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Management 1A- Exam 2 Study Guide

by: Daniel Ochs

Management 1A- Exam 2 Study Guide Management 1A

Daniel Ochs

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Study Guide for Exam 2 and Spring 2015 Exam.
Principles of Accounting
D.S. Litt
Study Guide
Management, Accounting
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This 11 page Study Guide was uploaded by Daniel Ochs on Thursday May 5, 2016. The Study Guide belongs to Management 1A at University of California - Los Angeles taught by D.S. Litt in Spring 2016. Since its upload, it has received 114 views. For similar materials see Principles of Accounting in Business, management at University of California - Los Angeles.


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Date Created: 05/05/16
Management 1A- Exam 2 Study Guide Chapter 5 [Page 155- 200] - Cost of Sales: product costs as well as any cost of transporting - Depreciation and Amortization: straight-line method over the estimated useful lives of various assets - Income Taxes: accounted for under asset and liability method - Revenue Recognition Criteria • Revenue should be recognized only when earned and realized/realizable • Revenue Sources - Revenues arising form operations - Gains arising from the sale of assets - Non operating income • Expense (or loss) Recognition - Criterion - Sources of costs and expenses - Impact on shareholders’ equity - Recording expenses in an accrual system - Net Income = Revenues (Gains) - Expenses (Losses) - Issues in Earnings Management • Ways to improve earnings: recognize revenues early, recognize expenses late, or realize one-time gains • Ways to decrease earnings: recognize revenues late, recognize expenses early, or realize one-time losses • Ways to appear big (or grow fast): - Wash sale: transaction that is nullified by its reversal or offset - Barter exchange: type of trade - Income Statement Basic Format • All-Inclusive Approach: all changes in equity during a period • Modified All-Inclusive Approach: excludes equity changes from non-owner sources - Components of Income Statement • Single Step [Page 175] • Multi-Step [Page 176] - Discounts and Terms • Quantity discounts: for purchasing various qualities • Purchase discounts: early or prompt payment • Credit terms: contains term of discount and invoice due date - Financial Analysis of Income Statements • Percentage Analysis: reducing related amounts to a series of percentages of a given base • Horizontal Analysis: proportionate change in financial statement items over a period of time • Vertical Analysis: expression of each item on a financial statement over a period of time Chapter 6 [Page 201- 238] - Cost Flow Assumptions • First-In, First-Out (FIFO): cost of goods sold = cost of oldest available units • Last-In, First-Out (LIFO): cost of goods sold = cost of most recently purchased units • Average Cost: cost of goods sold = per-unit weighted average cost - Begging Inventory + Net Purchases = Merchandise Available for Sale = Ending Inventory + Cost of Goods Sold - LIFO Reserve = Ending Inventory (FIFO) - Ending Inventory (LIFO) = Cumulative difference in FIFO - LIFO inventory • LIFO Reserve = COGS (LIFO) - COGS (FIFO) - Assessing Inventory Management • Inventory Turnover Ratios - Purpose - Times Inventory Turnover = COGS / Average