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ACCT207 > Exam 2 Concepts > Flashcards

Exam 2 Concepts Flashcards

1
Q

Companies report interest revenue as…

A

other revenue and gains

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1
Q

________ controls:

  1. Safeguarding assets
  2. Enhancing reliability of accounting records
  3. Increases efficiency of operations
  4. Ensures compliance with laws and regulations
A

Internal

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1
Q

This fluctuates based on how much it is used.

A

Unit-of-activity

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1
Q

Repairs or maintainenances are _______, which means they are ________.

A

expenses; debited

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2
Q

______________ is required to maintain a system of internal control.

  1. Independent outside auditors must attest to the adequacy of internal controls.
A

Sarbane Oxley Act

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2
Q

The amount of bad debt expense that should be recorded in the adjusting entry is the difference between the _______ _______ and the _______ _________ in the allowance account.

A

required balance; existing balance

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2
Q

________ _______ = cost less accumulated depreciation.

A

Book Value

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3
Q

How to account for the disposal of plant assets:

  1. Eliminate book value of that useful asset at date of disposal
  2. Record cash proceeds, if any
  3. Account for the difference between book value and cash proceeds as a gain or loss
A
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4
Q

To properly manage receivables, management must:

  1. Determine to whom to extend credit
  2. Establish a payment period
  3. Monitor collections
  4. Evaluate liquidity
  5. Accelerate cash receipts
A

^^^

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5
Q

Promissory notes may be used :

(1) when individuals and companies lend or borrow money,
(2) when the amount of the transaction and the credit period exceed normal limits, and
(3) in settlement of accounts receivable.

A
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5
Q

Costs incurred to increase:

  1. Operating efficiency
  2. Productive Capacity
  3. Useful life of a plant asset

Are a _______ to the ______ asset.

A

debit; plant

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7
Q

_______ items such as the following produce time lags:

  1. Deposits in transit
  2. Outstanding checks
  3. Bank memoranda
  4. Errors
A

Reconciling

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8
Q

Improvements to land AFTER its initial *land aquisition *include:

  1. Walkways
  2. Parking Lots
  3. Irrigation Systems
  4. Landscaping
A
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9
Q

_______ _______ are amounts customers owe on account.

A

Accounts receivable

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9
Q

With Decreasing Prices:

______ is more profitable and has lower cost of goods sold.

A

LIFO

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9
Q

Cost of Goods Available for Sale/Total Units Available for Sale =

A

Average Cost

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9
Q

When the account is written off, accounts receivable are _______ and allowance for doubtful accounts are ________.

A

credited; debited

**Please note: The WRITE-OFF is reversed if the company pays the amount that has been written-off. **

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9
Q

________ is the process of allocating to expense the cost of a plant asset over its useful life.

A

Depreciation

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9
Q

Intangible assets with _______ lives should **NOT **be amortized.

A

indefinite

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10
Q

Indefinite Life of an Intangible asset, ___________.

A

NO AMORTIZATION

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12
Q

Accelerating Depreciation (declining balance) every company will take it because…

A

there are less taxes

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13
Q

______ value is the **estimate **of the asset’s value at the end of it’s useful life.

A

Salvage

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15
Q

Depreciation reflects an asset’s decreasing _______ and _________ producing ability, resulting from wear and tear or becoming obsolete.

A

usefulness; revenue

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16
Q

______ reports lower earnings, but LESSER taxes.

A

LIFO

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17
Q

_________ _____________

costs incurred to acquire a plant asset that are expensed immediately.

A

Revenue Expenditure

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17
Q

Additions and improvements are _________.

A

capitalized

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18
Q

Beginning inventory + Purchases - Returns and Discount Allowances = _______________

A

Goods Available Sold

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19
Q

Whether companies are at the point-of-sale of merchandise on account, or performing a service on account…companies record _______ _______.

A

accounts receivable

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21
Q

Aquisition costs are those that prepare land for its intended use, which include

  1. Grading & Filling
  2. Draining
  3. Cleaning
  4. Removing
  5. Closing Costs
  6. Cost of Land Acquired
A

^^

22
Q

Short-term receivables are considered ______ _______ and are located below ______________________ on the balance sheet.

A

current assets; short-term investments

23
Q

With the declining balance method we have _____ in the beginning and _______ in the end.

