Exam 3 Review Flashcards

1
Q

Bad Debt Expense

A

(Net Credit Sales for Period) x (Historical Bad Debt Loss Rate)

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2
Q

Percentage of Credit Sales Equation

A

(Net Credit Sales) x (% Estimate Uncollectible)

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3
Q

Interest Equation

A

Principal(P) x Interest Rate(I) x Time(t)

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4
Q

Write Off Journal Entry:

A

dr. Allowance for Doubtful Accounts

cr. Accounts Receivable

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5
Q

Reverse Write Off Journal Entry:

A

dr. Accounts Receivable

cr. Allowance for Doubtful Accounts

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6
Q

Receipt of Cash Journal Entry:

A

dr. Cash

cr. Accounts Receivable

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7
Q

Bad Debt Journal Entry:

A

dr. Bad Debt Expense

cr. Allowance for Doubtful Accounts

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8
Q

Loan to Employees Journal Entry:

A

dr. Notes Receivable

cr. Cash

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9
Q

Interest Accrued Journal Entry:

A

dr. Interest Receivable

cr. Interest Revenue

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10
Q

Receipt of Interest on Note’s Maturity Date Journal Entry:

A

dr. Cash
cr. Interest Revenue
cr. Interest Receivable

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11
Q

Payment for Full Principal of Note:

A

dr. Cash

cr. Notes Receivable

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12
Q

Average Net Receivable

A

(Beginning Net Receivable + End Net Receivable) /2

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13
Q

Receivable Turnover Ratio

A

(Net Sales) / (Average Net Receivables)

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14
Q

Days to Collect

A

365 / (Receivable Turnover Ratio)

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15
Q

Company Interested in Minimizing Income Taxes:

A

Declining Costs - FIFO

Rising Costs - LIFO

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16
Q

Manager’s Goals for Inventory

A

(1) Maintaining sufficient quantity
(2) Ensuring quality
(3) Minimizing acquisition and carrying costs

17
Q

Inventory Turnover Ratio

A

COGS / (Average Inventory)

18
Q

Average Inventory

A

(Beginning Inventory + Ending Inventory) / 2

19
Q

Days to Sell

A

365 / (Inventory Turnover Ratio)

20
Q

Oldest price sold first.

21
Q

Most recent purchase price sold first.

22
Q

Gross Profit Equation

A

Net Sales - COGS

23
Q

Current asset on balance sheet.

24
Q

Expense on income statement

25
Reasons Inventory Falls Below Cost:
(1) Easily replaced by identical goods at lower cost | (2) Becomes outdated or damaged.
26
Periodic Updating Equation
Beginning Inventory + Purchases - Ending Inventory = COGS
27
Perpetual Updating Equation
Beginning Inventory + Purchases - CCOGS = Ending Inventory
28
Effects of Increasing Costs on Financial Statements
FIFO: Inventory - higher COGS - lower **Highest Gross Profit** LIFO: Inventory - lower COGS - higher
29
Effects of Decreasing Costs on Financial Statements
FIFO: Inventory - lower COGS - higher LIFO: Inventory - higher COGS - lower ** Highest Gross Profit**
30
Advantages of Extending Credit
(1) Increases the sellers revenue
31
Disadvantages of Extending Credit
(1) Increased Wage Costs (2) Bad Debt Costs (3) Delayed Receipt of Cash
32
Number of Days to Sell
Average Inventory / (Daily Average COGS)
33
Average Inventory
(Beginning Inventory + Ending Inventory) / 2
34
Daily Average COGS
COGS / 365
35
Bad Debt Expense
Before income operations
36
Interest Revenue
After income operations
37
Allowance for Doubtful Accounts if a contra-account that offsets
Accounts Receivable
38
If inventory costs have been falling during the year, which cost method results in the highest gross profit?
LIFO
39
Costing method that approximates closely the current cost of each of the following
Ending Inventory - FIFO | COGS - LIFO