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actg 210 > exam 2 > Flashcards

exam 2 Flashcards

1
Q
  • The SEC requires companies to file, on an annual basis, four financial statements:
A

Thebalancesheet
The income statement
The statement of changes in owners’ equity The statement of cash flows

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2
Q

fraud

A

Intentional misstatement of financial reports

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3
Q

rationalization

A

We are bold and entrepreneurial…that is how we do things here

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4
Q

opportunity

A

can occur when chief executive hires friends to important positions

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5
Q

incentive

A

it can increase executives job prospect

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6
Q

fraud triangle

A

presents the conditions under which fraud is most likely to occur.(rationalization, incentive, opportunity

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7
Q

demand deposit accounts(checking account)

A

funds deposited by the company with a financial institution

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8
Q

cash equivalents

A

Instruments that can be readily converted to a known amount of cash(CD and gov. securities)

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9
Q

certificate of deposit

A

short-term investment purchased through a bank or financial
institution.

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10
Q

Interest formula

A

Interest = principal x interest rate x time(Time is always in fractions of a year. 3/12, 1/4

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11
Q

spread

A

he difference between interest rates charged and interest rates paid

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12
Q

purchase of the CD

A

transaction has no effect on the income statement, no effect on the total Cash and Cash Equivalents reported on the balance sheet.

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13
Q

interest income

A

how interest is recorded; net income will be higher on income statement

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14
Q

interest receivable

A

asset indicates that SCE is entitled to receive that amount of interest in cash at a future date

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15
Q

merchandise inventory

A

Acquired inventory is inventory that a company can purchase and resell with minimal or no cost for additional processing

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16
Q

manufacturing inventory

A

inventory that is made by company

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17
Q
  • Capitalizing
A

means those expenditures become part of the cost of the inventory, and thus part of the asset value reported on the balance sheet.(will be recognized as expense in the future as part of cost of goods sold.)

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18
Q

gross profit formula

A

revenue – COGS

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19
Q

Gross profit rate

A

gross profit divided by revenue, in percentage

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20
Q

FIFO

A

Costs of the earliest goods purchased are the first to be recognized in determining cost of goods sold.

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21
Q

Cost of Goods Available for Sale (CoGAS)

A

Total cost of goods sold+Ending inventory balance

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22
Q

Lifo

A

costs of the latest goods purchased are the first to be recognized in determining cogs

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23
Q

In a period of price inflation

A

FIFO> Lifo net income lifo has tax advantage

24
Q

If prices are falling

A

LIFO>fifo net income

25
Q

average-cost produces

A

net income between FIFO and LIFO.

26
Q

LIFO reserve.

A

the difference between inventory reported using LIFO and inventory as-if using FIFO

27
Q

Average inventory

A

simple average of beginning and ending balances for the period covered by COGS.

28
Q

inventory turnover ratio

A

COGS/average inventory

29
Q

days in inventory

A

365/inventory turnover ratio

30
Q

perpetual system

A

record inventory transactions in chronological order.

31
Q

periodic inventory

A

COGS is recorded at the end of each period as an adjusting entry. * The order of purchases and sales does not matter.

32
Q

Cost of goods available for sale formula

A

beg inventory +cost of goods purchased
end inventory+cost of goods sold

33
Q

Under Periodic Inventory, COGS

A

cost of goods available for sale - ending inventory

34
Q

conservatism principleCOGS using periodic inventory:

A

expenses and decreases in asset values are recognized immediately, but revenues and increases in asset values are delayed until they have occurred.

35
Q

property, plant, and equipment (PP&E)

A

non-current asset that is held not to sell, but to facilitate the generation of revenue
tangible asset, meaning its value comes from its physical properties.

36
Q
  • Capitalizable expenditures for PP&E include
A

associated with acquiring or putting the PP&E into service:

37
Q

Improvements

A

expenditures that improve the asset in a permanent way.(become part of assets accounting value)

38
Q

Maintenance

A

expenditures are necessary to maintain the asset’s current standard of productivity and expected period of use.( recorded as expense immediately)

39
Q

future benefit (improvements and maintenance)

A

improvements increase pp&e future benefit
maintenance prevents loss of future benefit

40
Q

depreciation

A

allocation of PP&E depreciable cost to expense over the useful life of the asset.

41
Q

annual depreciation expense formula

A
42
Q

Historical cost

A

is the amount capitalized to acquire the asset

43
Q

Depreciation expense

A

an operating expense reported on the income statement.

44
Q

Accumulated depreciation

A

contra-asset account.It has a credit balance, which is opposite to (or contra) the debit balances that
assets normally have.
* It is paired with the related asset account

45
Q

Depreciable cost formula

A

Acquisition cost – salvage value

46
Q

Depreciable cost

A

is the total amount of depreciation expense that will be recognized over the useful life of the asset.

47
Q

Salvage value

A

the amount the company expects to receive upon disposing of an asset it will no longer use.

48
Q

straight-line depreciation formula

A

depreciable cost / useful life
= (acquisition cost – salvage value) / useful life

49
Q

FASB

A

Accounting standards are developed

50
Q

SEC

A
  • Accounting standards are enforced
    enforces that any public traded company must periodically file GAAP
51
Q

Establishment of Responsibility

A

Control is most effective when only one
person is responsible for a given task.
* Establishing responsibility often requires limiting access only to authorized personnel, and then identifying those personnel.

52
Q

documentation procedure

A

companies should use renumber documents and all document should be accounted for
employees should forward source documnets for accounting entries to the accounting department

53
Q

segregation of duty

A

different individuals should be responsible for related activities
responsibility for record-keeping for an asset should be separate from the physical custody of that asset

54
Q

Independent InternalVerification

A

records periodically verified by an employee who is independent
discrepancies reported to managment

55
Q

human resource control

A

bond employees who handle cash
rotate employees duties and require vacations
conduct background checks

actg 210 (1 decks)

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