ACCY201, Exam 3 Study Guide
ACCY201, Exam 3 Study Guide Accy 201
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This 5 page Study Guide was uploaded by Mallory McClurg on Sunday April 24, 2016. The Study Guide belongs to Accy 201 at University of Mississippi taught by Barton, Whitney in Spring 2016. Since its upload, it has received 17 views. For similar materials see Intro to Accounting Principles I in Accounting at University of Mississippi.
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Date Created: 04/24/16
ACCY201 FINAL EXAM STUDY GUIDE Chapters 8-10 Chapter 8 – Accounting for Long-Term Assets Plant assets – tangible assets used by a company for more than a year 4 main issues in accounting for plant assets: Computing the cost, or all necessary expenditures for getting the asset in place and ready for its intended use Allocating the costs of most plant assets (less and salvage amounts) against revenue for the period they benefit Accounting for expenditures such as repairs, maintenance, and improvements to plant assets Recording the disposal of plant assets Revenue Expenditures – income statement expenditures; additional costs of plant assets that do not materially increase the asset’s life or productive capabilities; ordinary repairs, for example: Date Repairs Expense ($$$) Cash ($$$) Capital Expenditures – balance sheet expenditures; additional costs of plant assets that provide benefits extending beyond current period; increase and improve the type or amount of service an asset provides; betterments/improvements: Date Machinery ($$$) Cash ($$$) Lump-Sum Purchase of Assets – when a group of assets is purchased together at one bulk cost; to allocate costs among assets in a lump-sum purchase: Determine total appraisal value of all assets Asset’s percent of total = Appraised value of an asset (land, building, etc) / gross purchase price Asset’s apportioned cost = asset’s percent of total (x) total cost Depreciation – process of allocating the cost of the plant assets to expense in the accounting periods benefitting from its use; accumulated depreciation is a contra-asset account with a normal credit balance; factors determining depreciation are: Cost – all reasonable expenditures to acquire and prepare goods Salvage value – estimate of assets’ value at the end of period Useful life – length of time it is productively used Straight-line depreciation – (cost – salvage value) / useful life in periods Units-of-production depreciation – Depreciation per unit = (cost – salvage value) / total units of production Depreciation expense = depreciation per unit (x) units produced in period ACCY201 FINAL EXAM STUDY GUIDE Chapters 8-10 Double Declining Balance depreciation – 100% / useful life = straight line rate 2 (x) straight line rate = double declining balance rate Double declining balance rate (x) beginning-period book value = Depreciation Expense Chapter 9 – Accounting for Current Liabilities Liabilities – past transaction or event that presents an obligation to make a future payment of assets or services; important concepts: who to pay, when to pay, how much to pay Current liabilities – short-term; obligations usually due within a year or at end of the company’s operating cycle Long-term liabilities – for example, notes payable, lease/warranty liabilities Sales Tax Payable – Date Cash (full amount) Sales (cost amount) Sales Tax Payable (tax amount) Unearned Revenue – amounts received in advance from customers for future products or services Date Cash ($$) Unearned Rev ($$) Date Unearned Rev (portion earned) Earned Revenue (portion earned) Short term note given to extend credit period – Date Accts Pay –customer (full amount) Cash (cash amount accepted) Notes Pay – customer (payable amount) Date Notes Pay – customer (payable amount) Interest Expense (interest amount) Cash (full amount) Short term note given to borrow from bank – Date Cash (full amount) Notes Payable (full amount) Date Notes Payable (owed amount) Interest Expense (interest amount) Cash (note amount w/interest) End of Period Adjustment – Date Interest Expense ACCY201 FINAL EXAM STUDY GUIDE Chapters 8-10 Interest Payable Date Interest Expense Interest Payable Notes Payable Cash Payroll Liabilities Gross pay = federal income tax + state and local tax + voluntary deductions + FICA taxes + net pay Recording payroll deductions for employees – Date Salaries Expense FICA – social security FICA – medicare Employee Fed. Income Taxes Payable Employee Union Dues Payable Salaries Payable Recording payroll deductions for employers – Date Payroll Taxes Expense FICA – social security FICA – Medicare State Unemployment Taxes Payable Federal Unemployment Taxes Payable Health and Pension Benefits (estimated) - Date Employee Benefits Expense Employee Medical Insurance Payable Employee Retirement Program Payable Vacation liabilities (estimated) – Date Vacation Benefits Expense Vacation Benefits Payable Bonus Plans (estimated) – Date Employee Bonus Expense Bonus Payable Contingent Liabilities – potential obligation that depends on a future event arising from a past transaction or event, such as guarantees or potential legal claims; if a future event is probable/possible and is able to be estimated, then its liability is recorded Chapter 10 – Accounting for Long-Term Liabilities Bond – issuer’s written promise to pay an amount identified as the par value of the bond with interest Par value of a bond – face value; paid at a specified maturity date ACCY201 FINAL EXAM STUDY GUIDE Chapters 8-10 Carrying value of a bond – value of a bond plus premiums or minus discounts Bond indenture – a legal contract between the issuer and bondholders and the discussion of how often interest will be paid Advantages of bonds – Don’t affect owner control Interest is tax deductible Can increase return on equity Disadvantages of bonds – Require payment of periodic interest and par value at maturity Can decrease return on equity Bond trading – securities that can be purchased or sold in the market; they have a market value which is a percent of par value Issuing bonds at par – Date Cash ($$$) Bonds Payable (par value) Semi-annual interest – Date Bond Interest Expense (interest rate x par value x time period) Cash ($$$) At maturity date – Date Bonds Payable ($$$) Cash ($$$) Issuing Bond at a Discount – Date Cash ($$$) Discounts on B/P (discounted amount) Bonds Payable (par value) Amortizing a bond discount – Date Interest Expense ($$$) Discounts on B/P (discounted amount) Cash ($$) Issuing Bond at a Premium – Date Cash ($$$) Premium on B/P (overage amount) Bonds Payable (par value) Amortizing a bond premium – Date Interest Expense ($$) Premium on B/P (overage amount) Cash ($$$) Issuance of a short-term note – ACCY201 FINAL EXAM STUDY GUIDE Chapters 8-10 Date Cash (full amount) Notes Payable (full amount) Date Interest Expense (interest amount) Interest payable (interest amount) (principle x rate x time) Date Notes Payable (full amount) Interest Expense (principle x rate x time) Interest Payable (principle x rate x time) Cash (full amount + interest)
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