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accounting test 4 Flashcards

1
Q

inventory

A

tangible resource that is held for resale in the normal course of operations

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2
Q

acquisition cost

A

inventory is Recorded at ________ cost

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3
Q

expense

A

Inventory becomes ____ when sold

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4
Q

gross profit

A

the amount of resources that are left to pay operating expenses (selling and administrative expenses) and provide for net income

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5
Q

perpetual

A

Cost of goods Sold updated with each sale

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6
Q

FOB shipping point

A

ownership of the inventory passes from seller to buyer at the shipping point and buyer pays and includes transportation costs termed as freight-in. Freight-in is included in the cost of inventor

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7
Q

FOB destination

A

ownership of the inventory passes from seller to buyer when goods are delivered. Seller pays transportation costs termed as freight-out. Freight-out is included as an expense on the seller’s income statement.

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7
Q

FOB destination

A

ownership of the inventory passes from seller to buyer when goods are delivered. Seller pays transportation costs termed as freight-out. Freight-out is included as an expense on the seller’s income statement.

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7
Q

FOB destination

A

ownership of the inventory passes from seller to buyer when goods are delivered. Seller pays transportation costs termed as freight-out. Freight-out is included as an expense on the seller’s income statement.

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8
Q

FOB destination

A

ownership of the inventory passes from seller to buyer when goods are delivered. Seller pays transportation costs termed as freight-out. Freight-out is included as an expense on the seller’s income statement.

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9
Q

Consigment

A

Goods owned by one party are held and offered for sale by another

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10
Q

2

A

In perpetual system, sales require ______ journal entries

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11
Q

One to recognize revenue *

One to recognize cost of goods sold and a reduction of inventory

A

What 2 transactions needed for sales in perpetual system

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12
Q

Restore inventory and decrease COGS *
Decrease A/R or cash and revenue

A

What 2 journal entries does returns and allowance require under perpetual

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13
Q

net method

A

returns and allowances liability is debited and A/R or Cash is credited

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14
Q

gross method

A

revenue account is debited and A/R or cash is credited

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15
Q

BI + p + EI

A

COGS equation

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16
Q

COGS - EI

A

COGAFS equation

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17
Q

Average cost equation

A

Total Extended Cost/Total Units = Average Cost per Unit

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18
Q

highest ending inventory, lowest COGS, highest income

A

in rising purchase prices FIFO produces

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19
Q

lowest ending inventory, highest COGS, and lowest income

A

in falling purchase prices FIFO produces

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20
Q

highest ending inventory, lowest COGS, and highest income

A

In falling purchase prices LIFO produces

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21
Q

FIFO

A

Inventory on the balance sheet and net income on the income statement are higher under

