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Accounting > Exam 2 > Flashcards

Exam 2 Flashcards

1
Q

Free On Board Shipping Point

A

Revenue recognized when shipped

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2
Q

FOB Destination Point

A

Revenue recognized when arrived to customer

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3
Q

Credit Card Discount

A

Discount of the CC Service Fee
(XR) account, decrease AR

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4
Q

Cash Discount: x/d, n/30

A

x = % if paid in d days, n = net remaining in 30 days

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5
Q

Cash Discount Account

A

Contra Revenue Account

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6
Q

Sales Return Account

A

Contra Revenue Account

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7
Q

Trade Discount

A

Reductions from the list price of an item

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8
Q

Volume Discount

A

Reduction in price based on quantity purchased

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9
Q

What two discounts are not included in the Net Sales calculations or contra revenue accounts?

A

Volume and Trade Discount

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10
Q

AFDA EB Equation 1

A

Credit Sales x Bad Debt Rate

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11
Q

AFDA EB Equation 2

A

AFDA BB + Bad Debt Expense

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12
Q

AFDA Account

A

Contra Asset

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13
Q

Is AFDA a permanent account?

A

Yes

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14
Q

Net AR

A

Amount expected to be collected

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15
Q

Net AR Equation

A

A/R EB - AFDA EB

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16
Q

Write offs

A

Used once determined company won’t pay their balance
Deduction of AFDA Account(-XA)

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17
Q

A/R Turnover Ratio

A

Net Sales / Average Net AR

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18
Q

Days to Collect AR

A

365/ AR Turnover Ratio

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19
Q

Cash Equivelants

A

Investments with maturity of f3 months or less
Ex: Checking/savings accounts and stocks

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20
Q

Bank Reconciliation

A

Making sure cash balance in Bank and General Ledger are equal

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21
Q

Bank Recon Adjusts for 6 things:

A

Outstanding Check, Deposits in Transit, Interest Earned, Bank Charge, Non Sufficient Funds Check, Errors

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22
Q

Perpetual Method

A

Tracks inventory automatically through barcode and scanning

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23
Q

Periodic Method

A

Tracks inventory manually over time

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24
Q

COGS Equation

A

BI + P = COGAS - EI = COGS

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25
Q

BI:

A

Beginning Inventory

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26
Q

P:

A

Purchased inventory

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27
Q

COGAS:

A

Beginning Inventory + Purchased Inventory

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28
Q

EI:

A

COGAS - COGS

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29
Q

Net Profit Margin Equation

A

Net Sales - COGS

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30
Q

Inventory Turnover Ratio

A

COGS / Average Inventory

31
Q

Days to Sell Inventory:

A

365/ Inventory Turnover

32
Q

What are the 4 Inventory Costing Methods?

A
  1. Specific Identification
  2. Average Cost
  3. FIFO
  4. LIFO
33
Q

Specific Identification Costing Method

A

multiple what is sold by the price that it is bought with
-EI: Units remaining x Price of where the units remain

34
Q

Average Cost Method

A

(COGAS/ Total Units available for sale ) x units sold
EI: Average Cost * Ending Units

34
Q

First In First Out

A

EI: Units Remaining * last cost

34
Q

Last In First Out

A

EI: Units remaining * first cost

35
Q

Who has the highest EI: LIFO or FIFO

A

FIFO

35
Q

What has the highest NI: LIFO or FIFO

A

FIFO

35
Q

Property definition

A

Land and land improvements
Doesn’t depreciate

36
Q

Plant definition

A

buildings like warehouses, factories and offices

37
Q

Equipment

A

Machinery, tools and furniture

38
Q

Aquisition/Historical Cost

A

Purchase Price + any costs to get the asset ready for use

39
Q

Depreciation

A

cost of using up assets to the periods in which those assets are used to generate revenue

40
Q

Useful life definition

A

How long the company plans to utilize the asset in the course of the business

41
Q

Salvage/residual Value

A

Amount the company expects to receive from the sale of the asset at the end of it’s useful life

42
Q

Depreciable Base Equation

A

Cost- Salvage Value

43
Q

Net PP&E Equation

A

PP&E - Accumulated Depreciation

44
Q

What are the 3 Depreciation Methods?

A
  1. Straight Line Depreciation
  2. Units of Production
  3. Double Declining Balance
45
Q

Straight Line Depreciation Equation

A

(Cost- Salvage Value) / Useful life

46
Q

Units of Production Equation

A

((Cost - Salvage Value) / Estimated Units Produced ) * Units actually produced

47
Q

Double Declining Balance Equation

A

BB: Book Value = Cost
Rate: 2(1/useful life)
Depreciation Expense: Book value * Rate
Accumulated Depreciation: All current depreciation expense summed up
EB: Ending book value: Cost - AD

48
Q

Impairment

A

Decline in an assets value due to various indicators

49
Q

what are the indicators of impairment? (4)

A
  1. Physical Damage
  2. Change in economic/ legal factors
  3. Significant decline in market price
  4. Significant increase in cost of asset
50
Q

Impairment Loss Equation:

A

Book Value - Fair Value

51
Q

Net Income regular account

A

Credit
Loss = Debit
Gain = Credit

52
Q

Cash Collection Equation

A

Beginning AR + Credit Sales - Ending AR

53
Q

Do net sales include write offs?

A

No

54
Q

Gross Profit Equation

A

Sales Revenue - COGS

55
Q

What are the 3 Contra Asset Accounts?

A
  1. Accumulated Amortization
  2. Accumulated Depreciation
  3. AFDA
56
Q

What is an example of a Contra Revenue Account

A

Discounts: Cash, Credit Card, Sales Return

57
Q

Intangible Asset definition

A

nonphysical asset that has significant financial value

58
Q

Examples of intangible asset

A

Patent, trademark, goodwill

59
Q

What are intangible assets recorded at (value)

A

Historical Cost

60
Q

Definite/ Limited Intangible Asset

A

An asset that will depreciate (amortization) on a straight line bases

61
Q

Indefinite/ Useful Intangible Asset

A

An asset that will not depreciate(amortization) but is still tested for impairment yearly

62
Q

Amortization

A

Depreciation but for Intangible assets

63
Q

Goodwill definition

A

Excess of the purchase price of a business over the fair value of the net assets of the business purchased

64
Q

Goodwill equation

A

Purchase price - Net assets

65
Q

Net assets equation

A

Assets - Liabilities

66
Q

Capitalized Costs

A

Non ordinary, large costs that can increase the useful life of an asset. Found on the balance sheet

67
Q

Expense Cost

A

Ordinary, smaller everyday business costs that don’t make an impact on the useful life of an asset.
Found on the income statement

68
Q

Fixed Asset Turnover Ratio

A

Net Sales/Average Net Fixed Assets

69
Q

Net Sales Equation

A

Sales - Deductions (cash, credit card, returns and allowances)

Accounting (6 decks)

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