Inventory - Days Inventory Turnover = 365 days / Times Inventory Turnover - Estimation of Ending Inventory • Gross Profit Method: based on cost of goods sold computation - Estimates inventory without counting anything (much faster and easier) - Gross Profit Method= Beginning Inventory + Net Purchases - Cost of Goods Sold • Retail Method: company must keep track of cost and retail of inventory - Determine Cost of Goods Sold at Retail Price - Determine Cost of Goods Sold at Cost Price - Determine Cost to Selling Price Ratio - Solve for Ending Inventory at Cost - Consignment sales: goods sold by others - Perpetual vs. Periodic Inventory • Perpetual: maintains a continuous record for each inventory item • Periodic: inventory account is not updated when inventory is sold - Net Purchases = Purchases of Inventory - Purchase Discounts - Purchase returns and allowances - Installment Sales Method - Long-Term Contracts • Percentage of Completion Method • Completed Contract Method Chapter 7A [Page 230- 238] (Not tested) - Special Journals to make accounting easier and faster • Sales Journals Cash Receipts Journal • • Purchases Journal • Cash Disbursement / Payments Journal - General Journal • Voucher System: ensures that expenditures are properly authorized Chapter 7 [Page 239- 245] - Control of Cash - Balance Sheet Presentation: cash is a current asset - Management of Cash - Internal Control: management maintains control over all assets and liabilities - Bank Reconciliation: determines balance on bank statement • Balance Per Bank Records = Balance Per Books - Petty Cash: a way to pay for those little expenditures that come up all the time Management1A e DannynS.itt rc H u e EXAM 2 s o rs Sectiono:Ire ou agthmyepbSyuNCmber (Signatude)aNumber) Name: tu i s2ooints is ed h ar T h s M,lN.c,crcurNr 1A Exau2 statemeMarkouansweonyouSCANTRON. Writename and section number on this testawelasonyouSCANTRON.Youmausethtestapasscratcheand writoitamuchasouwish.) Turn examndturnthe SCANTRwhen finished. Chapte5 e t.Merchandinventconsiofsroduthaacompany acqtresetcustomeIs. c 3.Grossrofis alsoledomargin.^Tianselling merchtndise. r 4.Cosofgoodsoldalscalledofshes.'f H 5.A wholesisanintermethat buysdufrommanufactorother whulesalers e 6.Usingllgllowingr-einformatiBreanBoutiqucalcuthe current ratio andatiBtddffothe boutique: o s Cash......... $52,0001 s r Accounreceivable.s...... 54,00]\ Inventory. ....;.. 325,000l e u Prepaipayable.s. ...;......17,500-J r o Other currentbles. 125,000 A.1.andI fr*- 4 C.2.73ndl.52.52 y C and 0.90 E. Nonofhe choiccorrect d a 7.A company'ssqrgw-as83,75ud itssalwei$347,800.rossmarratio A.4.2%. t @z+.t't". @#rye-ceEq v c.7s.9%. s D.$264,050. (8t Acompany'ss€Ies--1ryereJ626of00,S_s4ily_gl$anditnet income V *u,$::,2!0.sismargin eatios: Mof 8.9.6%. r Nq, c.3s%. h 4:q,qc r @sxr** a \r'* 8.2T5.7%. 9.{LZNrcadiscounthe amountiwithindays, or balduein0 days. B.l0%ass discount amountiwithinayorthe balanin30 days. C.30discouifaiwith10days. 8.2%iscouifaiwith30days. Pagel2 M.q.N.rcBm1Ar Ex,q2Nr 10A trade discount is: N ltermusebyapurchatodescracasdiscountvetcustomeforrompt Davment. inricbelothlistice. @C.Atermusedya seltdescriacash discounttocustomeforrompt e payment. E.Alscalledcbate.rromptpayment. c 11A companusetheerpetinventsystem and recorfollowentry: r H AccounPayable. 2,590 - Mer-efimtliSelrwerftoTy:.:......50..... u e Cash. ....... 