A

more; less

24
Q

In a contra asset account, bad debts expense are ________ and allowance for doubtful accounts are __________.

A

debited; credited

26
Q

Cost - Salvage Value / Useful Life =

A

Straight-Line Depreciation

27
Q

_____ ______ are claims evidenced by formal instruments of credit.

A

Notes Receivable

28
Q

With the Allowance Method, losses are _________.

A

estimated

30
Q

Goods held on ________ are not accounted in the inventory.

A

consignment

31
Q

Effective Cash Management:

  1. Keep inv low
  2. Monitor payments of liabilities
  3. Plan timing of major expenditures
  4. Invest idle cash
A

^^^

32
Q

Units-of Activity =

A

Depreciable cost / Total Units

33
Q

**Accumulated Depreciation **is a _____________ acccount.

A

contra-asset

34
Q

Companies only make revisions of periodic depreciation in ______ and _______ periods.

A

present; future

35
Q

The party making the promise to pay is called the ________.

A

maker

36
Q

If an intangible asset has a _______ life, its cost should be allocated (amortized) over its useful life.

A

limited

37
Q

_______ is when you get rid of the old shit first because you have the risk of it going bad or going out of fashion.

A

FIFO

38
Q

With ______ we use the new coal first because it is NOT like the old coal is going to go bad like food does!

A

LIFO

39
Q

The cost of ______ _______ includes all expenditures to acquire the asset and make it ready for its intended use.

A

Plant Assets

41
Q

Companies report **intangible assets **at their cost *less *any amounts amortized.

A
43
Q

If a company issues cash in exchange for a note, the entry is a ______ to Notes Receivable and a _______ to Cash in the amount of the loan.

A

debit; credit

44
Q

If Laird Company decides to establish a $100 fund on March 1, the entry in jounral form is:

Mar 1. Petty Cash 100

           Cash                                             100

            (To Establish a petty cash fund)

What would the adjusting entry be if Laird Company decided on July 1st to increase the size of the fund to $250?

A

Petty Cash $150

Cash $150

46
Q

Notes can be held to ________.

A

maturity

47
Q

_____________ is when the ownership of the goods remains with the seller until the goods reach the buyer.

A

FOB destination

48
Q

_______ when item increases efficiencies/productive capacity/expected life.

A

Capitalize

50
Q

Companies report bad debt and service charge expenses in the _______ _______ as operating expenses.

A

income statement

51
Q

A gain or loss up until you sell a product is an increase or decrease to _________ ________.

A

Stockholder’s Equity

52
Q

The party to whom the payment is to be made is called the ________.

A

payee

53
Q

________ have 20 year renewals.

A

Trademarks

54
Q

_______ ______ are costs included in a plant asset account.

A

Capital Expenditure

55
Q

Understating ending inventory **overstates **_____________________.

A

Cost of Goods Sold

56
Q

How do you compute interest on notes receivables?

A

Face Value of Note x Annual Interest x Time (in years)

57
Q

Cost *less *accum. depreciation = ____

A

NBV

58
Q

Eliminate fixed assets by

  1. ________ Accumulated Depreciation
  2. *________ *the Asset Account
A

*debiting; *crediting

60
Q

Losses are placed on the _______ side, gains are placed on the ______ side.

A

*debit; *credit

61
Q

A Direct Write-Off is theoretically __________.

A

undesirable

62
Q

A _________ ________ is a written promise to pay a specified amount of money in a definite time.

A

promissory note

63
Q

Ordinary repairs are ________.

A

expensed

64
Q

Goods Available Sold - Ending Inventory =

A

Cost of Goods Sold

65
Q

With Rising Prices:

______ is more profitable and has lower cost of goods sold.

A

FIFO

66
Q

Limited life of an intangible asset ______ asset account *or *accummulated depreciation.

A

credit

67
Q

______ is when the current replacement cost is less than the cost.

A

LCM

68
Q

_______________ is when the buyer has legal title to goods after the goods have been shipped.

A

FOB Shipping Point

70
Q

The following should be considered when recording periodic **depreciation expense **on *plant assets: *

  1. Salvage Value
  2. Estimated Useful Life
  3. Cost
A

^^

71
Q

Declining Balance By the BV x Double Declining Bal Rate =

A

Annual Expense

ACCT207 (4 decks)

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