Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

ACG > ACG4101 Exam 3 Review > Flashcards

ACG4101 Exam 3 Review Flashcards

1
Q

What is conservatism, economic entity, and matching?

A

Conservatism - requires more verification for good news rather than bad news, resulting in losses reported quicker in net income rather than gains.
Economic entity - all economic events can be identified by a single economic entity.
Matching - associating expenses with revenue in a specific period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Adjusting journal entry for insurance when a company initially recorded the payment as an expense.

A

Debit prepaid insurance
Credit cash
Debit insurance expense
Credit prepaid insurance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Journal entry to record declaration and payment of dividends on the same day.

A

Debit retained earnings
Credit dividends payable
Debit dividends payable
Credit cash

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Debt-to-equity ratio, what does it calculate and what does it mean?

A

Total liabilities / total equity; it calculates a company’s ability to pay its long-term debts; the higher the ratio, the higher the company’s risk.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Calculate current ratio.

A

Current assets / current liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

If discovering an error, a big substantial one from prior year, how to fix it for current year?

A

Adjust retained earnings balance and adjust balance error.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Calculate the average collection period.

A

Average AR receivables = (AR beginning balance + ending balance) / 2
AR turnover = Net sales / Average AR receivables
Average collection period is 365 / AR turnover

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Calculate future value of annuity due with PV and FV table given.

A

Future value = annual deposit * FV annuity due factor
FV annuity due factor is found on the table based on amount of periods and interest rate.
Ex. five equal annual deposits at 3% interest = 5 periods by 3% interest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Calculate and write the 4th journal entry for year 2 of a contract based on percentage of completion.

A

Costs incurred during the year + costs incurred prior year + estimated costs to complete = total cost
Contract price * (costs incurred during and prior year / total cost) = percentage of completion
Percentage of completion * contract = revenue for the year
Debit CIP (profit), cost of construction (costs incurred during the year)
Credit revenue

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

How to record a sale return?

A

Debit sales return
Credit cash
Debit inventory (sales return * % of selling price)
Credit COGS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Using net method, record the journal entry for when the purchase is made and when payment was before the term of discount and after the term.

A

A. debit AR (merchandise sold - (sales revenue * sales discount))
A. credit sales revenue
B. debit cash
B. credit AR
C. debit cash
C. credit cash and sales discount forfeit (remaining amount paid * sales discount)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Figure out the impact on gross profit and inventory turnover when a company uses FIFO or LIFO and costs are rising.

A

If costs are rising, FIFO will have higher gross profit but lower inventory turnover compared to LIFO.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Calculate inventory turnover ratio.

A

COGS / average inventory

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Calculate gross profit ratio.

A

Net sales - COGS / net sales

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

LIFO retail method concept

A

Net purchases + (net markups - net markdowns)* = goods available for sale (no beginning inventory) - net sales + beginning inventory = ending estimated inventory

Beginning inventory of cost / beginning inventory of retail = beginning cost-to-retail percentage

(No beginning inventory) Goods available for sale of cost / goods available for sale of retail = current period cost-to-retail percentage

Ending estimated inventory - beginning inventory of retail = current period layer

Beginning inventory of retail * beginning cost-to-retail percentage + current period layer * current period cost-to-retail percentage

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Calculate conventional cost-to-retail percentage

A

(Cost) (Beginning inventory + net purchases) / (Retail) (Beginning inventory + net purchases + net markups)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Using average cost method and switching to FIFO. record journal entry.

A

Debit inventory (new method amount - past method amount)
Credit retained earnings

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

On year 1, company had made a mistake and income was overstated. What is the impact on year 1 and year 2?

A

Year 1 income was overstated, year 2 income was understated.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Exchanges with commercial substance; calculate gain or loss

A

Fair value of old equipment - book value of old equipment = gain/loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Calculate average accumulated expenditures

A

Accumulated expenditures / 2 if incurred evenly
Expenditure given * (12 - months that has passed) / 12

21
Q

Goodwill is only created when buying a company on acquisition

A

Goodwill is the excess of the fair value of net assets of other businesses.

22
Q

Calculate depletion for year 2

A

First year: cost of natural resources / estimated extractable amount for first year * resource sold for first = first year amount sold
Second year: (cost of natural resources - first year amount sold) / estimated extractable amount for second year * resource sold for second year

23
Q

Trading investments, available-for-sale, held-to-maturity; gain or losses will go

A

Ex. cost of 50, fair value of 40, there is a loss of 10. Loss in trading will go to the income statement, loss in available-for-sale goes to other comprehensive income (OCI), held to maturity is not recognized.

