Revenues
Explain the revenue recognition principle (when can we recognize revenue)
when it is earned- we have performed our obligation
Describe the two methods used for estimating bad debt expense. How do they work, and what are the benefits of using each?
percentage of credit sales is easier to apply, estimates bad debt expense directly. aging of receivables estimates ending allowance amount, more accurate.
Give 3 examples of a cost that could be capitalized as part of inventory.
inspection of product, transportation costs of materials, factory worker wages, manufacturing overhead
The historical cost less accumulated depreciation.
Explain the difference between a product and a period cost.
product- anything needed to produce the product. period- everything else
A customer returns a $15 shirt. Record the journal entry.
Dr sales returns and allowances $15
Cr cash $15
When do we use a bad debt expense adjusting entry vs a write off entry?
Bad debt expense is made after every period to estimate how much debt will be uncollected. write-offs are for a specific account we KNOW to be uncollectible.
Solve for cost of goods sold using FIFO periodic
$60,800
Record the depreciation expense for an asset purchased for $45,000 with a useful life of 10 years and a residual value of $3,500 if the company uses straight-line.
Dr depreciation expense 4,150
Cr accumulated depreciation 4,150
Accumulated depreciation is to equipment as ______ is to _______
options: allowance for doubtful accounts, bad debt expense, accounts receivable
allowance for doubtful accounts; accounts receivable
A customer pays for their $75 purchase with a credit card. The credit card company charges a 2% fee. Record the journal entry.
Dr cash $73.50
Dr credit card discounts $1.50
Cr revenue $75
A company writes off a $10,000 account as uncollectible. Record the journal entry to reflect this.
Dr allowance for doubtful accounts 10,000
Cr accounts receivable 10,000
Solve for cost of goods sold using LIFO periodic.
$61,100
What is the net book value of a machine that cost $35,000, has a salvage value of $12,000, estimated life of 20,000 hours that has been used the following amount:
5,700 hours, 6,300 hours, and 2,400 hours
$18,440
the amount of cash that is actually expected to be collected on accounts receivable is called
net accounts receivable
Gross sales total $1,156,157, half of which were credit sales. $23,178 was returned, discounts totaled $16,254. Credit card sales were $30,334 and were subject to credit card fees of 2%. What is the dollar amount of net sales?
$1,116,118
Using the aging of receivables method, a company estimates they have $6,500 in uncollectible accounts. If beginning allowance for doubtful accounts is $4,300 and had $2,000 in write-offs, record the adjusting entry for bad debt expense.
Dr bad debt expense 4,200
Cr allowance for doubtful accounts 4,200
Solve for cost of goods sold using a weighted average method.
$60,900
A company uses straight line depreciation on a $50,000 machine, 8 year life, salvage value $12,000. Record the disposal after 3 years for $35,000.
Dr accumulated depreciation 14,250
Dr loss on equipment 750
Dr cash 35,000
Cr equipment 50,000
What accounts does an inventory write down effect and when would we need to do one?
Cost of goods sold and inventory, do when the cost of inventory on the books is higher than the net realizable value.
A company sells a washing machine, dryer, and a 1 year warranty for $5,000. Each item costs $2,500, $1,000, and $1,500 individually. Record the journal entry at time of sale and 6 months after sale.
Dr cash 5,000, cr revenue 3,500, cr unearned revenue 1,500.
Dr unearned revenue 750, cr revenue 750.
Calculate the amount of write offs if beginning balance in the allowance for doubtful accounts is $12,000, ending is $8,000, and 2% of their $125,000 in credit sales is uncollectible.
$6,500
Describe what the LIFO reserve is and how we calculate it.
It is the excess of LIFO inventory over FIFO inventory. Calculate inventory via FIFO and LIFO, then subtract LIFO from FIFO to get LIFO reserve amount.
If we want the highest net income possible, we should (shorten/lengthen) useful life estimates and (raise/lower) estimated residual value
lengthen useful life estimates and raise estimated residual value to reduce depreciation expense
Name 3 things that will be affected by choice of inventory cost flow assumption (ex choosing FIFO over LIFO)
inventory, net income, and cost of goods sold