Exam 2 ACC 255 Jeopardy

Ch 5 Revenues and Receivables

100

This is the correct formula for calculating Net Revenue, which involves subtracting sales returns and sales discounts from gross revenue

What is (Total Revenues - Sales Discounts - Sales Returns) ?

200

Explain the differing impacts on Accounts Receivable for these three items and define each: (1) recording an Allowance for Uncollectible Accounts (AUA)  adjustment ((what type of account is it)), (2) recording Bad Debt Expense (BDE) (what type of account is it), and (3) performing a Write-off (Which Two Accounts Are Impacted).

• Allowance for Uncollectible Accounts (AUA): As a contra-asset, it reduces the Net Accounts Receivable reported on the balance sheet to show only the amount the company expects to collect.
• Bad Debt Expense (BDE): This is an operating expense on the income statement; it does not directly affect the Accounts Receivable account at all.
• Write-offs: This action directly reduces the gross balance of Accounts Receivable and the AUA account simultaneously, resulting in no net impact on total assets or net income.

300

On November 1, 2024, a company issues a $10,000, 12% note due in six months. This is the amount of Interest Receivable reported on December 31, 2024.

What is 200?

(10,000 × 0.12 × 2/12)

800

Nutmeg Inc. has an Accounts Receivable balance of 420,000 and an Allowance for Uncollectible Accounts with a 200 credit balance before adjustment. If they estimate 6% of receivables will be uncollectible, this is the amount of Bad Debt Expense recorded in the adjusting entry. (Show work on board)

What is 25,000? 

(420,000 × 0.06 = $25,200 desired ending balance; $25,200 - $200 current credit = $25,000 adjustment)

1000

Nutmeg Spice Co. has an Accounts Receivable balance of $500,000 and an Allowance for Uncollectible Accounts (AUA) credit balance of $25,000 before adjustment. Using the aging of receivables method, calculate the amount of Bad Debt Expense recorded in the year-end adjusting entry based on the following schedule:

• Not Due Yet: $380,000 (5% uncollectible)
• 0–60 Days Past Due: $70,000 (15% uncollectible)
• 61–120 Days Past Due: $40,000 (30% uncollectible)
• 120+ Days Past Due: $10,000 (80% uncollectible)

What is $24,500?

1. Calculate the desired Ending Balance for AUA (Step 1):
   • 380,000×519,000**
   • 70,000×1510,500**
   • 40,000×3012,000**
   • 10,000×808,000**
   • Total Desired Ending Balance: $19,000 + $10,500 + $12,000 + 8,000=∗∗49,500**
2. Calculate the Adjustment Amount (Step 2):
   • The company already has a $25,000 credit balance in the AUA account.
   • To reach the desired ending balance of $49,500, the adjustment (Bad Debt Expense) must be:
   • $49,500 (Ending) – 25,000(Beginning)=∗∗24,500**
3. The Adjusting Journal Entry (Step 3):
   • Debit: Bad Debt Expense $24,500
   • Credit: Allowance for Uncollectible Accounts $24,500

Ch 6 Inventory and COGS

100

Write what goes into goods available for sale, and what happens when it is either sold or not sold? (Write on the board)

Beginning Inventory + Purchases = GAFS
When Sold= COGS
When not sold= Ending Inventory

200

This is the difference between merchandising and manufacturing companies.

Merchandising companies: resells finished goods using a single inventory account

Manufacturing companies: creates products from raw materials and must track them through multiple inventory accounts representing different stages of production

300

This is when and why the accounting rule, Lower of Cost or Net Realizable Value (NRV) is used?

This specific accounting rule is applied at the end of a period whenever the estimated selling price of inventory drops below its original purchase cost. It is used to ensure that inventory and total assets are not overvalued on the balance sheet, as GAAP requires companies to adjust asset values if they can no longer be sold for at least what was paid for them.

800

Tiger Co. had the following inventory activity during the month of August:

• Beginning Inventory: 10 units at $10 each
• Purchase 1: 15 units at $7
• Purchase 2: 20 units at $15 each
• Purchase 3: 20 units at $20 each
• Total Units Sold: 35 units

Calculate the following three values: (Make sure you can show your work on the board)

1. The Cost of Goods Sold (COGS) using the LIFO method.
2. The Ending Inventory value using the Weighted Average method.
3. The Ending Inventory value if the company reported a COGS of $500.

1. COGS (LIFO): $625
2. Ending Inventory (Weighted Average): $417.69
3. Ending Inventory (using COGS): $405

1000

Tiger Industries began the month with 20,000 in beginning inventory. During the month, they completed the following transactions:

• Purchased $80,000 of inventory on account with terms 2/10 n/30
• Paid 4,000 for freight−in and 1,000 in sales tax
• Returned $5,000 of defective goods to the supplier.
• Paid the supplier within the discount window to receive a 2% purchase discount on the remaining balance owed.
• Sold inventory with an original cost of $45,000 to customers.
• Accepted a sales return from a customer for goods that had an original cost of $2,000.

