Random
What are the four levels of profitability on the Multi-Step Income Statement?
Gross Profit, Operating Income, Pre-tax Income, and Net Income
What is the formula for calculating ending inventory?
BB Inv + Pur - COGS = EI
What is the formula for calculating interest?
Principal * rate * time
What are the disadvantages of extending credit?
Does the seller pay for the freight-in when it is FOB shipping point?
NO
True or False:
Inventory is typically purchased on account
True
During periods of rising costs, which method results in higher ending inventory, lower COGS & higher GP
FIFO
True or false: if the note's term is greater than one year I record interest revenue at maturity date
false!!!
How do you solve for Net AR?
AR - ADA
Why do we use the LCM/NRV Method?
When the value of inventory falls below its recorded cost, companies must adjust the inventory balance from cost to value
Conservatism!
True or False: Net AR is unchanged after a write-off
True
What is the primary benefit to LIFO and what special rule applies to LIFO?
Lower taxable income = tax savings
A company that uses LIFO for taxes must also use for financial reporting
When do I receive cash for interest and principal?
At maturity
How do you record ADA and Bad debt Expense?
Debit Bad Debt Expense
Credit ADA
How do you calculate for total inventory cost?
Purchase + Freight - Returns - Discounts
How do you calculate Gross Profit Percentage?
Gross Profit / Net Sales
What is the difference between Perpetual Inventory System and Periodic?
Perpetual:
continuously records both changes in inventory quantity and inventory costs each purchase and sale
Periodic:
adjusts inventory and records the cost of goods sold at the end of each reporting period.
ETC.
What is the JE for the loan date and maturity date in regards to the principal amount?
Loan Date: Debit N/R, Credit Cash
Maturity: Debit Cash, Credit N/R
How do you record a write-off?
Debit ADA
Credit AR
What would the journal entry look like for a LCM/NRV write-down?
Debit COGS
Credit Inventory
Explain the difference between manufacturing companies and merchandise companies
Manufacturing= raw materials, WIP, Finished Goods
Merchandise= acquire inventory to re-sell
What is shrinkage and how can we solve for it?
the cost of inventory lost to theft, fraud, and errors
Calculate EI given our equation and the shrinkage is the difference between the book amount and what is actually on hand
On November 1, 2021, the company loans $100,000 at 6% interest to another company, due on October 31, 2022. What is interest revenue for 2021?
$1,000
How do you record an AR recovery?
Debit AR
Credit ADA
Debit Cash
Credit AR
How do you calculate Net Sales?
Sales Revenue - Sales Returns & Allowances - Sales Discounts