Exam 1
Current assets total $5,000 and inventory totals $2,000. Compute the company’s quick assets, assuming there are no prepaid expenses.
$3,000
What is the journal entry for when a firm sells $100 of their inventory?
(Ignore revenue.)
Debit COGS $100
Credit Inventory $100
Give 2 examples of an intangible asset.
Trademarks, patents, copyrights.
What is financial leverage?
How indebted a company is
If a company purchases inventory for $4,000 on credit with 2/10,n/40 on January 4th.
Record the journal entry if it paid off its credit on January 24th.
Dr. Accounts Payable 3,920
Dr. Interest Expense 80
Cr. Cash 4,000
Is the following an example of an adjusting or closing entry. Dr. Depreciation Expense; Cr. Accumulated Depreciation.
Adjusting Entry
What are the three inventory costing methods? Describe them.
FIFO - First-in, First-out. The first inventory a firm buys is the first that it sells
LIFO - Last-in, Last-out. The last inventory a firm buys is the first that it sells
Weighted-Average - A firm uses the average of its inventory cost whenever it sells inventory
Slipstream Surf Shop has equipment and uses double declining balance for depreciation. It acquired the equipment for $10,000, it has a residual value of $1,000 and has a useful life of 10 years. Record the depreciation expense for year 2.
$1,600
What are the two kinds of current liabilities?
(Extra points if you describe them)
Operating - used in financing business's day-to-day operations
Non-Operating - not used in financing business's day-to-day operations
Walk me through an income statement, balance sheet, statement of cash flows, and statement of shareholders' equity.
Income statement - detailing the revenue and expenses of a company to give that company's net income
Statement of cash flows - detailing the inflows and outflows of cash for a business, broken into cash flows from operating, investing, and financing activities
Balance sheet - detailing a company's resources (assets) and claims on resources (liabilities and equity)
Statement of shareholders' equity - Showing a company's shareholder's equity accounts and the changes they underwent throughout the year
Give an example of a closing journal entry.
Dr. Sales Revenue, Cr. Retained Earnings OR Dr. Retained Earnings, Cr. An Expense
If a company has $5,500 in COGS in 2024, $2,000 of inventory in 2023 and $3,000 of inventory in 2024, what is its inventory turnover?
2.2x
$5,500 / ([$2,000 + $3,000]/2) = 2.2
Sabretooth Dentistry buys equipment at the cost of $100,000 on account. It costs $5,000 to ship the equipment and an additional $2,000 to install, which is paid for in cash. Record the journal entry for the acquisition of the equipment.
Dr. Equipment 107,000
Cr. Accounts Payable 100,000
Cr. Cash 7,000
If a company buys $5,000 of inventory on account on January 5th with 1/10, n/30, how much will the inventory be recorded at?
(For bonus points, what will the journal entry be.)
$4,950 ($5,000 * (99%)
Debit Inventory $4,950
Credit Accounts Payable $4,950
What kind of corporation is not tax-exempt?
C-Corp.
What is the difference between a deferral and an accrual?
In a deferral, cash is received/paid before the expense/revenue can be recognized. In an accrual, the expense/revenue is recognized before cash is received/paid.
Firm A buys 30 units for $10 on January 12, then 20 units for $15 on January 17.
Firm A then sells 45 units on January 19. If the firm used FIFO, what would be its cost of goods sold expense for this sale?
COGS = $525
30 * $10 + 15 * $15 = $525
Quicksilver Corp has machinery on its books at a net value of $200,000. The expected sum of undiscounted future cash flows is $190,000 and the fair value is $175,000. Record the impairment loss (if any).
The asset is impaired by $25,000
Company A borrows $5,000 on a 4%, 60-day note payable on March 12.
What will the month-end interest accrued be? Make a journal entry.
The interest will be $10.4.
Debit interest expense $10.4
Credit interest payable $10.4
A bond is issued at $10,000. It is a 8% bond that pays interest of $400 semi-annually and was purchased for $13,270.29, since the market rate is 4%. Prepare the journal entry for the first period to recognize the interest expense.
Dr. Interest Expense 265.41
Dr. Bond Premium 134.59
Cr. Cash 400
Prepare the T-Accounts for the following journal entries (on the spreadsheet).
In a period of rising costs, how would the following items be affected using FIFO vs. LIFO (higher/lower):
COGS
Ending Inventory
Net Income
Taxes
COGS - Higher for LIFO, lower for FIFO
Ending Inventory - Higher for FIFO, lower for LIFO
Net Income - Higher for FIFO, lower for LIFO
Taxes - Higher for FIFO, lower for LIFO
A building was acquired at a cost of $210,000, has a residual value of $10,000 and was depreciated using a straight-line method over 10 years. In the beginning of year 6, there is a change in estimates and the machinery is now expected to have a useful life of 15 years. Compute the depreciation expense for year 6.
$10,000
Bushman, Inc. issues $250,000 of 9% bonds that pay interest semiannually and mature in 10 years. Compute bond price if the bonds' market rate is 8% per year.
Principal - $250,000
Installment - $11,250 ($250,000 * 0.09 * 6/12)
A. 8% (bonds sold at premium)
PV of Principal - 0.45639 * $250,000
PV of Installment – 13.59033 * $11,250
Total = 114,097.50 + 152,891.21 = $266,988.71
Name 5 TAs.
Joyce Teng, Adam Davidson, Akiva Cohen, Blake Owen, Shon Thomas, Celia Nolan, Anna Liu, Adam Barrett, Austin Crouchley, Tanushri Kular, Sebastian Teuscher, Charles Rosenbaum