2,450 s 'APurchaofmerchandoncredit. o r B. Retofmerchandise. s C. Saofmerchandise on credit. u @E. Paymeothe accountabanrecognitianl%o cdiscount taken. \/12A debit memorandum is: r o \ -X ri.qriwhenevaroumaentryrecorded. Lrat {'fLae4. - )/rfr.ourcecumenfothe*"-huomerchandiinventory. " C. Redocumeabuyer isto infthe seotate"bYfmAdee sellaccouin Vehbuyer'scords. dft ,,,*2PNotnecessaryinaperpetualinventorysystemawDti;suap^* W Chapte6 u i 13. Goodtransitautomatiintludin invenfiry. 14partcalledconsignor.dshippedtheovner, called the toanother, 15Ifobsolete or damagedbe sold, thbeincluded in iatthenet realizvalue"f tOlfthe sellerspsnforleinfreicharges, ownership of inventory whengoodarriitheirestinatfon. 17Netrealizableforluegeor obsoleteissalesipluthe cofmakinghe sale. ? h incluits invcosminuanyiscouandpluany 18added incidentaas necessaryinaplaandconditiosal'rT: 1g.$TrchandiseinventoryincludesFs14naaypr^lrl 'Dt'61p";54''*"- h acompanv andror'sai5' Stl il:$:,""T#,|.l il*E' "Mrdrf C.Alloods consignmentrry" !*w ,u,[Jo SSHf##j*il, a^uny 20. Gooin transitcludea inchasinventory: A Atanytime dutransit. \EWhen thsupplier respofsr freightges.arges. }(itfegoodare shippeddestination. E.Afterhhalf-wayibetween b,uyerdeller. PagI M.q.NacrNrE1A Ex,qu2 21.GoBdson consignment: @a\t" goodsshippby the owntothe consigwho sells thedsfotheowler. ,KAre reportinthe consignbooksasinventory. C.Aregoodshippetotheconsignwho sells thedsfotheowner. D. Arnot reporinthconsignorinventosinctheydo nohaveossessiofthe e E.ventory.paid 22.Physiccountof inventory:nsigwhen thetakepossession c necessary untheperpetusystem. r -@rei'Arnecessatoadjust Inventoraccouto the actinventoavailable. H C. Musbe taken at leaatmonth. D.Requires useofhand-heldrtablcomputers. u e E.Arenotecessarunder the cobenefconstraint. s 23.OnDecember31ofthe currentrHewettCompany reporan endininventobalance of$215,000.efollowinadditional inforis also availabls: r 2\4-oo.r 'Hewetsoldoodscostin$zu00 to TrumEntp4p;i shipped the **1q6ro9 oodson hadaetwih hipingermsoff(ffihlpnug&oirfl"feobdsbiehotinuluded ithe endiinventoamountof$215,000ecausthey wernot Hewett'warehouse. 'Hewetturchased gocostinS.44*qpp Decembe29.Tregoodsweresoipped FOB wasarush order that was stoarribygDecemberefollowgoodsThe shipment the endinventorbalanof$J15,000. 31. These wereincludein 'Hewett's eninventorbalanco$215,000nclude$1S*0-BPgoodsbeinhgu$orr onsgnmentrom Rumsfldcompany.(HewetCompany i;tJcnsgneer. , 'Hewett's eninventorbalanco$215,d00idnot includeodcostin$9,5,000affi-n(* were shipto Heweton December withshipping tafEQB dest-inationviereW-Ar; stillransatyear-end i 'ti*to Baseontheaboverorratur,hetuucutsLurgiuErtry {lleullbgr1Is.: - _"4. A.$194,000 t {ie&"t,, B.$209,000 v c.$200,000 s n. $171,000 ,-H,it';:,i:eintheMerchandiInv-entory accouninclude athefollowiexcept: A. InvoiceicminurunyaGffi. fTransportation-in. e Efstorage. r bf Insuranc.. @amaged inventoahat carursold.-Nf ' 25.Durinaperioofsteadirisincosts, inventory valuatioq:thatrodthe lowest reportene[jfrgois: f-eq,c A. Specificentificamethod. co}.a'(l''"['r't B. Averaseosmethod. C. Weighted-averageod. D.FIFO method. 