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acct 1211 > Exam 3 > Flashcards

Exam 3 Flashcards

1
Q

how are account receivables created?

A

when a customer purchases goods or services on credit. Will get paid for later.

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2
Q

How to calculate using the percentage of sales method?

A

Sales given * the given rate = estimate for bad debt expense

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3
Q

Sorts the balance of accounts receivables per customer based on the length of time the account has been outstanding. Results in the ending balance of allowance for bad debt expense.

A

Aging of accounts receivable method.

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4
Q

Why you cant use the direct write off method?

A

Does not comply with the matching principle of GAAP - revenues and expenses must be recorded at the time it occurred .

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5
Q

journal entry for an estimate of bad debts

A

bad debt expense
allowance for bad debt

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6
Q

journal entry for recovery of previously written-off bad debt

Then collection of previously written off accounts receivable

A

account receivables
allowance for bad debt

cash
account receivable

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7
Q

the formula for interest?

A

Principle * rate * time

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8
Q

What is asset capitalization?

A

Contributes to the business to generate more profit/
Assets held for continuing usage in the business NOT for resale.
1) costs that result in higher future earnings
2) expense costs that have uncertain/NO impact on future earnings
recording the of land, building, or other assets by debiting (increasing) an asset account

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9
Q

what are long term (fixed assets) assets?

A

Assets that are used by the company for a long time (more than one financial year.)
Land, equipment, building, vehicles. investments.

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10
Q

Journal entry for long-term asset purchase

A

long term asset
cash

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11
Q

Journal entry for deprecation

A

Depreciation expense
accumulated depreciation

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12
Q

Book value formula

A

Asset Cost - Accumulated depreciation

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13
Q

Calculate gain or loss on sale fixed asset

A

Selling price - book value of the asset = gain/loss

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14
Q

What is an intangible asset?

A

nonmonetary assets without any physical substances - patent, copyright, franchise, goodwill

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15
Q

Understand how natural resource cost is allocated

A

(cost - residual value) / estimated number of units * number of units extracted

Depletion expense
accumulated depletion

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16
Q

Components, benefits, characteristic of bonds.

A

Witten promise to pay

loans from people

requires the holder to pay interest/principle amount of the date of maturity

Components : face/ par value, stated interest rate, the effective interest rate (market rate)

BENFITS - BONDS DON’T AFFRCT OWNER CONTROL, AND ARE TAX DEDUCTABLE
DISADVANTAGE - HAVE TO PAY BOTH FACE VALUE AND INTEREST RATE AT MATURITY

17
Q

Journal entry for fave value?

A

cash
bonds payable

18
Q

Journal entry on premium

A

Dr - Cash
Cr - Premium
Cr bonds payable

19
Q

Journal entry for discount

A

Dr - cash
Dr - discount
Cr - bonds payable

20
Q

contra assets = credit balace

A

accumulated depreciation, acc depletion, allowance for bad debt

21
Q

journal entry for write off

A

allowance for bad debt
accounts receivable

22
Q

goal of a premium or discount

A

to reduce it to 0 at maturity

23
Q

Which method almost always produces the most depreciation in the first​ year?

A

Double declining

24
Q

which method is used to compute depletion?

A

units of production

25
Q

bonds that all mature at the same time

A

term bond

26
Q

bonds that mature in installments at regular intervals

A

serial bonds

27
Q

bonds that give bondholders the right to take specified assets of the issuer if the issuer fails to pay principal or interest

A

secured bonds

28
Q

unsecured bonds backed only by the creditworthiness of the bond issuer

A

debentures

29
Q

effect on estimate journal

A

expenses are higher
assets are lower

30
Q

affect of write off

A

no effect
assets are lower but contra asstet is increased

31
Q

reversal affect

A

no affect cash up
allowance down
they cancel eachother

acct 1211 (7 decks)

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