Chapter 1 - 2
What is the accounting equation?
Assets = Liabilities + Stockholders' Equity
What does debit mean?
Left
When costs are increasing, what inventory costing method will produce the largest gross margin?
FIFO
Largest Gross Margin if lowest COGS
FIFO - lowest COGS if pricing increasing because sell oldest units at lowest costs
What is the formula for double-declining balance depreciation expense?
(Asset cost - Accumulated Depreciation) x 2 x SL Rate
OR
(Asset cost - Accumulated Depreciation) x 2 x 1/useful life
Name one of the inventory methods a company can use. (not the acronym)
Weighted Average or Average Cost
First-In First-Out
Last-In First-Out
Specific Identification
If a transaction occurs and there is both an increase and decrease in assets, what is that called?
Asset Exchange
Give an example of an account that has a normal debit balance.
Cash, A/R, Supplies, Inventory, Equipment, Goodwill, Salary Expense, Depreciation Expense, COGS, Dividends, etc....
Given the following information for a company that uses FIFO:
Beg Inventory 200 units @ $1.50/unit
1st purchase 400 units @ $1.70/unit
2nd purchase 250 units @ $1.40/unit
Sales 550 units @$3.00/unit
What is the COGS?
COGS: $895
200 x 1.50 = 300
350 x 1.70 = 595
What kind of account is Accumulated Depreciation?
Contra-Asset
Who is responsible for paying FICA taxes?
Both the employer and employee
A company had beginning R/E of $500,000, net income for the year of $100,000 and dividends of $30,000. What was ending R/E?
$570,000
[$500,000 + $100,000 - $30,000]
A company has a balance of $50,000 in their revenue account at the end of the year. What is the closing journal entry?
Dr. Revenue $50,000
Cr. Retained Earnings $50,000
Sales for the quarter were $20,000. Based on historical records, the company earns an average gross margin of 25 percent on sales. Beginning inventory for the quarter was $5,000 and purchases were $17,000. What is the amount of ending inventory?
$7,000
Beg Inventory 5,000 + Purchases 17,000 - Estimated COGS 15,000 (20,000 x .75)
OR
Estimated GM: 20,000 x .25 = 5,000
Estimated COGS: 20,000 - 5,000 = 15,000
Beg Inventory 5,000 + Purchases 17,000 - Estimated COGS 15,000
Given this information what is the uncollectible accounts expense journal entry for 2019?
A/R on Jan 1, 2019 $150,000
Credit sales during 2019 $1,000,000
Collections from credit customers in 2019 $800,000
Accounts written off in 2019 $5,000
ADA on Jan 1, 2019 $10,000
ADA on Dec 31, 2019 $30,000
Dr. Uncollectible Accounts Expense $25,000
Cr. ADA $25,000
$10,000 Beg ADA + x Uncollectible Accounts Expense - $5,000 Write Offs = $30,000 End ADA
What is it called when a corporation buys back some of its issued stock from the public?
Treasury stock
A company had beginning assets of $200,000, beginning liabilities of $100,000, and beginning common stock of $20,000. For the year there was net income of $50,000, what is the ending stockholder's equity?
$150,000
Beg S/E: $200,000 - $100,000 = $100,000
[$100,000 + $50,000]
A company collects $500 upfront from a customer for services they are going to provide next month. What is the journal entry the company records when they collect the $500?
Dr. Cash $500
Cr. Unearned Revenue $500
When does a company record journal entries related to petty cash (2 answers)?
1) Establish the petty cash fund
Dr. Petty Cash
Cr. Cash
2) Replenish the petty cash fund
Dr. Expenses
Cr. Cash
A company buys a printer on January 1, Year 1 for $50,000 with an expected salvage value of $5,000 and 5-year useful life. The company uses straight-line depreciation. On January 1, Year 3 the company sells the printer for $15,000. What is the journal entry to record the sale?
Dr. Cash $15,000
Dr. A/D $18,000
Dr. Loss on Sale of Printer $17,000
Cr. Printer $50,000
What is the journal entry when a company issues a $100,000 bond?
Dr. Cash $100,000
Cr. Bond Payable $100,000
A company had a beginning amount in Supplies of $1,000, During the year the company purchased another $800 in supplies on account. A count of actual supplies on hand at December 31 indicates a balance of $1,200. What adjusting journal entry does the company need to record at December 31?
Dr. Supplies Expense $600
Cr. Supplies $600
Beg Supplies $1,000 + $800 Purchases - $x used = $1,200 Ending Supplies
On September 1, 2023, Winslow Transportation prepaid $3,500 for insurance coverage that covers September 1, 2023 and ends March 31, 2024. What journal entry would be needed on December 31, 2023?
Dr. Insurance Expense $2,000
Cr. Prepaid Insurance $2,000
[3,500 x (4/7) = 2,000]
A company's bank statement reported an unadjusted bank account balance of $25,500 at the end of February. The unadjusted cash account balance was $21,500. The company has the following information:
Credit memo for funds the bank had collected on a note receivable, $3,000
Deposits in transit, $800
Debit memo for service charge, $10
Outstanding checks, $2,500
NSF check, $690
What is the true cash balance at the end of February?
$23,800
Bank statement balance 25,500 + deposits in transit 800 – outstanding checks 2,500 = 23,800
OR
Unadjusted book balance 21,500 + credit memo 3,000 – debit memo 10 - NSF check 690 = 23,800
Given this information what is the net realizable value at December 31, 2019?
A/R on Jan 1, 2019 $150,000
Credit sales during 2019 $1,000,000
Collections from credit customers in 2019 $800,000
Accounts written off in 2019 $5,000
ADA on Jan 1, 2019 $10,000
ADA on Dec 31, 2019 $30,000
$315,000
$150,000 Beg A/R + $1,000,000 Sales on Credit - $800,000 Cash Collections - $5,000 Write-Offs = $345,000 End A/R
Net Realizable Value: $345,000 - $30,000
What section of the statement of cash flows does interest received from a bond go?
Operating Activities