Chapters 1-3
What is the order of a financial statement?
Income Statement
Statement of RE
Balance Sheet
Cash Flows
What would the journal entry on the balance sheet??look like to calculate Cost of Goods available for sale and Cost of goods sold.
Plus: Net purchases
Plus: Transportation
=Cost of goods available for sale
Less: Ending Inventory
=Cost of Goods Sold
How would you record a contingent liability that is probable, but nonestimable?
dont record. disclose in notes.
Unearned revenue xx
Revenue. xx
Ninas company is declaring a stock dividend. make the journal entry.
retained earnings. xx
common dividend payable xx
What are the 4 accounting principles and what do they mean?
1. Measurement Principle (Cost)- accounting information is based on actual cost. Actual cost is considered objective.
2. Revenue Recognition Principle- 1. recognize revenue when goods or services are provided to customers and.. 2. at an amount expected to be received from the customer. *WHEN WE RECOGNIZE REV. NO WHERE DOES it SAY CASH WAS RECOGNIZED*
3. Expense Recognition Principle (matching)- a company records its expenses incurred to generate the revenue
4. Full Disclosure Principle- a company reports the details behind financial statements that would impact users decisions in the notes to the financial statements.
What are the 4 generally accepted inventory costing methods.
1. Specific Unit Cost
2. Weighted average cost
3. FIFO (First-in, First Out)
4. LIFO (Last-in, First out)
If market rate > face rate a bond is issued at...
a discount!
In Allies company, a note was given to borrow cash. record the journal entry.
Cash. xx
Notes Payable xx
Noah Barr is issuing a stock split. record the journal entry.
NONE! there are no journal entries for stock splits
What are the accounting assumptions and their definitions?
1. Going-concern assumption- the business is presumed to continue operating instead of being closed or sold
2. Monetary unit assumption- transactions and events are expressed in monetary, or money units
3. Business entity assumption- a business is accounted for separately from other business entities, including its owner.
4. Time period assumption- the life of a company can be divided into time periods, such as months and years.
Define and explain the difference between:
Transportation-IN (FOB shipping point)
Transportation-OUT (FOB destination point)
Transportation-IN (FOB shipping point): cost responsible by the buyer
Transportation-OUT (FOB destination point): cost responsible by the seller
What are the advantages and disadvantages of stock vs debt financing?
advantages: flexibility, exchange facilitate trading, return on investment
disadvantages: control, tax consequences, and impact on ratios.
Mady's company is issuing common stock above par value, which is $10. Record the journal entry.
Cash. xx
Common Stock, $10 par value . xx
APIC common stock. xx
Molly's company is selling treasury stock. The sale price is greater than the reaquisition price. record.
Cash. xx
Treasury stock common. xx
APIC, treasury stock. xx
TRUE OR FALSE AND EXPLAIN WHY!
Any US publicly traded company can report its financial info under the rules established by the FASB or IASB.
FALSE.
only US based publicly traded entities must report its financial statements under GAAP rules that are established by FASB.
How would you record the write-off of uncollectible receivables?
Bad Debt Expense xx
Accounts Receivable. xx
Date of record- dividend is going to be paid to stockholders who own the stock as of this date.
Date of payment- cash dividends are paid
Nina's company is issuing common stock in exchange for services. The par value is $10. record the journal entry.
organizational expenses. xx
common stock, $10 par value. xx
APIC, common stock. xx
Allie's company is issuing common stock at a $10 par value in exchange for land. record.
Land. xx
Common Stock. xx
APIC. xx
Cash basis- revenues are recognized when cash is received and expenses are recognized when cashh is paid.
Accrual basis- revenues are recognized when earned and expenses are recognized when incurred.
TRUE OR FALSE!
The write off does NOT affect the realizable value of accounts receivable
TRUE!
What are the 3 types of business activities?
1. Operating Activities
2. Investing Activities
3. Financing Activities
NONE! no entries are made for the date of record
What are Bond Price Factors? (3 of them)
Face rate of interest (stated rate): the rate of interest on the bond certificate
Market rate of interest (effective rate): the rate that investors could obtain by investing in other bonds
Bond issue price: the present value of annuity of interest payments plus the present value of the principal