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Accounting 210 > AC210 Test 3 > Flashcards

AC210 Test 3 Flashcards

1
Q

`Cost of Goods Sold is what kind of account?

A

Expense.

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2
Q

What is ending inventory?

A

EI = BI + purchases - COGS

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3
Q

What is COGAFS?

A

Cost of Goods Available for Sale: Everything that we could sale.

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4
Q

Gross Profit is…

A

Gross Profit = Net Sales - COGS

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5
Q

If we sell it, it goes to what?

If we don’t sell it where does it go?

A

COGS.

Just sits in inventory.

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6
Q

What are the 4 methods of calculating COGS?

A

Specific Identification
FIFO
LIFO
Weighted Avg. Cost

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7
Q

When would you use specific identification?

A

On high dollar, low volume, unique goods. This doesn’t work for Walmart. Only works for antiques, where there is just one of something.

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8
Q

What does FIFO mean?

A

First in, First out.

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9
Q

What does LIFO mean?

A

Last in, Last out.

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10
Q

In times of rising prices, which method will you always have higher expenses?

A

LIFO

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11
Q

If you wanted a high recorded income, which method should you use?

A

FIFO

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12
Q

How does the WAC method work?

A

Average the cost of the goods. This will always give you a result between LIFO and FIFO.

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13
Q

Beginning Inventory: 10 units at $7.00
Purchase: 30 units at $8.00
Purchase: 10 units at $10.00
Sold: 35

a. What is the cost of goods available to sale?
b. What is the number of units in ending inventory?

A

a. $410

b. 15

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14
Q

Beginning Inventory: 10 units at $7.00
Purchase: 30 units at $8.00
Purchase: 10 units at $10.00
Sold: 35

Under FIFO:

a. What is the cost of goods sold in $?
b. What is ending inventory in $?

A

a. $270.00

b. $140.00

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15
Q

Beginning Inventory: 10 units at $7.00
Purchase: 30 units at $8.00
Purchase: 10 units at $10.00
Sold: 35

Under LIFO:

a. What is the cost of goods sold in $?
b. What is ending inventory in $?

A

a. $300.00

b. $110.00

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16
Q

Beginning Inventory: 10 units at $7.00
Purchase: 30 units at $8.00
Purchase: 10 units at $10.00
Sold: 35

Under WAC:

a. What is the cost of goods sold in $?
b. What is ending inventory in $?

A

a. 287

b. $123

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17
Q

With rising costs, which method has the lowest net income?

A

LIFO

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18
Q

With rising costs, which method has the lowest ending inventory?

A

LIFO

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19
Q

With declining costs, which method has the lowest net income?

A

FIFO

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20
Q

With declining costs, which method has the lowest ending inventory?

A

FIFO

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21
Q

With rising costs, which method has the highest expense?

A

LIFO

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22
Q

When do you write down inventory?

A

When market price falls below inventory.

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23
Q

What will a J.E. look like always for a write down if market is lower?

A 
dr cost of goods sold (+E, -SE)
   cr inventory (-A)
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24
Q

What is the inventory turnover ratio? and what does it mean?

A

COGS/Avg. Inventory (sells) during the period.

  • higher ratio, faster turnover.
  • number of times inventory turns over
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25
Q

What is the Days to Sale ratio? and what does it mean?

A

365/inventory turnover ratio.

  • average number of days from purchase to sale.
  • higher number, longer time to sale.
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26
Q

50 alligator costs $30.00 and the market is $24.00.
400 elephants costs $15.00 and the market is $12.00
What is the total write down and J.E.?

A

Total write down is: $1500
J/E:
dr COGS 1500
cr inventory 1500

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27
Q

How do you find the total write down cost?

A

Take the difference of the cost and market and multiply it by the number of units. then add them together.

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28
Q

What is an advantage of giving credit?

A

increase the seller’s revenue

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29
Q

What are disadvantages of giving credit?

A

Increase wage costs.
Bad debt
Delayed receipt of cash

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30
Q

On 1/1 we record the revenue.
On 1/31 we record estimates of bad debt.
Now that we know of the bad debt, we debit the allowance for doubtful account.

