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accounting test 1 > accounting test 4 > Flashcards

accounting test 4 Flashcards

1
Q

inventory

A

tangible resource that is held for resale in the normal course of operations

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2
Q

acquisition cost

A

inventory is Recorded at ________ cost

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3
Q

expense

A

Inventory becomes ____ when sold

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4
Q

gross profit

A

the amount of resources that are left to pay operating expenses (selling and administrative expenses) and provide for net income

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5
Q

perpetual

A

Cost of goods Sold updated with each sale

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6
Q

FOB shipping point

A

ownership of the inventory passes from seller to buyer at the shipping point and buyer pays and includes transportation costs termed as freight-in. Freight-in is included in the cost of inventor

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7
Q

FOB destination

A

ownership of the inventory passes from seller to buyer when goods are delivered. Seller pays transportation costs termed as freight-out. Freight-out is included as an expense on the seller’s income statement.

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7
Q

FOB destination

A

ownership of the inventory passes from seller to buyer when goods are delivered. Seller pays transportation costs termed as freight-out. Freight-out is included as an expense on the seller’s income statement.

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7
Q

FOB destination

A

ownership of the inventory passes from seller to buyer when goods are delivered. Seller pays transportation costs termed as freight-out. Freight-out is included as an expense on the seller’s income statement.

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8
Q

FOB destination

A

ownership of the inventory passes from seller to buyer when goods are delivered. Seller pays transportation costs termed as freight-out. Freight-out is included as an expense on the seller’s income statement.

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9
Q

Consigment

A

Goods owned by one party are held and offered for sale by another

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10
Q

2

A

In perpetual system, sales require ______ journal entries

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11
Q

One to recognize revenue *

One to recognize cost of goods sold and a reduction of inventory

A

What 2 transactions needed for sales in perpetual system

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12
Q

Restore inventory and decrease COGS *
Decrease A/R or cash and revenue

A

What 2 journal entries does returns and allowance require under perpetual

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13
Q

net method

A

returns and allowances liability is debited and A/R or Cash is credited

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14
Q

gross method

A

revenue account is debited and A/R or cash is credited

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15
Q

BI + p + EI

A

COGS equation

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16
Q

COGS - EI

A

COGAFS equation

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17
Q

Average cost equation

A

Total Extended Cost/Total Units = Average Cost per Unit

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18
Q

highest ending inventory, lowest COGS, highest income

A

in rising purchase prices FIFO produces

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19
Q

lowest ending inventory, highest COGS, and lowest income

A

in falling purchase prices FIFO produces

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20
Q

highest ending inventory, lowest COGS, and highest income

A

In falling purchase prices LIFO produces

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21
Q

FIFO

A

Inventory on the balance sheet and net income on the income statement are higher under

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22
Q

LIFO

A

Lower tax liability under

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23
Q

LIFO conformity rule

A

IRS rule requiring a company that uses LIFO for tax reporting to also use LIFO for financial reporting

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24
Q

NRV of inventory equation

A

Estimated Selling Price - Costs of Disposal (Selling Costs)

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25
Q

NRV

A

WHen ______ of inventory is lower than its original cost, the valuation of inventory is adjusted down

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26
Q

NRV

A

____ is an example of conservatism

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27
Q

physically counted

A

ending inventory is unknown until

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28
Q

COGS Understated * EI Overstated * Net Income Overstated

A

understating beginning inventory leads to

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29
Q
  • COGS Overstated * EI Understated* Net Income Understated
A

overstating beginning inventory leads to

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30
Q

Gross Profit Ratio

A

gross profit / net sales

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31
Q

Inventory Turnover Ratio

A

Cost of Goods Sold / Average Inventory

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32
Q

365 days / Inventory Turnover

A

Average days to sell inventory

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33
Q

operating assets

A

long-lived assets that are used by the company in the normal course of operations

34
Q

Amortization

A

intangible assets are ______ expense

35
Q

depletion

A

natural resources are _____ expense

36
Q

straight line depreciation equation

A

(cost-residual value)/useful life

37
Q

double declining balance method

A

more depreciation in early years of the asset’s life

38
Q

different

A

Method chosen for taxes can be _______from the method used for F/S purposes

39
Q

revenue expenditures

A

expensed on the income statement

40
Q

revenue expenditures

A

Maintain the level of benefits provided by the asset, relate only to the current period, occur frequently, typically relatively small dollar amounts

