cash

Question 1

what is excluded from cash

Answer 1

cert of deposit(restricted as to maturity)
compensating balances(restricted as to use)
bond sinking fund(restricted to retire bond)

Question 2

ar

balance sheet approach

Answer 2

calculates the ending balance of the ar account

AR*%

Question 3

ar

income statement approach

Answer 3

directly calculates the amount of bad debt expense

credit sales*%

Question 4

direct write off method

Answer 4

bad debt exp

ar

Question 5

what costs are included in the cost of inventory

Answer 5

purchase returns
freight in
sales tax on acquisition
insurance in transit
packaging costs (if for purchased items)

Question 6

fifo is same under

Answer 6

periodic and perpetual

Question 7

conversion index for dollar value life

Answer 7

ie in cy dollars/ie in base year dollars

Question 8

LCM

ceiling(nrv)
floor
replacement cost

vs cost

Answer 8

ceiling= selling price less cost to complete

floor=nrv less normal profit margin

Question 9

capitalized interest cannot _____ actual interest cost for the period.

Answer 9

exceed

Question 10

sum of years digits

Answer 10

of years remaining*(cost-salvage)/sum of years

Question 11

Assume a 2-year, $100 bond, with 10% stated rate, pays semi-annually is purchased at 12%.

bond purchased at a discount

Answer 11

Bond Purchased at a Discount

Assume a 2-year, $100 bond, with 10% stated rate, pays semi-annually is purchased at 12%.

Purchase price: PV of principle ($100, 4 periods, 6%) = .79209 = $79.21
PVa of interest ($5, 4 periods, 6%) = 3.46511 = 17.33
$96.54

Entries at purchase date:

Bond Investment 96.54
Cash 96.54
Interest income (effective interest method) for first 6-month period:

Cash 5.00
Bond Investment .79
Interest Income 5.79

Question 12

Assume a 2-year, $100 bond, with 10% stated rate, pays semi-annually is purchased at 8%.

purchased at a premium

Answer 12

Entries at purchase date:

Bond Investment 103.63
Cash 103.63
Interest income (effective interest method) for first 6-month period:

Cash 5.00
Bond Investment .85
Interest Income 4.15

Question 13

gross margin and relative sales value method

Answer 13

you want to find the
cost/sales ratio and multiply that by sales in order to get cogs. once you have cogs you can calculate inventory
ex
A flash flood swept through Hat, Inc.’s warehouse on May 1. After the flood, Hat’s accounting records showed the following:
Inventory, January 1 $ 35,000
Purchases, January 1 through May 1 200,000
Sales, January 1 through May 1 250,000
Inventory not damaged by flood 30,000
Gross profit percentage on sales 40%
What amount of inventory was lost in the flood?

sales 1
cost .6
.4

cost/sales .6/1=.6

.6*sales of 250=150,000

bi +purch-ie=cogs
35+200-x=150000
x=85000
85-30=55,000 not damaged in fire