A
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31
Q

What is the Income Statement Approach? How does it work?

A

Percentage of Credit Sales method.

Take all credit sales and multiply it by a percentage of bad debt losses.

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32
Q

What is the Balance Sheet Approach?

A

Aging of Accounts Receivable.

Take all A/R and divide if in a bucket based on age: 0-30 days, 31-60 days, 61-90 days, over 90 days.

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33
Q

What does the calculations from the Aging of A/R method result give you?

A

the desired ending balance in AFDA.

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34
Q

What does the calculations from the Percentage of Credit Sales result give you?

A

the desired ending balance in BDE.

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35
Q

Interest formula:

A

I=Prt

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36
Q

Chapter 7, MC question 1.

A

C

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37
Q

Chapter 7, MC question 2.

A

D

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38
Q

Chapter 7, MC question 3.

A

D

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39
Q

Chapter 7, MC question 4.

A

B

40
Q

Chapter 7, MC question 5.

A

D

41
Q

Chapter 7, MC question 6.

A

D

42
Q

Chapter 7, MC question 7.

A

C

43
Q

Chapter 7, MC question 8.

A

C

44
Q

Chapter 7, MC question 9.

A

C

45
Q

Chapter 7, MC question 10.

A

B

46
Q

CH. 8 MC #1

A

D

47
Q

CH. 8 MC #2

A

B

48
Q

CH. 8 MC #3

A

B

49
Q

CH. 8 MC #4

A

D

50
Q

CH. 8 MC #5

A

C

51
Q

CH. 8 MC #6

A

D

52
Q

CH. 8 MC #7

A

C

53
Q

CH. 8 MC #8

A

B

54
Q

CH. 8 MC #9

A

D

55
Q

CH. 8 MC #10

A

D

56
Q

Chapter 9, MC 1

A

D

57
Q

Chapter 9, MC 2

A

D

58
Q

Chapter 9, MC 3

A

C

59
Q

Chapter 9, MC 4

A

C

60
Q

Chapter 9, MC 5

A

D

61
Q

Chapter 9, MC 6

A

A

62
Q

Chapter 9, MC 7

A

D

63
Q

Chapter 9, MC 8

A

B

64
Q

Chapter 9, MC 9

A

D

65
Q

Chapter 9, MC 10

A

B

66
Q

Long-lived assets:

A

property, land, equipment

67
Q

tangible assets:

A

land, property, equipment.

68
Q

intangible assets:

A

copyright, patents, etc.

69
Q

What does it mean to capitalize?

A

All expenditures needed to prepare the asset for its intended use can be capitalized.

70
Q

What is a basket purchase?

A

Pay one price for a basket of stuff.

71
Q

Example of a basket purchase:

A

Land and Property on it.

72
Q

We paid $400,000 for land with a building on it.
The building is appraised for $325,000 and the land is appraised for $175,000.
a. What are the steps for figuring out the price you paid for each?
b. What are the answers?

A

a. 1. Do the: appraised value for the building / total price of both appraised values and then do the appraised value for the land / total price of both appraised values.
2. Multiply the %age for each by what you paid in total.
b. 260,000 for the building and 140,000 for the land.

73
Q

Ordinary repairs and maintenance are treated as what? What are examples?

A

An expense and oil change in a truck.

74
Q

Extraordinary repairs, replacements, and additions are treated as what? What are examples?

A

Capitalization and adding to an equipment and making it work 20 hours instead of the 10 it worked before.

75
Q

What is accumulated depreciation?

A

a contra-asset account. it keeps track of all depreciation that builds up over time.

76
Q

What does a J/E look like for accumulated depreciation?

A

dr depreciation expense (+E, -SE)

cr accumulated depreciation (+xA, -A)

77
Q

What are the three methods to calculation depreciation?

A

Straight Line, Units of Production, and Double Declining Balance.

78
Q

What is the Straight Line Formula?

A

(Cost - Residual Value) x 1 /depreciation in years.

79
Q

What is Units of Production Formula?

A

(Cost - Residual Value) x use / estimated use

80
Q

What is Double Declining Balance Formula?

A

(Cost - Accumulated Depreciation) x 2 / depreciation in years.

