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Accounting General Journal, 9E: Chapter 14
Distributing Dividends and Preparing a Work Sheet for a Merchandising Business
Terms in this set (36)
the total amount of depreciation expense that has been recorded since the purchase of a plant asset
allowance method of recording losses from uncollectible accounts
crediting the estimated value of uncollectible accounts to a contra account
board of directors
a group of persons elected by the stockholders to manage a corporation
the difference between an asset's account balance and its related contra account balance
book value of a plant asset
the original cost of a plant asset minus accumulated depreciation
book value of accounts receivable
the difference between the balance of Accounts Receivable and its contra account, Allowance for Uncollectible Accounts
cash and other assets expected to be exchanged for cash or consumed within a year
declaring a dividend
action by a board of directors to distribute corporate earnings to stockholders
the portion of a plant asset's cost that is transferred to an expense account in each fiscal period during a plant asset's useful life
earnings distributed to stockholders
estimated salvage value
the amount an owner expects to receive when a plant asset is removed from use
the amount of goods on hand for sale to customers
assets that will be used for a number of years in the operation of a business
an amount earned by a corporation and not yet distributed to stockholders
straight-line method of depreciation
charging an equal amount of depreciation expense for a plant asset in each year of useful life
accounts receivable that cannot be collected
Under what major chart of accounts division are the owners' equity accounts for a corporation normally listed?
How many accounts are kept for the investment of all owners of a corporation?
One account called Capital Stock
What account does a corporation use to record earnings not yet distributed to stockholders?
What action is required before a corporation can distribute income to its stockholders?
The board of directors declares a dividend.
What accounts are used for the adjustment to office supplies?
Supplies - Office
Supplies Expense - Office
What accounts are used for the adjustment to prepaid insurance?
In what order should general ledger accounts be listed on a work sheet?
In the same order they appear in the general ledger.
What accounts are used for the adjustment for merchandise inventory?
What adjusting entry is entered on a work sheet when the ending merchandise inventory is less than the beginning value?
Debit Income Summary
Credit Merchandise Inventory
When is the temporary account Income Summary used?
The Income Summary account is used to adjust the Merchandise Inventory account at the end of a fiscal period.
Why is an uncollectible account recorded as an expense rather than a reduction in revenue?
The loss is considered a regular expense of doing business.
Revenue was earned when the sale was made.
Failing to collect an account does not cancel the sale.
When do businesses normally estimate the amount of their uncollectible accounts expense?
At the end of the fiscal period
What two objectives will be accomplished by recording an estimated amount of uncollectible accounts expense?
1. Report a balance sheet amount for Accounts Receivable that reflects the amount the business expects to collect in the future.
2. Recognize the expense of uncollectible accounts in the same period in which the related revenue is recorded.
Why is Allowance for Uncollectible Account called a contra account?
It reduces its related asset account, Accounts Receivable.
How is the book value of accounts receivable calculated?
The difference between the balance of Accounts Receivable and its contra account, Allowance for Uncollectible Accounts.
What are the two categories of assets?
What three factors are used to calculate a plant asset's annual depreciation?
Estimated Salvage Value
Estimated Useful Life
In what column is the Income Summary amount extended?
Income Statement Debit or Credit column
To which Balance Sheet column is a net loss amount extended?
Balance Sheet Debit
What extra step is required when a 10-column work sheet is prepared instead of an 8-column work sheet?
Trial balance amounts after adjustments are extended to the Adjusted Trial Balance columns, and the Adjusted Trail Balance columns are proved before extending amounts to the Income Statement and Balance Sheet columns.
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