equipment
--> Land
Land Improvements
Automobiles

All of the following are depreciated except:

--> Equipment
Copyright
Trademark
Patent

Which of the following is not an intangible asset?

The process of allocating an asset's cost to expense over its useful life.

Depreciation is:

--> An oil well
Land
A patent
Equipment

Which of the following would be depleted?

Purchase price
Sales tax on the purchase price
Installation charges
--> Repairs made in the normal course of operations

The cost of an asset includes all of the following except:

Cost minus accumulated depreciation

The book value of a plant(fixed) asset equals:

$900,000

Scarecrow Co. purchased land and a building for $1,500,000. The appraised value of the land is $650,000 and the appraised value of the building is $975,000. The amount that will be debited to the Building account on Scarecrow''s books is:

$700

A machine was purchased on May 18, 1996 for $7,500. The estimated useful life is 6 years and the residual (salvage) value is estimated to be $300. Straight-line depreciation is chosen for this asset. What is the depreciation expense for the year ended December 31, 1996?

Gross Pay

The total amount of employee compensation before taxes and other deductions is referred to as:

Federal Insurance Contributions Act taxes

Which of the following payroll-related taxes is levied on both the employer and the employee?

Gross pay minus all deductions

Net pay is equal to:

FICA
--> State Income Tax
State unemployment tax
Federal unemployment tax

All of the following are payroll taxes that are an expense of the employer except:

Union dues
Medical insurance
--> Federal income tax
Charitable contributions

All of the following are optional payroll deductions except:

In the same period as the related sale

The matching principle requires that a company record warranty expense:

Credit to Gain on Sale of Equipment for $700

Georgia Co. sold a piece of equipment for $3,200. The equipment cost $9,000 and accumulated depreciation to the date of sale totaled $6,500. The journal entry to record this sale will include a:

$12,200

Allowance for Doubtful Accounts had a credit balance of $18,000 at the beginning of the year. During the year, recoveries of previous write-offs were $1,500 and uncollectible accounts of $30,000 were written off. The current year provision for bad debts is $22,500. What is the ending balance in the Allowance account?

Understate net income, owner's equity and assets

Indiana Co. failed to make the year-end adjusting entry to accrue interest on a note receivable. This error will:

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