26.The inventory valmethod that ttosmootouterratic chaincosts is: A. FrFO. G)ileightedverage. C.LIFO. D.Specificentification. EWIFO. Pag4 | M.q.NA,cBNmnr 1A Ex,c,N,I2 27.T\inventory vamethod thathe advantofssigniaamounto inventory onthfomostbusinessesoximitcurrent cost,mimictheactufloof \A/FIFO. B. Weighted average. e C.LIFO. E.Alofthenventvaluatmethodaccomplish this. c 28Theinventoryuatmethod tresuinthe lowest taxabinaperiof r H inflatis: @B.FIFOmethod. u e C.Weighted-average cost method. s D.Speciidentificmethod. o r E. Grossomethod. s 29Accounting information process u orgarithemnusefreports,commuricresutodecisimakersts and events, 30Accountiinformasystems saccurate that makerinractioonot need abasiknowledofowthe systworkI 31compatibility,ipoaccountinformatsystemscontrocompetency, 32Intercontrincludelicitdireoperatitowacommongoalprocedures to ensureliable fireports, saftouardcompanasseand methods to 7*-achieve complwitlaws andulatioIs. a {_33,,aLatin Amersegment hadureof$2,089iliooperatin-gin$-1-,033 milliand averasseof$1,4t3llion. "-,-.o-n:,^*,./t*r-.r',ey;*:fu-e 8.69.0% v ,1..{ tw,Jr",e"* =VrEg:N60/o* s E.144.\o/v- 34.henthsalesourscolumn faccounts recandsalitotalathe eofthe month, totisi A.DebittoSales and ctoAecounReceivable. */p tr*J-r*g C. DebitoCash and crtoAccounts Receivable. AccouReceivable and toSales.--- &:' E.TDebitoCash and crtoSales. 3,Th.AccountshPayableintheuntrledger is: (E lcontrolaccontrolspurch.4sesal.,yable ledger. C. The subsidiaryttheurchasesurnal. u wb'rV B.r* oaspecialurnal. &/P Y. P* oasubsidiary ledger. 36.J\"urchasesmais usforecording: ( C. Casales. D.Cashurchases. Pagi M,c.N.acr1Arnxr Ex.q2u 37. Whenmpanuses specialthegeneralris usfoselected transactions and evincluding: * @k ecording adjustlnjournals. )eAccumulatdebits and credits e .-D.llectdetailistofamounts. SRecordingsh receipts. c GrC.neraledger.aaccountsiamountoacompanis the: r H BGeneralurnal. 1d.pecijournal.r. u e *EColumn balanceer. o s ledger: r Includes trannocoverbyspecialmals. s alisting of accountsamounwitacorlmcharacteristic. -*{.Q,also calledrledger. r -:pE. Is alsaspecialrnal. o Chapt8r 40performa-fe.edtecontrsysteakeypyofsystemC designandnalysis, 41. usof intemaltrolsvidesranprotectagainst dutooperating activitietr d a vo-\*tr 42.Maintuadequate recoimpurtant intimalincipTe. 43. Printernal means thttonsifortaskclearlytabland assigned to onepefson. v 44. Technoloacash registers, checkmclocandersoidentification scannerimprovetercontrJl. 45APostage stamps.equivalents, includes: -t-eoicurrency,heckiaecounts. D. Twohyear ceofificates EMoneymarketnds. 46. Cash eouivalents: G-ar.,hort-h.rrnliquidestment assets. C.nclucheckingounts. D. Arecordedetcash- E.nclumoneyrders. 47AAaliofutstandingks:/ BA list ofcash amounts. Cg)fh,"begi'nni"ge endinofbalanceositor's\--,- EAllofhe choicesincludebanktatement. Pa|e 6 48. Preabankgconciliationhlyis is anf: Exam2 A.Establishingsibility. B.Separassetsrovaccurofysrecords. D. A technological e E. Pinternalrol. c 49TCasinank accountaualu9ohnManufaItC-UII$6,4s5 r Inventorytastamps Money markbalance $12,40u, e NSchecksocustomers byturned {,01-r s Postdated checkscustomers -$"'39r- r Moneorders maturongecembeof31 $8.000"? currentronth certificate e u Based ons information,facturingnyrurepCashoand Cash X$ts,ooznts30f: JA$zo,t+o (asrq.z--- y C G/srs,aoz d 50.ir4"ur*emanyyosalesmainthenofthear. B.Determinenumber-yst havewithcgllgoningounts receivable. LJdentifyikelihir'irt.iir"fr"i;a;r'ie?oiesivable is receiicash'iiiii"si*. " /..* s d i e h r a T h s PagelT


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