Intermediate 1 Review Exam 1

Accounting Framework

100

Who sets GAAP?

FASB, SEC, AICPA

200

What are the Fundamental Qualities of the Accounting Framework?

Relevance and Faithful Representation

300

Name and give examples/definitions for the 4 principles and 4 assumptions of accounting.

Principles: Revenue Recognition, Expense Recognition, Measurement, Full Disclosure

Assumptions: Going Concern, Monetary Unit, Economic Entity, Periodicity

Accounting Cycle

100

Create the Journal entries for these events/transactions. 

1. Issuance of common stock worth $400

2. Sell $350 inventory for $450 in receivables

3. Buy $550 of equipment with $150 in cash and the rest on credit

1. Dr. Cash $400 Cr. Common Stock $400

2. Dr. Accounts Receivable $450 Cr. Revenue $450     Dr. COGS $350 Cr. Inventory $350

3. Dr. Equipment $550 Cr. Cash $150 Cr. Accounts Receivable $400

200

Adjusting Entries - 12/31/17                                 1. Co. paid $2400 for 2 years of Rent in October 2017. They reported that amount as Rent Expense. 2. Co. took out a note April 1st with a principal of $100,000. It has annual taxes of 10% due every April 1st.                                                           3. Co. purchased $140,000 equipment. It has a 12 year useful life and $20,000 salvage value. Co. uses straight line depreciation.

1. Dr. Prepaid Rent $2100 Cr. Rent Expense $2100   2. Dr. Interest Expense $6667 Cr. Interest Payable $6667      

3. Dr. Depreciation Expense $10,000 Cr. Accumulated Depreciation $10,000

300

April 1, 2009 Comet Magazine received $2400 is advance for a 2-year subscription starting that day and credited the entire amount to unearned revenue. However, the company failed to make adjusting journal entries in 2009 or 2010. Indicate the effect of the error on the 2009 and 2010 financial statements. O=overstated, U=understated, NE=no effect, state the amount of the effect. 

2009 NI - U$900; Assets-NE; Liabilities-O$900; Equity-U$900

2010 NI - U$1200; Assets-NE; Liabilities-O$2100; Equity-U$2100

Income Statement

100

List Non-operating revenues or expenses

Interest revenue or expenses, Rent revenue or expenses, Unusual gains/losses

200

Discontinued Operations                                           Co. decided to discontinue their T-shirt operations. The segment was not sold by the end of the year. It had a net loss from operations during the period of $75000. At the end of the reporting period, the fair value minus anticipated costs to sell was $25000 and book value of $50000. Income from continuing operations was $135000. Taxes are 30%. 

Income from Cont. Operations    $135000             Discontinued Operations:                                 Loss from operating discontinued segment $75000 Impairment Loss                                      $50000 Income Loss from discontinued segment $125000  Net Income                           $10,000 

300

What is included in Comprehensive Income?

Net Income and Other Comprehensive Income 

Balance Sheet

100

Classify these accounts:                                           Cash, Inventories, Accumulated Depreciation, Equipment, Note Payable, Interest Payable, Patent, Capital Stock, Retained Earnings, Other Comprehensive Income

CA, CA, CA, PPE, CL/LTL, CL, IA, E, E, E, 

200

Difference between current and long-term assets and liabilities and examples

Cash, Accounts Receivable vs. Stocks, Bonds, Cash Held for Something

Accounts Payable, Unearned Revenue vs. Notes Payable (due in more than a year), Long term debt

300

Create a Classified Balance Sheet                    Cash - $150,000   Accounts Payable - $40,000        Equipment - $65,000 Salaries Payable - $75,000 Common Stock - $90,000 Unearned Revenue - $10,000 Notes Payable - $45,000 Accounts Receivable - $55,000 Allowance for Doubtful Accounts - $10,000

Notes Payable - $15,000 of the principle is due every year. Taxes are 25% per year

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Statement of Cash Flows

100

Classify as Operating, Investing or Financing:

Sale of Equipment, Interest Received, Interest Paid, Dividends Received, Dividends Paid, Issue Common Stock, Loan Money to a Smaller Company, Change in Accounts Receivable 

I, O, O, O, F, F, I, O

200

How do these affect cash flows

An increase in Accounts Receivable, Increase in Accounts Payable, Sale of Equipment, Pay dividends, Buy a Building 

Decrease(O), Increase(O), Increase(I), Decrease(F), Decrease(I)

300

Create a Statement of Cash Flows: *don't worry about numbers

Depreciation Expense, Gain on Sale of Equipment, Sale of Equipment, Increase in Accounts Receivable and Accounts Payable, Pay Dividends, Issue Common Stock, Interest Received

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