Chapter 4
What is the J.E to record amortization on Software for the year for $200.
Amortization Expense
Accumulated Amortization
Which units do we expense first in LIFO?
The most recently purchased units.
When are adjusting Journal entries recorded?
At the end of the period.
How do you solve for the weighted average cost per unit?
Cost of Goods Available for sale / Total units
What are the goods available for sale?
Beginning Inventory + Purchases
What are the three factors in the fraud triangle?
1. Incentive. (Motivation)
2. Opportunity (Ability/access)
3. Rationalization (Why)
A customer prepaid for a new roof for 5,000. James Roofing Co. completed 60% of the service by the end of the period. Record the AJE.
Deferred Revenue 3000
Service Revenue 3000
What is the equation for EI in the perpetual system?
BI + P - COGS = EI
Describe the difference between Depreciation Expense and Accumulated Depreciation.
Expense relates to a period
Accumulated relates to a running total of the depreciation over the life of the asset
Set of procedures to limit fraud
Internal Controls
Record wages of $5000 owed to employees
Salaries and Wages Expense 5000
Salaries and Wages Payable 5000
What is the equation for Gross Profit?
Net Sales(Revenues - Returns)
-Cost of Goods Sold
= Gross Profit
What is Inventory recorded at?
Cost to acquire. (Shipping, Installation, Price)
Adjustments never involve which account?
Cash
How are taxes affected when using LIFO in a declining unit cost period?
Taxes are increased because as COGS goes down, Gross Profit is increased causing taxes to increase.
What is a contra account? Example?
Decreases the corresponding account.
Ex. Accumulated Depreciation decreases Equipment.
Ex. Sales Returns and Allowances decreases Revenues