ACC 131 Seipp Final Exam Study Guide
ACC 131 Seipp Final Exam Study Guide ACC 131
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This 7 page Study Guide was uploaded by Daniel Hemenway on Thursday December 3, 2015. The Study Guide belongs to ACC 131 at Illinois State University taught by Edward Seipp in Summer 2015. Since its upload, it has received 70 views. For similar materials see Financial Accounting in Accounting at Illinois State University.
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Date Created: 12/03/15
Accounting 131002 Final Exam Chapters 19 Please note that the final exam may include some or all of the following topics Although this study covers the majority of the exam it may not be all inclusive The final exam has 32 conceptual multiple choice questions and 8 computational multiple choice questions Seven questions are from Chapter 9 the other 33 questions are from Chapters 18 Know the accounting equation and be able to manipulate it into various forms Assets Liabilities Stockholders Equity Stockholders Equity contributed capital retained earnings Retained earnings Beginning ret Earnings net income dividends Assets Liabilities cont cap beginning ret Earnings net income dividends Which financial statement is for a specific date specific point in time Balance Sheets What is the definition of a current asset and a current liability Current Assets Cash and other assets that are expected to be converted to cash within 1 year or 1 operating cycle whichever is longer Current Liabilities obligations that will be satisfied through the payment of cash or by providing goods or services within one year or the operating cycle whichever is longer What is historical cost A principle that requires the activities of a company to be initially measured at their cost the exchange price at the time the activity occurs At what value is property plant and equipment reported on the balance sheet At book value historical cost accumulated depreciation 0 What is a journal ledger Taccount and trial balance Journal Chronological record showing the debit and credit effects Ledger Collection of financial statement accounts TAccount T chart showing both a left and right side The left Debit DR and the right Credit CR 0 What is the definition of a debit and a credit Debit The left side of a Taccount alternatively debit may refer to the act of entering an amount on the left side of an account Credit The right side of a Taccount alternatively credit may refer to the act of entering an amount Deb DR E A L E R Credit CR I x s I Q E v P s A u v I E E B I E D N T 39 T N E s 5 IL Y u N E T E o s I 5 E s 0 Know the normal balance for assets liabilities equity dividends revenues and expenses Assets DR Liabilities CR Stockholders Equity CR Dividends DR Revenues CR Expenses DR What is the revenue recognition principal Revenue is recognized when it is earned When it has not yet been earned it is put in an quotUnearned Revenue account Be able to prepare accrual and deferral adjusting entries A threestep procedure can be followed for making Adjusting journal entries Step 1 Identify pairs of income statement and balance sheet accounts that require Adjustments Step 2 Calculate the amount of the Adjustments based on the amount of revenue that was earned or the amount of expense that was incurred during the accounting period Step 3 Record the Adjusting journal entry What are accrued expenses prepaid expenses accrued revenue and unearned revenue Accrued Expenses Previously unrecorded that have been incurred but not yet paid in cash Prepaid Deferred Expenses Assets arising from the payment of cash which have not been used or consumed by the end of the period Accrued Revenues Previously unrecorded revenues that have been earned but for which no cash has yet been received Unearned Deferred Revenues Liabilities arising from the receipt of cash for which revenue has not yet been earned When preparing a bank reconciliation what are credit memos debit memos deposits in transit NSF checks and outstanding and how are they shown on the bank reconciliation Credit Memo Increase in Account Balance Debit Memo Decline in Account Balance Nonsufficient Funds NSF Check that has been returned to the depositor because funds in the issuer s account are not sufficient to pay the check bounced check Less NSF Checks Outstanding Check A check issued and recorded by the business that has not been cashed by the recipient of the check Cause the bank balance to be higher than the business s cash account balance Less Outstanding Checks Who is according to the SarbanesOxley Act primarily responsible for internal controls in a company Responsibility is with management What account is used to record the difference between what a cash register shows and what is actually deposited Cash Over and Short Be able to read and interpret different sales terms such as 210 n30 115 neom etc Seller who expects payment in 30 days and offers a 2 discount if payment is made within 10 days would have the notation 210 n3O which is read 210 net 30 EOM End of Month What are sales returns sales allowances trade discounts sales discounts Sales Discount A price reduction usually expressed as a percentage of the selling price that companies may offer to encourage prompt payment Trade Discount Reduction in selling price to a certain class of customers Sales Returns Sending back items received that were defective or were the wrong items Sales Allowance A price reduction offered by the seller to induce the buyer to keep the goods when the goods are only slightly defective are shipped late or in some other way are rendered less valuable What type of account is Allowance for Doubtful Accounts Contra Asset What are the differences between the percentage of sales method and the aging of receivables also called percentage of receivables method of estimating bad debt expense Direct WriteOff Method Record account as an expense at the time of the writeoff when it s deemed uncollectable Since accounts are often determined to be uncollectible in accounting periods subsequent to the sale period the direct writeoff method is inconsistent with the matching concept Can be used only if bad debts are immaterial under GAAP Percentage of Credit Sales Method Using past experience a company estimates the percentage of the current period s credit sales that will eventually become uncollectible Total Credit Sales x Percentage of Credit Sales Estimated to Default Estimated Bad Debt Expense Aging Method Bad debt expense is estimated by determining the collectability of the accounts receivable rather than by taking a percentage of total credit sales At the end of each accounting period the individual accounts receivable are categorized by age How is cost of goods sold calculated Beginning Inventory Purchases Cost of Goods Available for Sale COGAS Ending Inventory Cost of Goods Sold Be able to calculate cost of goods sold and ending inventory using FIFO and LIFO in a perpetual inventory system FIFO The earliest purchases the first in are assumed to be the first sold the first out and the more recent purchases are in ending inventory Under the LIFO method the most recent purchases newest costs are allocated to the cost of goods sold and the earliest purchases oldest costs are allocated to inventory Which inventory method results in higher ending inventory andor higher cost of goods sold in a period of rising prices Use an example Bought CM EI COGS 7 Inc Prices FIFO 8 7 8 LIFO 7 8 10 Dec Prices FIFO 8 10 8 LIFO 10 8 What does the company have to use if the market value of inventory has declined below its cost Lower of cost or market LCM Under LCM if the market value replacement cost of a company s inventory is lower than its cost the company reduces the amount recorded inventory to its market value What information is need to calculate depreciation Original value salvage value and estimated useful life Be able to calculate depreciation using the straight line double declining balance and units of activity methods StraightLine Depreciation Cost Residual Value Expected Useful Life StraightLine Rate 1useful life Double Declining Balance Method 2 x straightline rate Previous rate x book value accumulated depreciation Units of Production Method Depreciation Cost per Unit Cost Residual Value Expected Usage of the Asset What is the definition of longterm debt Obligations that extend beyond one year When do bonds sell at a discount par or at a premium Par Market Rate Yield Stated Rate when they are the same Discount Market Rate Yield gt Stated Rate Premium Market Rate Yield lt Stated Rate How is the Discount on Bonds Payable account shown on the balance sheet Contra Liability How is the current portion of longterm debt shown on the balance sheet Current Liability Be able to calculate interest on bonds sold at a discount using the effective interest method Interest Payment IP Par Value x Rate x Time Interest Expense IE Carrying Value x Market Rate Yield x Time Carrying Value Par Discount OR Par Premium Interest amortization is the process used to determine the amount of interest to be recorded in each of the periods the liability is outstanding What are the different terms used to describe the interest rate printed on a bond certificate Stated Rate Face Rate or Contract Rate Market Rate or Yield
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