Accounting Final Exam

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What are the accounting principles?
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Terms in this set (59)
What is the time period assumption?the long life of a company can be reported in shorter time periodsWhat is the accounting equation?Assets = Liabilities + EquityNet income =Revenues - ExpensesWhat is an account?a record of increases and decreases in a specific asset, liability, equity, revenue, or expense itemWhat are some asset accounts?Cash, Accounts recievable, notes recievable, prapaid accounts, supplies, equipment, buildings, landWhat are some liability accounts?Accounts payable, notes payable, unearned revenue, accrued liabilitiesWhat are some equity accounts?dividends, expenses, revenues, common stockadjustiing entry for Prepaid Expenses: FastForward paid $2,400 to cover insurance for 24 months that began on December 1 of 2018. FastForward recorded the expenditure as Prepaid Insurance on December 1. What would the adjusting journal entry be on 12/31/18Debit insurance expense 100 Credit prepaid insurance 100Adjusting entry for unearned revenues: FastForward's client paid 60-day fee in advance covering the period from 12/27 - 2/24 and recorded: debit cash 3000 credit unearned consulting revenues 3000 FastForwards earns payment as time passes. At 12/31, 5 days' service is earned or 5/60 x $3,000 = $250. What is the adjusting entry on 12/31debit unearned consulting revenue 250 consulting revenue 250Formula for merchanise available for salebeggining inventory + net purchases OR ending inventory + cost of goods soldEntry for purchase of merchandise inventory with no discountdebit merchandise inventory credit cashIdentify the terms of the discount: 2/10, n/302% discount availabe within 10 days, otherwise full undiscounted payment is due in 30 daysJournal entry for purchase of merchandise inventory with discount and payment made: On November 2, Z-Mart purchased $500 of merchandise inventory on account, credit terms are 2/10, n/30. On November 12, Z-Mart paid the amount due on the purchase of November 2.11/2 debit merchandise inventory 500 credit accounts payable 500 11/12 debit accounts payable 500 credit merchandise inventory 10 ($500 x 2%) Credit cash 490 ($500 x (100%-2%))FOB shipping pointgoods in transit owned by buyerFOB destinationgoods in transit owned by sellerwho owns goods under consignment?ConsignorJournal entry for transportation costs of $75.debit merchandise inventory 75 credit cash 75Gross Margin Ratio and percentratio: (Net Sales - Cost of Goods Sold) / Net Sales percent: ((net sale - cost of goods sold)/net sales) x 100What are the 4 inventory costing methods?specific identification, FIFO, LIFO, weighted averageHow to find average cost per unit for weighted averagetotal cost of units for sale/units available for saleEffects of FIFOending inventory approximates current costEffects of LIFOCOGS on income statement approximates its current costsEffects of weighted averagesmoothes out price changesTax Effects of Costing MethodsThe Internal Revenue Service (IRS) requires that when LIFO is used for tax reporting, it must also be used for financial reporting: LIFO conformity rule.Principles of Internal Control1. establish responsibilities 2. maintain adequate records 3. insure assets and bond key employees 4. separate record keeping from custody of assets 5. divide responsibility for related transactions 6. apply technological controls 7. perform regular and independent reviewsThe entry to establish a petty cash funddebit petty cash credit cashreimburse petty cash fund without cash over/shortdebit all expenses covered by petty cash fund credit cashreimburse petty cash fund with cash over/shortdebit all expenses covered by petty cash fund debit cash over and short credit cashbad debt transactions for the direct write-off: TechCom determines on January 23 that it cannot collect $520 owed to it by its customer J. KentDebit bad debts expense 520 credit accounts recievable - J. Kent 520how many days in each month30 days has september, april, june, and novembercomputation of maturity date of noteif it is for 90 days for example it matures on date 90 days from establishment of notecomputation of interest for noteprinicapl of the note(amount) x annual interest rate x time expressed in fraction of year (so D/360, D = Days) = interestFormula for straight line depreciation(cost - salvage value) / useful lifeFormula for double declining depreciation2 x ((cost - salvage value)/useful life)Book value =cost - accumulated depreciationend-of-year adjusting entries for a note payable On Dec. 16, 2018, a company borrows $2,000 from a bank at 12% interest for 60 days. An adjusting entry is needed on December 31. What would it be?debit inerest expense 10 credit interest payable 10 interest = ($2,000 x 12% x 15/360)What is a contingent liability?a potential liability that has arisen as a result of a past eventAdvantages of Bonds1. Bonds do not affect owner control 2. Interest on bonds is tax deductible 3. Bonds can increase return on equityWhat is a stock split?the division of a single share of stock into more than one shareWhat is a stock dividend?a distribution of a corporation's own stock to its shareholdersWhat are retained earnings?cumulative net income - net losses or dividends declaresWhat is par value?An assigned dollar value given to each share of stockWhat is market value?the price at which stocks can actually be bought or soldThe classifications of cash flowsoperating, investing, financingTypes of cash flows reported under operating activitiesInflows: from cash sales to customers, from receipt of dividend revenue, from collections on credit sales, from receipt of interest revenue. Outlfows: To pay salaries and wages, to pay operating expenses, to pay taxes and fines, to pay interest owed, to pay suppliers for goods and servicesTypes of cash flows reported under investing activitiesInflows: From selling intangible assets, from selling long-term and short-term investments, from selling (discounting) of notes receivable, from collecting principal on notes receivable, from selling property, plant, and equipment Outflows: To buy property, plant, and equipment, to buy intangible assets, to loan money in return for notes receivable, to buy short and long-term investments.Types of cash flows reported under financing activitiesInflows: From issuing its common and preferred stock, from reissuing treasury stock, from issung its short and long-term debt (notes payable and bonds payable), from contributions by owners. Outflows: To purchase treasury stock, to pay dividends to shareholders, to pay withdrawals by owners, to pay off its short and long term debt (notes payable and bonds payable)FICA taxes for social security for employees6.2% of the first $127,200 earned in the yearFICA taxes for medicare for employees1.45% of all wages earned in the year