41
Q

revision of deprecation steps

A

Obtain the book value of the asset at the date of revision *
2. Compute depreciation expense using the revised amounts for book value, useful life, and/or residual value

42
Q

impairment

A

Permanent decline in market value

43
Q

write downs

A

FASB requires immediate recognition of

44
Q

impairment

A

exists if future cash flows expected to be generated by the asset are less than the asset’s book value

45
Q

Average Age of Fixed Assets

A

Accumulated Depreciation / Depreciation Expense

46
Q

intangible assets

A

No physical substance *
Rights, privileges or competitive advantages *
Recorded at cost

47
Q

intangible assets

A

No physical substance *
Rights, privileges or competitive advantages *
Recorded at cost

48
Q

periodic system

A

records purchases into temporary account

49
Q

formula for net purchases

A

purchases - returns and allowances - discounts + freight in

50
Q

when legal title to the goods passes to the buyer

A

When Should Items Purchased Be Included in Ending Inventory?

51
Q

opposite

A

Any error in ending inventory means the ___________error for Cost of Goods Sold (expense). Therefore, both the balance sheet and the income statement are impacted in the year of the error

52
Q

Gross profit equation

A

Gross profit equation

53
Q

periodic

A

Cost of Goods Sold are recorded only at the end of a period.

54
Q

perpetual

A

Purchase price of the merchandise PLUS any cost of bringing the goods to sellable condition and location *

Inventory account represents the net cost of inventory that is on hand and ready to sell*

Historical Cost basis!

55
Q

deprecation

A

PPE is an _____ expense

56
Q

deprecation

A

PPE is an _____ expense

57
Q

all expenses necessary to acquire and make an asset ready to use

A

Cost for PPE include

58
Q

deprecation

A

Process of allocating to expense the cost of an asset over its useful life

59
Q

straight line depreciation

A

Equal amount of depreciation expense each year

60
Q

units of production method

A

Life of asset is expressed in terms of total units of production or activity

61
Q

units of production equation

A

(Cost-Residual Value)/Expected Usage

62
Q

full years

A

if the fixed asset is purchased (or disposed of) at the beginning or end of an accounting period, a _______ of deprecation is recorded

63
Q

post acquisition expenditures

A

Ordinary repairs and maintenance, major overhauls, additions, improvements

64
Q

capital expenditures

A

included in asset cost

65
Q

capital expenditures

A

Increase future economic benefits in both current and future periods * Added to asset account and are subject to depreciation

66
Q

earnings management

A

Companies delaying the timing of impairment recognition are practicing

67
Q

write down transaction

A

loss on impairment
fixed asset

68
Q

conservatism

A

write-down is consistent with ________________ principle

69
Q

impairment

A

Measured as the difference between book value and fair value

70
Q

steps in disposing assets

A

Update depreciation to date of disposal*
2. Compute the NBV at date of disposal*
3. Remove from the books by crediting the asset and debiting accumulated depreciation

71
Q

Fixed Asset Turnover Ratio

A

Net Sales / Average NBV of Fixed Assets

72
Q

Fixed Asset Turnover Ratio

A

Measures how efficiently company is using its fixed assets

73
Q

natural resources

A

Generally only replaced or restored by an act of nature

74
Q

depletion equation

A

Cost-Residual) / Recoverable Units

depletion * units recovered = depletion

74
Q

depletion equation

A

Cost-Residual) / Recoverable Units

depletion * units recovered = depletion

75
Q

cost flow assumption

A

perpetual record is kept both in units and dollars using a particular_____________________ throughout the accounting period.

76
Q

Specific Identification

A

Assumption used where a small number of costly, distinctive items are sold
b. Appropriate for following types of inventory è cars, furniture, fur coats, jewelry
c. Cost flow does match physical flow of goods sold

77
Q

matching

A

f the asset is purchased (or disposed of) during the accounting period, the __________________ principle requires that depreciation be recorded only for the portion of the year that the asset was used to generate revenue.

78
Q

voluntary disposal

A

The disposal may occur at the end of the asset’s useful life or at some other time

79
Q

involuntary disposal

A

l occurs when assets are lost or destroyed through theft, acts of nature, or by accident.

80
Q

Gain on disposal

A

selling price greater than NBV

81
Q

loss on disposal

A

selling price is less than NBV

82
Q

journal entry for asset disposal

A

CASH
Accumulated depreciation
Asset
Gain/ Loss on sale

accounting test 1 (6 decks)

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