Final Review

Question 1

Using a perpetual inventory system, the entry to record the return of merchandise purchased on account includes a

Answer 1

debit Accounts Payable

credit Merchandise Inventory

Question 2

Buyer sends seller a ____ memo

Answer 2

debit

Question 3

Buyer or Seller? “record the return of merchandise purchased”

Answer 3

buyer (“purchased”)

Question 4

Company side Bank Reconciliation

Answer 4

add Notes Receivables
add Interest
less NSF Checks
less Bank Service Charges

Question 5

Bank side Reconciliation

Answer 5

add Deposits in Transit
less Outstanding checks
** less Electronic Transfers?

Question 6

Credit Terms

Answer 6

arrangement between buyer and seller as to when payment is made

Question 7

Credit Memos ____ to cash amount in bank reconciliation

Answer 7

add

Question 8

Debit Memos ____ cash amount in bank reconciliation

Answer 8

deduct

Question 9

Direct write-off method vs. allowance method of accounting for uncollectible accounts. direct write offs….

Answer 9

record uncollectibles as they occur at the time the account is determined worthless

Question 10

Who uses direct write off system?

Answer 10

small businesses with few receivables

Question 11

Equipment with a cost of $150,000 has an estimated residual value of $15,000 and an estimated life of 7 years or 15,000 hours. It is to be depreciated by the straight line method. What is the amount of depreciation for the first full year, during which the equipment was used 6,300 hours?

Answer 11

$19,285.71

(150,000-15,000) / 7

Question 12

The most widely used depreciation method is

Answer 12

straight line method

Question 13

Two methods of accounting for uncollectible receivables are the…

Answer 13

allowance method

direct write-off method

Question 14

Dalton company uses the estimate based on analysis of receivables to account for uncollectible accounts. The company has determined that the Irish Company account is uncollectible. What is the journal entry to write-off this account?

Answer 14

debit ADA

credit AR-Irish co.

Question 15

The term cash includes:

Answer 15

cash checks
credit cards
cash, coins, currency
money orders, money on deposit

Question 16

When the three sections of a balance sheet are presented on a page in a downward sequence, it is called the ____

Answer 16

Report Form

Account form is the other way

Question 17

Equation for the straight line depreciation calculation.

Answer 17

(cost- residual value) / useful life

Question 18

Petty Cash (type of account and normal balance)

Answer 18

Asset, Debit Balance

Question 19

An estimate based on an analysis of receivables shows that $10,090 of account receivables are uncollectible. The allowance for doubtful accounts has a debit balance of $1,120. The adjusting entry at the end of the year will include a credit to Allowance for Doubtful Accounts in the amount of:

Answer 19

$11,210

Question 20

A machine with a cost of $200,000 has an estimated residual value of $8,000 and an estimated life of 10 years or 25,000 hours. It is to be depreciated by the units of production method. What is the amount of depreciation for the third full year, during which the machine was used 8,000 hours?

Answer 20

$61,440
Depreciation cost= (200,000-8,000)= 192,000
Total depreciation value / hours useful= (192,000/25,000)
=per hour rate = $7.68
(per hour rate= 7.68)(hours used=8,000)= 61,440

Question 21

Merchandise with an invoice price of $7,000 is purchased on September 2 subject to terms of 3/10, n/30, FOB destination. Freight costs paid by the seller totaled $400. What is the cost of the merchandise if paid on September 12, assuming the discount was taken?

Answer 21

$6,790
(97%)(7000)=6790

do not add shipping (seller responsibility)

Question 22

FOB destination

Answer 22

seller responsible for shipping

do NOT add to buyer

Question 23

Expected useful life begins…

Answer 23

at time asset is placed in service.

Question 24

Gross Profit

Answer 24

Sales- Merchandise Sold

excess of sales revenue is more than COGS

Question 25

The method of determining depreciation that yields successive reductions in the periodic depreciation charge over the estimated life of the asset is

Answer 25

Double Declining Balance Method

Question 26

At the end of the current year Accounts receivable has a balance $950,000. Net sales for the year total $5,000,000. Bad debt expense is estimated at 3/4 of 1% of net sales. The allowance for doubtful accounts has a credit balance of $55,000 after adjustment. Determine the net realizable value of accounts receivable.

Answer 26

$895,000 950,000-55,000=895,000

Question 27

A note receivable due in 18 months is listed on the balance sheet under the caption

Answer 27

Investments

Question 28

What is deducted from the balance per books on a bank reconciliation?