Calculate the final Ending Inventory balance reported on the Balance Sheet. ( Show work on an Inventory T Chart)

What is $55,500?

Ch 7 Long Term Assets

100

This tangible asset is never depreciated, and why?

What is land because it has an unlimited service life.

200

This is the formula for Book Value.

What is Cost - Accumulated Depreciation?

300

A piece of equipment costs $120,000, has a $15,000 residual value, and a 5-year life. This is the Accumulated Depreciation at the end of Year 3 using the straight-line method.

 What is 63,000?

[120,000 - $15,000] / 5 = $21,000 per year; $21,000 × 3 = $63,000

800

The $1,000 Question: Evergreen Enterprises purchased a new property for its headquarters and incurred the following costs:

• $200,000 land purchase price
• $12,000 in realtor commissions and legal fees
• $9,000 to demolish an old shed on the site
• $3,000 received from selling salvaged materials from the shed
• $15,000 for a new paved parking lot and landscaping
• $400,000 for construction of the new office building
• 80,000 for new machinery
•   (plus) 6,000 in sales tax,
•   (plus) 1,500 shipping
•   (plus) 2,500 for a one-year insurance policy.

Calculate the specific amounts that must be capitalized to the (1) Land, (2) Land Improvements, (3) Buildings, and (4) Equipment accounts.

• Land: $218,000
• Land Improvements: $15,000
• Buildings: $400,000
• Equipment: $87,500

1000

A company buys equipment for $100,000 with a 10-year life and $16,000 residual value. This is the depreciation expense for the second year using the Double-Declining Balance method.

What is $16,000? (Year 1: $100,000 × 20% = 20,000;Year2:[100,000 - $20,000] × 20% = $16,000)

Ch 8 Cash and TVM

100

These are the three type of cash equivalents:

W

200

These two types of investments, the first resulting in dividend income and interest income, which are they respectively and how do you obtain them?

1st: Equity investment: purchasing ownership in another company 

2nd: Debt investment: purchasing loans or bonds

300

Blueberry Co. purchased Raspberry Inc. for $6,500,000 in cash. The book values and fair values of Raspberry Inc.'s assets and liabilities on the date of acquisition are listed below:

Accounts Receivable

Book Value: $400,000

Fair Value: $350,000

Inventory

BV:$800,000

FV:$1,000,000

Plant, Property, and Equipment

BV:$3,000,000

FV: $4,200,000

Intangible Assets 

BV: $200,000

FV:$600,000

Accounts Payable

BV: $300,000

FV: $300,000

Notes Payable

$(1,200,000)

$(1,200,000)

Part A: Calculate the value that Blueberry Co. should report as goodwill.

Part B: Show the financial statement impact of Blueberry’s acquisition of Raspberry.

A: Blueberry Co. should report $1,850,000 as Goodwill.

(Purchase Price: 6,500,000 - Net Assets at FV: 4,650,000 = $1,850,000)

Part B: 

To show the impact, you must record all acquired assets and liabilities at their fair value, record the goodwill, and record the cash paid.

Assets

+ $350,000 (AR)

+ $1,000,000 (Inv)

+ $4,200,000 (PPE)

+ $600,000 (Patents)

+ $1,850,000 (Goodwill)

– $6,500,000 (Cash)

Liabilities:

+ $300,000 (AP)

+ $1,200,000 (NP)

Equity

Net Change: +$1,500,000

800

If you invest $10,000 today in an account that earns an annual interest rate of 7%, this is the total amount the investment will be worth at the end of 5 years.

What is 14,025.5?

FV$1

$10,000×1.40255

1000

A company decides to set aside $5,000 every year months for the next 3 years to save for a new piece of equipment. The account earns an annual interest rate of 10% compounded semiannually. Calculate how much the company will have at the end of the 3 years.

What is $34,009.55 (or $34,010)?

FVA
(5,000 × 6.80191)

Unit 2 (5-8)

100

The Allowance for Uncollectible Accounts (AUA) is categorized as this type of account and appears on this financial statement.

What is a contra-asset on the Balance Sheet?

200

 When a specific account receivable is written off, these are the impacts on total assets and net income.

What is no net effect on either?

300

Calculate the value today of receiving a series of five annual payments of $3,000 each, assuming an interest rate of 8% compounded annually

What is 11,978.13 or 11,978?

PVA:

3.99271

$3,000×3.99271