24
Q

Available-for-sale; bought for 80 and fair value was 100

A

Gain of 20 goes to OCI
In the balance sheet, it is shown as fair value of 100 and gain is shown in OCI.

25
Q

Investing into a company and an investor has significant influence. When the company pays dividends, the investment account is decreased by the portion owned. What is the impact on the investment account?

A

Stock bought + (% of stock * net income) - (% of stock * dividends paid)

26
Q

What is OCI?

A

Answer: EVERY CHANGE IN EQUITY FROM NON-OWNERS’ SOURCES.

27
Q

Calculate the new equity balance from accounts given.

A

Equity = assets - liabilities

28
Q

Company sold inventory under AR. On collection, what is the effect on the accounting equation?

A

Answer: NO EFFECT

29
Q

Some transactions are given and what is the impact on assets?

A

Collecting cash = increases assets, decreases assets
Providing services on account = increasing assets, increasing liability
Deferred revenue = increasing assets, increasing liability

30
Q

Collecting 50% upfront and other 50% at end, record the receipt of final payment.

A

Debit cash and unearned revenue
Credit revenue

31
Q

Which of the following is most likely to be classified as discontinued operations?

A

A component or group of components that has a major effect on a company’s operations and financial results.

32
Q

Which of the following is not a performance obligation?

A

Anything that doesn’t specifically require or list the contractor to do.
Ex. A right of return, prepayments, and quality assurance warranties.

33
Q

Figure out how many performance obligations are in this contract.

A

Ex. buying lumber, paint, and nails from a store = three performance obligations
Ex. contracting to build a house with lumber, paint, and nails = one performance obligation

34
Q

How to recognize interest revenue?

A

Answer: OVER TIME

35
Q

Calculating discontinued operations conceptually

A

Income or loss from operations of discontinued operations -/+ income tax expense/benefit

36
Q

Intangible assets with indefinite life

A

No legal contractual factors, cannot be amortized, and provides infinite benefit to the company.

37
Q

Calculate straight-line depreciation; find gain or loss on sale at year 3

A

Asset cost - residual value / service life
Debit cash, accumulated depreciation
Credit asset sold
Find the difference between the debit and credit

38
Q

How to account for sale of property of equipment for cash

A

Answer: GAIN OR LOSS BASED ON BOOK VALUE

39
Q

Calculate gross profit on project over time in year 1

A

Revenue - cost of construction = CIP profit/loss

40
Q

Available-for-sale and trading securities (FV only)

A

Trading securities affect the income statement
Ex. on operating income (gain or loss)
Available-for-sale of gains or losses are shown in OCI and then reclassified as net income in the periods they were sold

41
Q

What is the ending inventory based on these transactions?

A

Included in ending inventory:
Items in possession of the company
Goods that are in transit (f.o.b. destination)
Goods on consignment (if not held by owner’s company)
Anticipated sales return

42
Q

Calculate COGS with FIFO

A

Ex. 800 units on hand that are $20 each, 400 units bought for $22 each.
Sold 100 units
800 * 20 + 200 * 22 = $20,400 COGS

43
Q

Calculate ending inventory with average cost

A

Ex. (80020)+(40022)/1200 = 20.66 * 200 (remaining inventory)

44
Q

Calculate ending inventory with LIFO

A

Remaining inventory * last inventory unit price

45
Q

Lump sum purchase of assets; allocate prices to each asset

A

Asset purchased amount * % assigned to each individual asset (fair value of an asset / total fair value of assets

46
Q

Calculate asset retirement obligation

A

(Cash outflow A * probability A + cash outflow B * probability B + cash outflow C * probability C) * present value of $1, n, i

47
Q

Sum-of-years’-digits method, calculate depreciation for year 2 and book value of year 2 with a service life of 5 years

A

Asset cost - residual base * 5/15 = depreciation for year 1
Asset cost - residual base * 4/15 = depreciation for year 2
Asset cost - depreciation for year 1 +2 = book value end of year 2

48
Q

Double declining method; calculate book value at year 2

A

1 / service life * 2 = depreciation rate
Book value * depreciation rate = depreciation for year 1
(Book value - depreciation for year 1) * depreciation rate for year 2
Asset cost - depreciation for year 1+2 = book value end of year 2

49
Q

Depreciated an asset with group depreciation; record the journal entry for riding of one asset

A

Debit cash, accumulated depreciation
Credit asset sold

ACG (11 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions