Midterm 2 Study Guide
Midterm 2 Study Guide BA 215
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This 7 page Study Guide was uploaded by Amy Notetaker on Wednesday September 2, 2015. The Study Guide belongs to BA 215 at University of Oregon taught by ? in Spring 2014. Since its upload, it has received 89 views. For similar materials see Accounting in Business Administration at University of Oregon.
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Date Created: 09/02/15
Midterm 2 02172014 1 Know how to calculate the maturity value of a 90day note 0 Face value x 90 days360 x Interest Rate total of interest to be paid 0 Rates are always 360 only ratios are 365 Maturity value of interest face value 2 Know the name of the two methods of accounting for uncollectible receivables Allowance Method 0 Direct WriteOff Method 3 Know where the allowance for doubtful accounts is listed on the balance sheet Allowance for doubtful accounts is listed under Assets D Current Assets and ContraAsset account 0 Associated with accounts receivable o Accumulated Depreciation is also a contra asset account under long term assets 4 Given accounts receivable and allowance for doubtful accounts balances be able to calculate net realizable value of accounts receivable Net realizable value for Receivables NRV Accounts receivable allowance for doubtful accounts 5 Know what type of account the allowance for doubtful accounts is 0 Operating 6 Be able to calculate and record the adjustment provision for doubtful accounts using the accounts receivable analysis method 0 Accounts receivable analysis method adjustment ending value beginning value 0 Hits ADA and RE negatively 7 Be able to calculate and record the adjustment provision for doubtful accounts using the sales method 0 A L E AR ADA RE bad debt expense 0 of sales method Adjustment net sales given x percentage of sales given 8 Know how to record a transaction to write off an account under the allowance method 0 A L E 0 AR ADA RE 0 9 Know which inventory cost method is where the merchandise is sold in the order the expenditures were made FIFO selling it in the order that it was purchased purchased rst sold rst 10 Know how to calculate ending inventory value using FIFO Jan 15 for 2 Feb 10 for 3 July 10 for 4 End Inventory 9 items left 9 items left are 4 each because it was the last bought so it is the last to be soldleft in inventory Cost of Merchandise in Inventory 9x4 11 Know how to calculate cost of merchandise sold using FIFO 15x210x31x4 Cost of Merchandise Sold 12 Know how to calculate ending inventory value using LIFO Jan 15 for 2 Feb 10 for 3 July 10 for 4 End Inventory 9 items left 9 items left at 2 because it was the rst bought so it is the last to be soldleft in inventory Cost of Merchandise in Inventory 9x2 13 Know how to calculate ending inventory value using average cost method Jan 15 for 2 Feb 10 for 3 July 10 for 4 End Inventory 9 items left 15x210x310x4 100 for 35 units so 10035 average price per unit Average price per unit x ending inventory total inventory cost 14 Know how to calculate ending inventory value using lower of cost or ma rket 0 Sales Price 20 Replacement Cost 14 D Market Cost Inventory Cost 10 Lower Cost of market is 10 because Inventory cost is lower than Replacement CostMarket Cost 15 Know which section of the balance sheet merchandise inventory is reported Assets D Current Asset Should be used in 1 year 16 Know which costs get included for land acquisition and calculate the cost of land 0 Be able to identify those that are positive or negative 0 quotMaterials salvaged from demolition of the buildingquot is negative Paying a contractor is not part of land acquisition 17 Know the de nition of capital expenditure Pg 254 0 Money spent to improve an asset should bene t more than one period of time 0 Revenue expenditure operating expense that only bene ts at one point of time 18 Recognize an example of a capital expenditure Replacing engines of a car 0 Adding a lift to a truck 0 Expansion of a building ex Hospital expands ability to make revenue 0 Bene ts more than one period of time 19 Know how to calculate book value 0 Book Value Cost what the company paid for it Accumulated Depreciation 20 Know how to calculate depreciable cost Depreciable Cost Cost what the company paid for it Residual Value 21 Know what accounting depreciation measures Depreciation is an allocation of a xed asset39s cost to expense over the asset39s useful life Thus the book value of a xed asset cost less accumulated depreciation usually does not agree with the asset39s market value This is justi ed in accounting because a xed asset is for use in a company39s operations rather than for resale Depreciation does not measure a decline in market value of a xed asset Depreciation does not