81
Q

Book Value:

A

Cost - Accumulated Depreciation

82
Q

Purchase something for $62,500
Life use of 3 years or 100,000 miles.
Residual / Salvage Value of $2,500

Calculate using Straight Line method.
What is accumulated depreciation?
What is the book value after one year and after 3 years?

A

($62,500 - $2,500) x 1/3 = 20,000/ year.
Book Value: 62,500 - 20,000 = 42,500
after 3 years: $2,500

83
Q

Purchase something for $62,500
Life use of 3 years or 100,000 miles.
Residual / Salvage Value of $2,500
Used 30,000 miles the first year.

Calculate using Units of Production method.
What is accumulated depreciation?
What is the book value after one year and after 3 years?

A

($62,500 - $2,500) x 30,000 / 100,000 = 18,000 for the first year.
Book Value: 62,500 - 18,000 = 44,500
after 3 years: $8,500

84
Q

Purchase something for $62,500
Life use of 3 years or 100,000 miles.
Residual / Salvage Value of $2,500
Used 30,000 miles the first year.

Calculate using Double Declining Balance method.
What is accumulated depreciation in 3 years?
What is the book value after one year and after 3 years?

A

YEAR ONE: ($62,500 - 0) x 2 / 3 = $41,667
BV: $62,500 - $41,667

YEAR TWO: ($62,500 - $41,667 ) x 2 / 3 = $13,889
BV: $62,500 - $55,556 = $6944

YEAR THREE: ($62,500 - 55,556) x 2 / 3 = $4,629
BV: $62,500 - $60,185 = 2315 — DOESNT WORK.

85
Q

Impairment:

A

When the asset isn’t worth what you thought it was.

86
Q

J/E for an impairment:

A

dr loss on impairment (+E,-SE)

cr rides and equipment (-A)

87
Q

Cedar Fair sold a hotel for $3,000,000 at the end of its 16th year of use. The hotel originally cost $20,000,000, and was depreciated using the straight-line method with zero residual value and a useful life of 20 years.

a. What is the amount of depreciation per year?
b. What is the book value?
c. Did you lose or gain? Calculate loss or gain.
d. J/E?

A

a. $1,000,000
b. $4,000,000
c. loss of $1,000,000
d. dr cash $3,000,000
dr accumulated depreciation 16,000,000
dr loss on disposal
$1,000,000
cr building $20,000,000

88
Q

Amortization: ___ as Depreciation: ___

A

intangible; tangible

89
Q

Do you dr or cr a loss?

A

dr

90
Q

Do you dr or cr a gain?

A

cr

91
Q

What method do you use for amortization?

A

Straight line.

92
Q

Truck cost us $28,000. We sold it for $16,000.
Depreciation of 3 years.
a. Calculate the amount of gain or loss on disposal assuming that accumulated depreciation was $12,000.
b. record the J/E

A 
a. BV = 28,000 - 12,000 
BV = 16,000
It is worth 16,000 so we didn't gain or lose.
b. dr cash 16,000
dr accumulated depreciation 12,000
cr equipment 28,000
93
Q

Truck cost us $28,000. We sold it for $16,000.
Depreciation of 3 years.
a. Calculate the amount of gain or loss on disposal assuming that accumulated depreciation was $10,000.
b. record the J/E

A 
a. BV = 28,000 - 10,000
BV = 18,000
It is worth 18,000, therefore, we lost $2,000 on the sale.
b. dr cash 16,000
dr accumulated depreciation 10,000
dr loss on sale 2,000
cr equipment 28,000
94
Q

Truck cost us $28,000. We sold it for $16,000.
Depreciation of 3 years.
a. Calculate the amount of gain or loss on disposal assuming that accumulated depreciation was $15,000.
b. record the J/E

A 
a. BV = 28,000 - 15,000
BV = 13,000
It is worth 13,000, therefore, we gained 3,000 on the sale.
b. dr cash 16,000
dr accumulated depreciation for 15,000
cr gain 3000
cr equipment 28,000
95
Q

do you dr or cr accumulated depreciation?

A

dr

Accounting 210 (4 decks)

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