Exam 2

Question 1

Percentage of Completion Method

Answer 1

Recognizing revenue based off of project percentage completed

Question 2

Cash Discounts

Answer 2

Reductions in the amount owed by customers due to prompt payment

Question 3

Bad Debts

Answer 3

Receivables considered to be uncollectible

Question 4

Specific Write-off method

Answer 4

violates matching principle

Question 5

Bad debt recoveries

Answer 5

Receivables that were previously written off but then collected

Question 6

Allowance for uncollectible accounts (AUA)

Answer 6

contra account to accounts receivable

Question 7

Days to collect A/R

Answer 7

365 / A/R turnover

Question 8

Compensating balances

Answer 8

the required minimum balances a company must keep on deposit designed to partially compensate the bank for the loan

Question 9

Reconcile a bank statement

Answer 9

To verify that the bank balance for cash is in agreement with the accounting records

Question 10

Cost Valuation

Answer 10

process of assigning a specific value to items in inventory

Question 11

Perpetual Inventory System

Answer 11

inventory is constantly valuated

Question 12

Inventory Shrinkage

Answer 12

loss of inventory from theft, breakage, or loss

Question 13

Specific identification method

Answer 13

linking individual items with their cost

Question 14

Net Realizable Value

Answer 14

The amount the company expects to receive when it sells the inventory

Question 15

Current replacement cost

Answer 15

what it would cost the company to buy an inventory item today

Question 16

Cut-off error

Answer 16

Failure to record transactions in the correct time period

Question 17

Raw materials inventory

Answer 17

cost of materials held in use for manufacturing a product

Question 18

Work-in-progress inventory

Answer 18

cost incurred for partially completed items

Question 19

Amortization

Answer 19

Paying off the costs of long term intangible assets in increments

Question 20

Depletion

Answer 20

Payments on the cost of using natural resources

Question 21

Capitalization

Answer 21

Expenditures on or for assets that will last more than a year

Question 22

Fair Value

Answer 22

the value of an asset based on the price they could sell it to a third party

Question 23

Basket Purchase (lump sum purchase)

Answer 23

The acquisition of 2 or more assets for a lump sum cost

Question 24

Depreciable value

Answer 24

difference between acquisition cost and residual value

Question 25

Residual value (scrap value)

Answer 25

The amount a company expects to receive from the sale/disposal of an asset at the end of its useful life

Question 26

STL Depreciation

Answer 26

(Acquisition cost - scrap value) / years of useful life

Question 27

Depreciation expense per unit

Answer 27

(Acquisition cost - scrap value) / number of units

Question 28

Accelerated Depreciation

Answer 28

any depreciation faster than STL depreciation

Question 29

Component depreciation

Answer 29

required by the IFRS: if a component of an asset composes significant portion of that asset, it must be depreciated separately

Question 30

Improvement

Answer 30

if an expenditure increases future benefits of asset by: decreasing operating cost, increasing output, improving safety, reducing pollution, or prolonging useful life

Question 31

Impaired

Answer 31

when an asset ceases to provide economic value at least as great as its book value