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22
Q

LIFO

A

Lower tax liability under

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23
LIFO conformity rule
IRS rule requiring a company that uses LIFO for tax reporting to also use LIFO for financial reporting
24
NRV of inventory equation
Estimated Selling Price - Costs of Disposal (Selling Costs)
25
NRV
WHen ______ of inventory is lower than its original cost, the valuation of inventory is adjusted down
26
NRV
____ is an example of conservatism
27
physically counted
ending inventory is unknown until
28
COGS Understated * EI Overstated * Net Income Overstated
understating beginning inventory leads to
29
* COGS Overstated * EI Understated* Net Income Understated
overstating beginning inventory leads to
30
Gross Profit Ratio
gross profit / net sales
31
Inventory Turnover Ratio
Cost of Goods Sold / Average Inventory
32
365 days / Inventory Turnover
Average days to sell inventory
33
operating assets
long-lived assets that are used by the company in the normal course of operations
34
Amortization
intangible assets are ______ expense
35
depletion
natural resources are _____ expense
36
straight line depreciation equation
(cost-residual value)/useful life
37
double declining balance method
more depreciation in early years of the asset's life
38
different
Method chosen for taxes can be _______from the method used for F/S purposes
39
revenue expenditures
expensed on the income statement
40
revenue expenditures
Maintain the level of benefits provided by the asset, relate only to the current period, occur frequently, typically relatively small dollar amounts
41
revision of deprecation steps
Obtain the book value of the asset at the date of revision * 2. Compute depreciation expense using the revised amounts for book value, useful life, and/or residual value
42
impairment
Permanent decline in market value
43
write downs
FASB requires immediate recognition of
44
impairment
exists if future cash flows expected to be generated by the asset are less than the asset's book value
45
Average Age of Fixed Assets
Accumulated Depreciation / Depreciation Expense
46
intangible assets
No physical substance * Rights, privileges or competitive advantages * Recorded at cost
47
intangible assets
No physical substance * Rights, privileges or competitive advantages * Recorded at cost
48
periodic system
records purchases into temporary account
49
formula for net purchases
purchases - returns and allowances - discounts + freight in
50
when legal title to the goods passes to the buyer
When Should Items Purchased Be Included in Ending Inventory?
51
opposite
Any error in ending inventory means the ___________error for Cost of Goods Sold (expense). Therefore, both the balance sheet and the income statement are impacted in the year of the error
52
Gross profit equation
Gross profit equation
53
periodic
Cost of Goods Sold are recorded only at the end of a period.
54
perpetual
Purchase price of the merchandise PLUS any cost of bringing the goods to sellable condition and location * Inventory account represents the net cost of inventory that is on hand and ready to sell* Historical Cost basis!
55
deprecation
PPE is an _____ expense
56
deprecation
PPE is an _____ expense
57
all expenses necessary to acquire and make an asset ready to use
Cost for PPE include
58
deprecation
Process of allocating to expense the cost of an asset over its useful life
59
straight line depreciation
Equal amount of depreciation expense each year
60
units of production method
Life of asset is expressed in terms of total units of production or activity
61
units of production equation
(Cost-Residual Value)/Expected Usage
62
full years
if the fixed asset is purchased (or disposed of) at the beginning or end of an accounting period, a _______ of deprecation is recorded
63
post acquisition expenditures
Ordinary repairs and maintenance, major overhauls, additions, improvements
64
capital expenditures
included in asset cost
65
capital expenditures
Increase future economic benefits in both current and future periods * Added to asset account and are subject to depreciation
66
earnings management
Companies delaying the timing of impairment recognition are practicing
67
write down transaction
loss on impairment fixed asset
68
conservatism
write-down is consistent with ________________ principle
69
impairment
Measured as the difference between book value and fair value
70
steps in disposing assets
Update depreciation to date of disposal* 2. Compute the NBV at date of disposal* 3. Remove from the books by crediting the asset and debiting accumulated depreciation
71
Fixed Asset Turnover Ratio
Net Sales / Average NBV of Fixed Assets
72
Fixed Asset Turnover Ratio
Measures how efficiently company is using its fixed assets
73
natural resources
Generally only replaced or restored by an act of nature
74
depletion equation
Cost-Residual) / Recoverable Units depletion * units recovered = depletion
74
depletion equation
Cost-Residual) / Recoverable Units depletion * units recovered = depletion
75
cost flow assumption
perpetual record is kept both in units and dollars using a particular_____________________ throughout the accounting period.
76
Specific Identification
Assumption used where a small number of costly, distinctive items are sold b. Appropriate for following types of inventory è cars, furniture, fur coats, jewelry c. Cost flow does match physical flow of goods sold
77
matching
f the asset is purchased (or disposed of) during the accounting period, the __________________ principle requires that depreciation be recorded only for the portion of the year that the asset was used to generate revenue.
78
voluntary disposal
The disposal may occur at the end of the asset's useful life or at some other time
79
involuntary disposal
l occurs when assets are lost or destroyed through theft, acts of nature, or by accident.
80
Gain on disposal
selling price greater than NBV
81
loss on disposal
selling price is less than NBV
82
journal entry for asset disposal
CASH Accumulated depreciation Asset Gain/ Loss on sale

accounting test 1 (6 decks)

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