Ch 5 Revenues and Receivables
How is Net Sales Revenue calculated?
Total Sales Revenue minus sales discounts and sales returns
How are Freight charges reported on inventory purchases?
Frieght charges are included in the inventory cost
How are research and development costs (R&D costs) handled with an internally developed patent?
Expensed
Inventory is NOT included in cash equivalents, why?
Because cash equivalent's are investments that mature to cash in 3 months or less. Inventory may not be sold in next 3 months.
Decribe the difference between simple interest and compound interest
Simple interest earns interest only on the initial investment
Compound interest earns interest on the inital investment plus the interst earned in previous periods
What accounts are debited or credited when the sale of inventory on credit occurs?
Dr Accounts Receivable
Cr Sales Revenue
Dr Cost of Goods Sold
Cr Inventory
If the cash received on the sale of a long-term asset is less than the book value of the asset, what is reported in the financial statements?
A loss would be reported on the Income Statement
How is book value of a long-term asset computed?
Cost of the asset minus accumulated depreciation = book value
Sophie deposits $500 today to her savings account that earns 5.5% interest. Which table would she use to determine how much she will have in the account in 3 years?
Future Value of $1
Good Company collects cash from their customers on credit sales faster than Okay Company. Which ratio would be better for Good Company?
Account Receivable Turnover Ratio
Classy Cleaning Service (CCS) is paid $1200 on September 1, 2026 for 12 months of cleaning services. How much will CCS report as revenue in 2026?
$400
$1200 x 4/12 = $400
If a company has beginning inventory of $5000, made purchases of $15,000 and their cost of goods sold was $18,000, what is their ending inventory?
$2,000
$5000 + $15,000 - $18,000 = $2000
Equipment purchased 1/1/26 costing $20,000 with a residual value of $3,000 and an 8 year life; using straight-line depreciation what would the balance in the accumulated depreciation account be the end of the second year?
$4,250
(($20,000 - $3,000)/8 years) x 2 = $4,250
The factors on the Time Value of Money tables represent the effect of simple or compound interest?
Compound Interest
What is the depreciation life for land?
Land is NOT depreciated.
When a customer's account is deemed uncollectible what account will be increased and what account will be decreased?
Accounts Receivable Decreases
Allowance for Uncollecible Accounts Increases
What does the Inventory Turnover Ratio indicate?
How fast the company is selling it's inventory.
FCB Company's inventory includes the following purchases:
March 1, 10 units purchased at $5 per unit
March 8, 15 units purchased at $7 per unit
March 15, sold 8 units
Using Weighted-Average Perpetual inventory costing method what is the cost of goods sold for this sale?
10 x $5 = $50
15 x $7 = $105
($50 + $105)/ 25 units = $6.20 per unit
8 units sold x $6.20 = $49.60 Cost of Goods Sold
Sam wants to invest money in a 4% savings account that compunds interest semi-annually, he would like to have $6,000 in 3 years from now. How much should Sam invest today to achieve his goal?
Use the PV of $1 Table
Factor from the Table i=2% n=6
$6,000 x .88797 = $5,327.82
Credit Terms of 3/15, net/45 means what?
3% discount if paid in 15 days, balance due in 45 days
The interest revenue on a $5,000 note receivable with a 6% interest rate for the period of 8/1/2026 - 12/31/26 would be how much?
$125
$5000 x 6% x 5/12 = $125
A company has Sales Revenue of $10,000, Gross Profit is $6,000, and Operating Expenses are $5,000. What is the Cost of Goods Sold?
$4,000
Sales Revenue - Cost of Goods Sold = Gross Profit
$10,000 - $4,000 = $6,000
Equipment purchased 1/1/26 costing $20,000 with a residual value of $3,000 and an 8 year life; using double-declining balance depreciation what would the depreciation expense be for 2026?
$5,000
1st Calculate Rate 2/8 = .25
$20,000 x .25 = $5,000
If $2,000 is invested at the end of each year for 5 years, assuming a 4% interest rate, what will the investment be worth at the end of 5 years?
Using the Future Value of an Ordinary Annuity Table
Factor from the table i=4% n=5
$2,000 x 5.4163 = $10,832.60
What cost allocation method is used to calculate the amortization of an intangible asset?
Straight-line