Exam 2 flash cards

Question 1

how does paying for freight effect the balance sheet

Answer 1

decrease cash
increase inventory

Question 2

recording returning gods

Answer 2

reduce inventory
reduce accounts payable

Question 3

recording allowance

Answer 3

decrease inventory
decrease accounts payable

Question 4

record a 2/10, n/30 ~ 500 owed

Answer 4

take 10% of 500 out of inventory
take 500 out of payable
take 490 out of cash

Question 5

record: sell inventory with a cost of 160 for 200
let the customer short pay 20

Answer 5

A/R 200 R/E 200
inventory (160) R/E (160)
A/R (20) R/E (20)

Question 6

Is advertising an operating activity

Answer 6

Yes

Question 7

what would be in the inventory account for a business using the perpetual inventory system

Answer 7

transport in
purchasing inventory

Question 8

How do you find net income on an income statement?

Answer 8

gross margin- selling expenses

Question 9

How do you find gross margin on an income statement?

Answer 9

net sales- COGS

Question 10

How to get outflow from inventory on cash flow statement

Answer 10

freight- out+ discounted INV

Question 11

How to put FOB shipping point on balance sheet

Answer 11

add to INV take cash out

Question 12

How would you record this

Delivered merchandise to customers in Event 5 under terms FOB destination with freight costs amounting to $150 cash.

Answer 12

take (150) cash
take (150) R/E

Question 13

When is transportation recorded on income statement

Answer 13

Transport out

Question 14

Why does a difference exist between net income and net cash flow from operating activities?

Answer 14

Because the shop is not selling goods purchased in the period

Question 15

is this a period or product cost and why:
Freight cost on the goods sold in Event 4 was $1,080. The goods were shipped FOB destination. Cash was paid for the freight cost

Answer 15

Period cost bc its FOB destination

Question 16

What is gross margin

Answer 16

compares the companies gross profit to its sales

Question 17

When are expenses and revenues matched for inventory

Answer 17

as they are sold

Question 18

when are accs updated for period costs

Answer 18

at the end of period

Question 19

T or F
Purchase allowances affect the financial statements the same way purchase returns do.

Answer 19

True

allowance and returns decrease inventory and accs payable

Question 20

What type of transaction
When inventory is sold for cash, the expense recognition part of the transaction represents a(n) Blank______.

Answer 20

Asset use (decrease in assets and decrease in liabilities)

Question 21

What type of inventory is LIFO vs FIFO used for

Answer 21

LIFO= increasing price (highest COGS)
FIFO= decreasing price (lowest COGS)

Question 22

benefits of LIFO

Answer 22

saving on taxes due to lowest ending inventory balence

Question 23

Benefits of FIFO

Answer 23

highest gross margin, looks appealing to investors

Question 24

Benifits of Avg Cost

Answer 24

most straightforward method and balenced

Question 25

What does a purchase discount effect

Answer 25

decreases liabilities and does not affect income statement

Question 26

what does recognizing transport out expenses decrease

Answer 26

assets, and stockholder equity

Question 27

how do you find net sales

Answer 27

gross sales-returns and allowances

Question 28

are companies required by GAAP to show sales returns and allowances and sales discounts on their income statements.

Answer 28

false

Question 29

are dividends a debit or credit

Answer 29

Debit

Question 30

is COGS temp or permanent

Answer 30

Temporary

Question 31

Is sales returns and allowances a temp or perm account

Answer 31

temporary

Question 32

is purchasing inventory an expense

Answer 32

no

Question 33

Is allowance of doubtful accounts the amount expected to be collected or amount expected to not be collected

Answer 33

amount that is uncollectable

Question 34

What’s the net realizable value of accounts receivable

Answer 34

A/R-ADA
An estimate

Question 35

intrest accured formula

Answer 35

AnnualPirncipal time outstanding/12
APt/12

Question 36

which statement does interest accurred have to be recorded on

Answer 36

cash flow