Brainscape's Knowledge GenomeTM

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


See full index

ACCT 200 > Exam 2 Ch. 5B, 6, 7, 8 & 9 > Flashcards

Exam 2 Ch. 5B, 6, 7, 8 & 9 Flashcards

0
Q

What is a PURCHASE RETURN?

A

items that are returned to the supplier because they are not right for some reason

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

How are shipping cost of goods you receive as a company recorded?

A

In an account called FREIGHT IN

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

What is a PURCHASE ALLOWANCE?

A

price reductions, granted after the fact, by the supplier to make amends for some error on its part

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

What is a PURCHASE DISCOUNT?

A

When suppliers provide merchandisers a 2-3% discount as incentive to pay bills promptly

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

What is a QUANTITY DISCOUNT?

A

When merchandisers who usually buy in large quantities receive discounts before the purchase is made, simply for buying a lot

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

What does 2/10 n45 mean?

A

2% discount if bill is paid within 10 days and if not paid within 10 days, then the full amount is due in 45 days

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

What does 2/10 EOM mean?

A

2% discount if bill is paid within 10 days and if not paid, the amount is due at the end of the month

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

Summarize GIVING THE U.S. CREDIT WHERE IT’S DUE Wall Street Journal Article

A

Credit use in America is expanding due to consumers and banks getting a little more relaxed about the economy.

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

Summarize ZARA BUILDS ITS BUSINESS AROUND RFID Wall Street Journal Article

A

Zara is using Radio Frequency Identification Chips in all of their merchandise security tags to help improve inventory management.

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

Summarize TRUMP ENTERTAINMENT CASINO BANKRUPTCY STANDS TO CHANGE RIVALS’ LUCK Wall Street Journal

A

Increasing competition of casinos in surrounding states having Atlantic City casinos shutting down. If Trump’s casino could cut debt load, they may become one of the only surviving casinos after the crash.

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

Summarize THE CLEVELAND BROWNS’ STRATEGY: WRITE THIS DOWN Wall Street Journal Article

A

Writing is a great tool to memorization

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

Summarize FED CLOSES CHAPTER ON EASY MONEY Wall Street Journal Article

A

The central bank will quit purchasing bonds to boost the economy. In the next year, interest rates for short term borrowing will rise, causing a reduction in unemployment.

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

What are the Four Types of Bankruptcy and describe all but the one not discussed in class

A

Chapter 7: Liquidation —-> you completely disappear
Chapter 11: Corporate-Workout ——> you still exist (judge appoints people to run the company in the meantime)
Chapter 12: Farmers —> didnt discuss
Chapter 13: Individual-Workout —>you still exist

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

What is the TVM Formula to find the Present Value of a Future Payment

A

PV=FV*PV(n,i)

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

What is the TVM Formula to find the Future Value of a Present Payment

A

FV=PV*FV(n,i)

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

What is the TVM Formula to find the Present Value of an Annuity

A

PVA=PMT*PVA(n,i)

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

What is the TVM Formula to find the Future Value of an Annuity

A

FVA=PMT*FVA(n,i)

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

What does PV stand for

A

Present Value

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

What does FV stand for

A

Future Value

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

What does n stand for

A

number of periods

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

What does i stand for

A

Interest Rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What does PMT stand for

A

Payment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What does PVA stand for

A

Present Value of an Annuity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What does FVA stand for

A

Future Value of an Annuity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is the different between an annuity and a single payment

A

with an annuity you make payments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

what happens if you are using anything other than annual payments in a TVM problem: For example (Semi-annual, quarterly, etc)

A

you multiply the number of periods and divide the interest rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

what helps make difficult TVM problems more manageable

A

a time line

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What is perpetual inventory?
What is an advantage?
Disadvantage?
Example?

A

Every transaction goes through inventory account
You know exact inventory count at any point in time, updated records
Costly to install, requires more day to day overhead
Big discount stores (walmart, best buy), Car dealerships

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What is Periodic Inventory?
Advantage?
Disadvantage?
Example?

A

At the end of the period you count all of your inventory manually
Less costly (money, time, people)
Have to do physical count to know, no idea if anything is missing
Clothing stores, grocery stores

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

What does the inventory t-account look like broke down and labeled

A

Inventory
___________________________________________________________
(BI) Beginning Inventory I
+ Purchases I
_____________________________________________________________
(GAS) Goods Available Sale I
I Cost of Goods Sold (COGS)
_____________________________________________________________
(EI) Ending Inventory

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

What is the equation of Goods Available for Sale (GAS)

A

GAS=BI+PURCH

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

What is the equation for Ending Inventory (EI)

A

EI=GAS-COGS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

What does Conservatism mean and what do they require?