provide cash to replace xed assets as they wear out 22 Know how to calculate annual depreciation expense using straight line method Depreciation Expense Depreciable Cost years of life 23 Know how to calculate depreciation expense using double declining balance method for year 1 Depreciation Expense Cost Accum Depreciation x 2 x Straight Line 24 Know how to calculate gainloss on disposal of asset if given cost accumulated depreciation and sales price Costdepreciation nd difference between sales price 25 Know what the main trait of an intangible asset is o It is not physical 26 Know that xed assets are shown in the balance sheet at cost less accumulated depreciation Fixed assets cost accumulated depreciation 27 Know the time frame that a current liability is expected to be repaid within 0 1 year 28 Know how to calculate the maturity value of a 120 day note 0 Face value x 120days360 x Interest Rate total of interest to be paid Maturity value of interest face value 29 Know when contingent liabilities are required to be recorded 0 When it is probable and estimable 30 Know what bonds sell at if contract rate gt market rate 0 If contract rate exceeds market rate it sells at a premium 31 Know how to calculate cash received from bonds issued at 102 o 5 million selling at 102 o 5 million x 102 cash received from bonds 32 Know what is included in stockholders equity 0 Paid in capital treasury stock retained earnings regarding dividends 33 Be able to calculate the shares outstanding common stock if given shares originally issued and shares reacquired Shares Outstanding Originally issued shares shares reaquired Know how to record stock issuance when price is greater than par value 35 Know the date when a dividend liability gets recorded 0 1 Date of declaration When it gets recorded 0 2 Date of Record 0 3 Date of Dividend Payment 36 Be able to calculate earnings per share if given 1 common shares outstanding 2 preferred stock dividend 3 net income 0 Net Income Preferred Dividends Common Shares Outstanding Be able to calculate earnings per share if given 1 net income 2 shares authorized 3 shares issued 4 shares outstanding Earnings per share Net income dividends Number of common shares outstanding 38 Know de nition of horizontal analysis Pg 324 0 Financial analysis that compares an item in a current statement with the same item in prior statements 39 Know de nition of common sized statements Pg 328 o A nancial statement in which all items are expressed only in relative terms 40 Know what pro tability of a business refers to pg 336 Pro tability analysis 0 To earn pro ts 41 Be able to calculate times interest charges are earned Income before taxes Interest Expense interest expense 42 Know what the quick ratio is o A nancial ration that measures the ability to pay current liabilities with quick assets cash marketable securities accounts receivables Quick AssetsCurrent Liabilities Quick Assets Cash Temporary investments Net Accounts Receivable Net accounts receivable receivables allowance for doubtful accounts 0 What are current assets Current Liabilities 0 Current liability Accounts payable notes payable unearned revenue unearned rent wages payable health care 0 Current Assets cash temporary investments accounts receivable inventory 43 Be able to calculate accounts receivable turnover 0 Net SalesAvg Accounts Receivable 0 Avg Acct Receivable Beg AR End AR2 0 Net Sales Salesdiscountsreturns 44 Be able to calculate of days39 sales in accounts receivable Avg Acct Receivablenet sales365 45 Be able to calculate the inventory turnover COGSAvg Inventory 0 Avg InventoryBeg Inven End Inven2 46 Be able to calculate the of days39 sales in inventory 0 Avg InventCOGS365 47 Be able to identify current assets and current liabilities and calculate working capital 0 What are current assets Current Liabilities 0 Current liability Accounts payable notes payable unearned revenue unearned rent wages payable health care 0 Current Assets cash temporary investments accounts receivable inventory 0 Working capital current assets current liabilities 48 Be able to identify current assets and current liabilities and calculate the quick ratio 0 Current liability Accounts payable notes payable unearned revenue unearned rent wages payable health care 0 Quick Assets Cash Temporary investments Net Accounts Receivable Net accounts receivable receivables allowance for doubtful accounts 49 Be able to calculate a priceearnings ratio and how many times the common stock was selling compared to earnings per share 0 Market Price per share of common stockannual earnings per share 50 Know what the purpose of an audit nancial statement audit is 0 To get an Opinion on the Fairness and Accuracy of the nancial statements
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