Definitions
Allocating the cost of an asset over its useful life.
What is depreciation?
To keep personal assets and transactions of the business owner separate from business.
What is business entity assumption?
An account that reduces a related account on the financial statements.
What is contra account?
Cost - salvage value / number of years of expected life.
What is straight line depreciation?
A business pays $240 for a 6 month insurance policy.
What are Cash and Prepaid Insurance?
Name two assets that depreciate.
What are vehicles, equipment, machinery, buildings?
The assumption or expectation a business will go on indefinitely.
What is going concern?
A form of business entity legally separate from its owners.
What is a corporation?
Assets: $20,000; Liabilities: $8,000; Expenses: $2000; Stockholder equity is _____.
What is $12,000?
A business purchases supplies on account.
What are Supplies and Accounts Payable?
Depletion.
What is allocating the cost of a natural resource over the period it is consumed?
Record assets and revenue at cost.
What is the Measurement (Cost) Principle?
Alternative to the Accrual Basis.
What is the Cash Basis?
Employee salary multiplied by 6.2%.
What is social security tax?
A business sold $700 of goods to a customer on account.
What are Accounts Receivable and Sales Revenue?
Book value.
What is cost minus salvage value?
Disclose information only if it would influence a reasonable users' decisions.
What is Materiality?
CD's, money market accounts, and T-bills
What are cash equivalents?
Net Sales minus Cost of Goods Sold
What is Gross Profit?
A business recorded 1 year of depreciation for a vehicle.
What are Depreciation Expense and Accumulated Depreciation?
Beginning inventory plus purchases.
What is merchandise available for sale?
What is the Time Period assumption?
2/10, n/30
What are credit terms?
A $10,000 bond trading at 103 means the bond is sold for ___
What is $10,300?
A company issued 500 shares of $10 par value Common Stock for $10 per share.
What is debit Cash $25,000, credit Common Stock $25,000