A
  • assets and net income should never be overstated and liabilities should not be understated on the financial statements
  • that LCM Lower of Cost or Market be used (Assets can be written down but never up)
33
Q

What is LCM and what does it require

A

Lower of Cost or Market
inventory be recorded at the lower of its historical cost or its market value, which is its current replacement cost (Market value will be given on test)

34
Q

What happens to inventory as COGS increases to reflect the loss in value

A

it gets written down

35
Q

what are the two methods of estimating inventory

A

Gross Margin Method

Retail Method

36
Q

What are the main points of the gross margin method of estimating inventory

A

You use the historical GM%
The goal is to estimate ending inventory
You use multiple steps to get ending inventory
-use GM/Sales=GM% to calculate GM
-use Sales-COGS=GM to calculate COGS

37
Q

what are the main points of the retail method of estimating inventory

A

relationship between cost and selling price
cost ratio=GAS@cost/GAS@retail
(net sales)*(cost ratio)=COGS

38
Q

what are three good inventory internal control elements

A
  • Inventory physically counted at least once a year no matter the system
  • Inventory stored to protect against theft, damage and decay
  • Access to inventory should be limited to people w/o access to acct.
  • Inventory purchased in most economical quantities
  • Inventory on hand should be sufficient to prevent shortages/lost sales
  • Do not have an excessively large inventory to reduce expenses
39
Q

Matching Concept

A

Expenses are recorded in the same period of any revenue associated with that expense

40
Q

Historical Cost Concept

A

What you bought it for

41
Q

What are the three common adjustments to purchases caused by

A

Costs (other than purchase price) incurred getting to merchandiser
Items arrive damaged or unacceptable to merchandiser
existence of discounts

42
Q

What account is used to track the cost of getting inventory delivered to you as a business

A

Freight In

43
Q

What account is used to track when you must return something to the supplier of your inventory

A

Purchase Returns

44
Q

What is it called when you receive price reductions granted by the supplier to make amends for an error

A

Purchase Allowances

45
Q

What account do you use to keep track of purchase returns and allowances

A

purchase returns and allowances

46
Q

Why would a business receive a purchase discount

A

they pay their bills promptly so if they are offered more of a discount, they will pay even quicker

47
Q

How do you calculate Net Purchases

A

(gross purchases+freight in)-(purchase discounts+purchase returns and allowances)=Net Purchases

48
Q

How do you calculate gross margin

A

sales revenue - cost of goods sold

49
Q

How do you calculate gross margin percentage

A

Gross Margin/Sales

50
Q

What account is used to record unintentional cash errors

A

Cash short and over

51
Q

How do companies use internal control with petty cash

A

Use single employee to administer fund
Keep specific maximum amount in fund
Use clear receipts when disbursements occur
Replenish the fund through normal cash disbursement procedures

52
Q

What does the entry to open petty cash look like

A

Petty cash. 300

Cash. 300

53
Q

What would it look like when you replenished petty cash? There was $25 for supplies, $15 for transportation, $32 for delivery

A

Supplies. 25
Transportation expense. 15
Delivery expense. 32
Cash. 72

54
Q

What is it called when accounts receivable is never paid

A

Bad debt

55
Q

What account do we use to record bad debt

A

Allowance for bad debt which is closed to bad debt expense

56
Q

What is the easiest way to record bad debt expense

A

The direct write off method

57
Q

What is the direct write off method

A

You take the money out of accounts receivable (credit it) and put it into bad debt expense (debit it)

58
Q

How do companies prepare for bad debt expense

A

The estimate it using an allowance method

59
Q

What are the two types of estimating bad debt expense

A

Percentage of sales

Aging of accounts receivable

60
Q

How does the percentage of sales bad debt allowance method work

A

You look at how much of last years sales on credit ended up being bad debt and make that a percentage and then prepare for that much bad debt to happen in your current period

61
Q

Can bad debt expense be taken back out if someone decides to finally pay? If yes, describe the entries

A

Yes

A/R. Amount
Allow. BDebt Amount
___________________________________________&
Cash. Amount
A/R. Amount

62
Q

Describe how the aging of accounts receivable bad debt expense estimation works

A

Looks at how long the money has sat unpaid and classifies it into categories and there is a certain percent for each classification that is estimated to be bad debt

63
Q

What is factoring

A

When a company needs cash so it sells it’s receivables to a third party and they take the responsibility of collecting the money

64
Q

When companies factor out their a/r do they get paid the full amount each account owes?

A

No

65
Q

Who owes the money in a notes payable

A

Maker

66
Q

Who lent the money in a n/p

A

Payee

67
Q

How do you calculate interest

A

Interest=Principal(x)Annual Interest Rate (x) Time in Years

68
Q

What is discounting a note

A

When companies sell their notes, at a lower price, to get cash and lose the responsibility of recollecting it

69
Q

Where do you record the differences in how much you loaned (receivable or note) and how much you get paid when you sell it to a third party (factoring or discounting)

A

Interest expense or interest revenue

70
Q

What is the turnover ratio

A

INCOME STATEMENT ACCOUNT VALUE FOR PERIOD
____________________________________________________________

AVERAGE LEVEL OF BALANCE SHEET ACCOUNT FOR PERIOD

71
Q

Accounts receivable turnover ratio

A

NET SALES REVENUE
_____________________________________

AVERAGE NET ACCTS RECIEVABLE

72
Q

Collection period

A

365
____________________

Turnover ratio

73
Q

How do you get average accounts receivable amount

A

Beginning balance a/r (+) Ending balance a/r
__________________________________________
2

74
Q

What is wrong with using the direct write off method

A

it does not record revenues and expenses in the same period

75
Q

How do you calculate average cost

A

value of GAS/total # of units in inventory

76
Q

What are long lived/operating asssets

A

assets use to produce and sell goods and services to customers

77
Q

What are the three classifications of long lived assets

A

tangible
intangible
natural resources

78
Q

what are tangible assets and give an example

A

longlived assets with physical form

land, equipment, furniture, buildings

79
Q

what are two other terms for tangible assets

A

plant assets and fixed assets

80
Q

what are intangible assets, examples

A

no physical form

patent, copyright, trademark, franchise

81
Q

what are capital expenditures

A

expenses that provide benefits in the future

ACCT 200 (3 decks)

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