Principles and Assumptions
This assumption states that the transactions of the business must remain separate from any personal transactions.
What is separate entity assumption?
What is the periodic inventory system?
The major difference between these two types is that one does not require a cost of goods sold on their income statement.
What is a service company and a merchandising company?
What is the generic journal entry for recording a least-of-cost-or-market adjustment?
COGS $$
Inventory $$
What is the equation to record interest accumulated from November 1 to December 31 on a note worth $120,000 with 8% interest?
120,000 x .08 x (2/12)
DAILY DOUBLE
What time are PASS sessions on Thursdays?
12:30 p.m.
What is the difference between paid-in capital and earned capital?
Paid-in capital: "The owners have a claim on amounts they contributed directly to the company in exchange for its stock (Common Stock)"
Earned capital: "The owners have a claim on profits the company has earned for them through its business operations (Retained Earnings)"
A $1,000 sale is made on May 1 with terms 2/30, n/60. Items with a $100 selling price are returned on May 3. What amount, if received on May 9, will be considered payment in full?
$882
When costs are rising, which inventory costing method will allow you the lowest income tax?
LIFO
What is the generic journal entry for recording payment on an account that was previously written off?
Accounts Receivable $$
A.D.A $$
Cash $$
Accounts Receivable $$
OR
Cash $$
A.D.A $$
What are the accounting rules that govern the United States and who comes up with them?
GAAP: the rules; generally accepted accounting principles
FASB: the creators; Federal Accounting Standards Board
Which inventory costing method should be used to record the COGS and ending inventory of gas in a pump?
Weighted average
Give three examples of accounts that would fall under the operating expenses portion of the multi-step income statement.
Acceptable responses include:
Salaries and wages expense; rent expense; selling expenses; general expenses; administrative expenses; freight-out expenses; anything else Serene says is correct
What is the equation to find the unit price when using the weighted average inventory costing method?
COGAS / # units AFS
What is the main difference between an account receivable and a note receivable?
Note receivables have interest
Also acceptable:
Notes are contractual; accounts are casual
Notes are normally long-term; accounts are normally short-term
What principle is satisfied when the allowance method is used?
Expense recognition principle
OR matching principle
This term requires that the seller recognize revenue when the goods reach the customer.
What is FOB destination?
A company has gross profit of $59,400 and a gross profit percentage of 25%. What were the company's net sales?
$237,600
If your days to sell is 36, your beginning inventory is $92,000, and your ending inventory is $80,000, then what is COGS?
Round intermediate calculations to the nearest tenth.
$871,944.44
Using the percentage of credit sales method, you estimated $1,700 of bad debts for the period. You currently have $1,300 in your A.D.A. account. What should your entry be to record bad debt estimates?
Bad Debt Expense $1,700
Allowance for Doubtful Accounts $1,700
What are the five steps of recognizing revenue?
1. Identify the contract
2. Identify the performance obligations
3. Determine the transaction price
4. Allocate the transaction price to performance obligations
5. Recognize revenue when or as each performance obligation is being satisfied
What does the number calculated using the aging method represent?
The desired ending balance for Allowance for Doubtful Accounts
Record the journal entry for this scenario:
Merchandise costing $500 that was sold for cash at a price of $620 is returned by the customer; the goods are in perfect condition
Sales Revenue/Returns $620
Cash $620
Inventory $500
COGS $500
What is the relationship between gross profit percentage and inventory turnover?
"Often, the company with a lower gross profit percentage has a faster inventory turnover"
If $150 of interest was earned and recorded at December 31 and another $450 of interest was earned from January 1 to March 31, what should the journal entry look like on March 31 when the borrower pays you the interest?
Cash $600
Interest Receivable $150
Interest Revenue $450