Accounting 211 Exam 3

Question 1

Return on Assets

Answer 1

Income divided by assets invested

Question 2

Examples of source documents

Answer 2

Sales receipts, checks, purchase orders, bills from suppliers, payroll records, and bank statements

Question 3

Accrued Expense

Answer 3

Expenses earned in a period that are both unrecorded and not yet received in cash (or other assets)

Question 4

Accrued Revenue

Answer 4

Revenues earned in a period that are both unrecorded and not yet received in cash (or other assets)

Question 5

Gross Method

Answer 5

Record full amount

Question 6

Perpetual Method

Answer 6

Records both the entries for COGS/Merch and Sales/Cash

Question 7

Net Method

Answer 7

Records net amount, i.e. subtracting the discount

Question 8

Periodic Method

Answer 8

Records the entries for Sales/Cash and later records COGS/Merch at the end of the period

Question 9

How do you reimburse the Petty Cash Fund

Answer 9

Credit all the purchases made on with the petty cash fund and credit cash DO NOT TOUCH PETTY CASH

Question 10

Effective Cash Management Priniciples

Answer 10

Encourage collection of receivables; delay payment of liabilities; keep only necessary assets; plan expenditures; invest excess cash

Question 11

How do you establish the Petty Cash Fund

Answer 11

Debit petty cash and credit cash

Question 12

How to find interest

Answer 12

Amount owed times the interest times the days/360

Question 13

Allowance method of accounting for uncollectible accounts

Answer 13

Estimate loss from uncollectible accounts

Question 14

Maker for Notes

Answer 14

The one who signed the note and promised to pay it

Question 15

Payee for Notes

Answer 15

The person to whom the note is payable

Question 16

Accounts Receivable Turnover

Answer 16

Net sales divided by average accounts receivable, new

Question 17

Materiality Constraint

Answer 17

Permits the use of the direct write-off method when its results are similar to using the allowance method

Question 18

Dishonoring a note

Answer 18

When a note is not paid at the maturity date

Question 19

How to calculate depreciation (double declining)

Answer 19

100% divided by useful life; 2 times that percent; then that percent times the beginning-period book value

Question 20

Modified Accelerated Cost Recovery System (MACRS)

Answer 20

Allows straight-line depreciation for some assets but requires accelerated depreciation for most kinds of assets

Question 21

Total Asset Turnover

Answer 21

Net sales divided by average total assets

Question 22

Revenue Expenditures

Answer 22

Ordinary repairs

Question 23

Times Interest Earned Ratio

Answer 23

Income before interest expense and income taxes divided by interest expense

Question 24

Current Liabilties

Answer 24

Due within one year or the company’s operating cycle if longer

Question 25

Contingent Liabilities

Answer 25

Potential obligation that depends on a future event arising from past transaction or event

Question 26

Short Term Notes Payable

Answer 26

A written promise to pay within one year

Question 27

Uncertainty in Liabilities

Answer 27

Whom, when, and how much to pay