Answer 28

NSF checks, Bank errors, service charges

Question 29

balance "per books" means

Answer 29

company balance

Question 30

Businesses use the bank reconciliation as a method of

Answer 30

Internal Control

Question 31

Items that would be subtracted from the balance per bank on a bank reconciliation

Answer 31

outstanding checks

Question 32

Proper sequence for the steps in the accounting cycle:

Answer 32

1. Transactions 2. Post to Ledger 3. Trial Balance 4. Adjustment Data 5. Prepare Financial Statements 6. Journalize closing entries 7. Post closings to the ledger

Question 33

In recording the cost of merchandise sold for cash, based on data available from perpetual inventory records, the journal entry is:

Answer 33

debit COGS | credit MI

Question 34

Allowance for Doubtful Accounts- type of account and normal balance

Answer 34

Contra-Asset | Credit Balance

Question 35

Alternative names for Bad Debt Expense are...

Answer 35

Doubtful accounts expense | Uncollectible Account Expense

Question 36

The depreciation method that does NOT use residual value in calculating the first years depreciation expense is

Answer 36

Double Declining Balance

Question 37

A $140 petty cash fund has cash of $18 and receipts of $100. The journal entry to replenish the account would include a

Answer 37

debit Expense 100 debit Cash Short and Over 22 (118[cash left = 18 = 100 receipts]+?=140) credit Cash 122

Question 38

Cash Short and Over is used when

Answer 38

the cash fund or register is not in balance OVER: revenue (cr.) SHORT: expense (dr.)

Question 39

Maturity Value

Answer 39

(Face amount) + (Interest)

Question 40

Interest

Answer 40

(face amount)(rate)(time)

Question 41

A 90 day, %15 note for $15,000, dated May 1, is received from a customer on account. The maturity value of the note is

Answer 41

15,000+(15,000)(15%)(90/360)= $17258

Question 42

The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a

Answer 42

single step statement

Question 43

The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or year, is called a(n)

Answer 43

Income statement

Question 44

A machine with a cost of $85,000 has an estimated residual value of $15,000 and an estimated life of 3 years or 28,000 hours. What is the amount of depreciation for the second full year, using the double declining balance method?

Answer 44

Double declining rate = straight line x 2= (1/3) x 2 = 66% 66%(85,000)= 56,100 (depreciation exp for the 1st year) first year book value = (85,000- 56,100)= $28,900 66%(28,900)= $19,074 (2ND YeaR DEPRECIATION EXP!)

Question 45

When a buyer returns merchandise purchased for cash, the buyer may record the transaction using the following entry:

Answer 45

debit Cash | credit Merchandise Inventory

Question 46

On the balance sheet, the value of the accounts receivables is reduced to the amount that is expected to be collected; this amount is called __________

Answer 46

Net realizable value

Question 47

Formula for depreciation cost is

Answer 47

(Cost of Asset)- (Residual or Salvage)

Question 48

The retained earnings statement shows

Answer 48

Net income, Net loss, dividends

Question 49

The primary difference between a periodic and perpetual inventory system is that a

Answer 49

perpetual is updated each time inventory changes | periodic is once a year or once a period

Question 50

Which of the following is NOT a true statement about the accounting equation and its elements? a) the accounting equation is Assets= liab- SE b) Assets are the resources a business possesses c) Liabilities represent debts of a business d) examples of assets are cash, land, buildings, and equipment

Answer 50

a) The accounting equation is Assets= Liabilities- Stockholder's Equity

Question 51

Which fixed asset account will NOT have a related contra asset account?

Answer 51

Land (does not depreciate)

Question 52

A fixed asset with a cost of $50,000 and accumulated depreciation of $48,500 is sold for $4,500. What is the amount of the gain or loss on disposal of the fixed asset?

Answer 52

$3,000 50,000-48,000=1,500 4,500-1,500= 3,000

Question 53

Internal control policies and procedures consist of

Answer 53

1. Protecting Assets 2. Help managers achieve goals 3. Report accurate information

Question 54

After all of the account balances have been extended to the Balance Sheet columns of the work sheet, the totals of the columns show debits of $132,000 and the credits of $87,000. What is the amount of net income(loss)?

Answer 54

$45,000 = net income(loss) 132,000-87,000= 45,000

Question 55

Allowance for Doubtful accounts has a credit balance of $2,200 at the end of the year (before adjustment), and an analysis of customers accounts indicates doubtful accounts of $14,900. Which of the following entries records the proper provision for doubtful accounts?

Answer 55

debit BDE 12,700 credit ADA 12,700 ADA- credit 2,200; ADJ 12,700; bal. 14,900 *analysis method to calc estimate -> 14,900 in ADA at END of period means after the adjustment.

Question 56

When the amount of use of a fixed asset varies from year to year, the method of determining depreciation expense that best matches allocation of cost with revenue is

Answer 56

Units of Production Method.