35 terms

# Accounting 201 Exam 3

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FIFO LIFO
which inventory costing method most closely approximates current cost for each of the following: ending inventory, cost of goods sold
a. FIFO FIFO
b. FIFO LIFO
c. LIFO FIFO
d. LIFO LIFO
FIFO
Which inventory costing method most closely approximates current cost for ending inventory?
LIFO
Which inventory costing method most closely approximates current cost for cost of goods sold?
Aging of accounts receivable method
A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the
What is the depreciation base to use for the asset?
What is the asset's useful life?
What method of cost apportionment is best for this asset?
What are the basic questions that must be answered before the amount of depreciation charge can be computed?
Straight line method or production or use method
Net income is understated if, in the first year, estimated salvage value is excluded from the depreciation computation using the:
No effect on net income and no effect on total assets
On October 29 of the current year, a company concluded that a customer's \$4,400 account receivable was uncollectible and that the account should be written off. What effect will this write-off have on this company's net income and total assets assuming the allowance method is used to account for bad debts?
Straight line method
depreciation is calculated by subtracting salvage value from the cost of the plant asset and then dividing the result by the useful life. When useful life is measured in years, the resulting amount is the annual depreciation expense for the asset.
units of production method
depreciation is calculated by subtracting salvage value from the cost of the plant asset and then dividing the result by the useful life in units. The resulting amount is the depreciation expense per unit. That amount is multiplied by the number of units produced during each accounting period to determine the total amount of depreciation expense for that period.
double declining
depreciation method uses twice the straight-line rate (100%/useful life in years) multiplied by the beginning of period book value of the asset. The resulting amount is the depreciation expense for that period.
first step
Step in the accounting process for asset disposals: bring the amount of depreciation up to date
second step
step in the accounting process for asset disposals: to then remove the cost of the asset and it's related accumulated depreciation from the accounting records
third step
step in the accounting process for asset disposals: to recognize the amount of cash and/or other assets involved in the transaction
fourth step
step in the accounting process for asset disposals: record any gain or loss from the asset disposal by comparing the asset book value to the market value of any asset received
Credit
Allowance for doubtful accounts (D or C)
FIFO
Which inventory method maximizes net income?
FIFO, because the last bought one is the closest to current market price. Highest Ending inventory, because EI goes to balance sheet
Which inventory method produces the most meaningful inventory amount for the balance sheet?
LIFO, because lowest taxes
inventory cost method that maximizes the company's cash flow, why?
Ending Inventory
=Beginning Inventory + Purchases - Cost of goods sold
= cost-salvage value / expected production value
Depreciation Rate used in production output depreciation method
= depreciation rate x # of units
Deprecation expense used in production output depreciation method
= (1/est. useful life) x 2
Depreciation ratio used in double declining balance depreciation method
= book value x depreciation ratio
depreciation expense used in double declining balance method
= (cost of asset @ aquisition - salvage value) / (est. useful life)
depreciation expense used in straight line depreciation method
salvage value
cannot depreciate below
balance sheet; assets
Accumulated depreciation goes to _____ ______ as a contra assets and decreases ____.
net income
smallest depreciation expense leads to the highest ___ ___.
Income statement and balance sheet
allowance for doubtful accounts
is a contra asset
accounts receivable
are amounts due from customers for credit sales