final exam Flashcards
what are the three forms of business organization?
Sole proprietorship - unlimited liability
Corporation - owned by stockholders. limited liability
Partnership - unlimited liability. more financial outlets
What kind of classification is cost of goods sold?
expense
Which financial statement reports assets, liabilities, and stockholders’ equity?
balance sheet
when does the balance sheet reports the assets, liabilities, and stockholders’ equity?
at a specific date
In a classified balance sheet, how are assets usually classified?
Current assets; long-term investments; property, plant, and equipment; and intangible assets
The beginning balance of retained earnings
the ending balance minus net income plus dividends
Issuing new shares of common stock will
increase common stock
What are generally accepted accounting principles?
A set of accounting rules and practices that have authoritative support
What are the accounting rules that have substantial authoritative support and are recognized as a general guide for financial reporting purposes in the U. S.?
Generally accepted accounting principles
The effect on the basic accounting equation of performing services for cash are to
increase assets and increase stockholders’ equity.
Retained earnings is decreased by
expenses
If cash is received in advance from a customer
liabilities will increase.
Receipt of an unearned revenue
increases an asset; increases a liability.
Which statement about an account is true?
An account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders’ equity items.
What journal entry is recorded as a result of issuing stock to investors for cash?
A debit to Cash and a credit to Common Stock
What type of account is unearned revenue?
liability
On. Jan. 10, Novis Company purchased manufacturing equipment for $80,000 cash. What kind of activity is this?
investing activity
The generally accepted accounting principle which dictates that revenue be recognized in the accounting period in which the performance obligation is satisfied is the
revenue recognition principle
The use of the cash basis of accounting violates both
the revenue recognition and expense recognition principles
Adjusting entries are made to ensure that: (3)
- expenses are recognized in the period in which they are incurred.
- balance sheet and income statement accounts have correct balances at the end of an accounting period.
- revenues are recorded in the period in which the performance obligation is satisfied.
What is not a typical example of a prepaid expense?
Wages
The difference between an asset’s cost and its accumulated depreciation is called
book value
what is not a typical example of an accrued expense?
depreciation
Which types of accounts will appear in the post-closing trial balance?
permanent accounts
what is a merchandiser that sells directly to consumers?
retailer
Which inventory system will likely be used by a company with merchandise that has a high unit value?
Perpetual inventory system
Under what system is cost of goods sold determined at the end of an accounting period?
Periodic inventory system
When is a physical inventory usually taken?
At the end of the company’s fiscal year
what is not an inventory account?
equiptment
what are the inventory costing methods?
Last-in, first-out
Average cost
First-in, first-out
Two companies report the same cost of goods available for sale, but each employs a different inventory costing method. If the price of goods has increased during the period, The company using which method would..
The company using FIFO will have the highest ending inventory.
What type of receivable is evidenced by a formal instrument and normally requires the payment of interest?
a note recievable
When is a receivable recorded by a service organization?
When service is provided on account
Bad Debts Expense
is a nominal account and is closed at the end of the fiscal period, while Allowance for Doubtful Accounts is a real account and remains open at the end of the fiscal period.
Obama Company has identified that Bill Clinton’s receivable account of $100 is uncollectible. What is the journal entry needed to write off the account under the allowance method?
Allowance for Doubtful Accounts 100
Accounts Receivable 100
On the date a 90-day note is honored, how much cash will the payee receive?
Face value plus 90 days of interest
when reporting receivables on the balance sheet..
Allowance for Doubtful Accounts is shown as a deduction from Accounts Receivable on the balance sheet.
what is not a depreciable asset?
land
Which depreciation method calculates annual depreciation expense based on book value at the beginning of each year?
Declining-balance
The time period for classifying a liability as current is one year or the operating cycle, whichever is
longer
Which one of the following is not a typical current liability?
bonds payable
When a bond is sold at a premium, at what value is it reported on the balance sheet?
face value plus any premium
What is not a major advantage of a corporation?
Government regulations
what is not a stockholder’s right?
The right to participate in management decisions
For what reason might a company acquire treasury stock?
To reissue the shares to officers and employees under bonus and stock compensation plans
what features are associated only with preferred stock?
Preference to assets in the event of liquidation
Dividend preference
Cumulative dividends
In the stockholders’ equity section of the balance sheet, from what is the cost of treasury stock deducted?
Total paid-in capital and retained earnings
When a stock dividend is declared, which of the following accounts is debited?
Stock Dividends
positive of fifo
highest potential profit
positive of lifo
lower taxable income
positive of weighted average
quick and easy
specific identification
best option but not realistic for most companies. for high price, low volume. like a car dealership or a jewelry store
what does value of ending inventory mean
it is what is left
account recievable
verbal and informal
note recievable
formal and has interest
allowance for doubtful accounts
a contra asset account. on the balance sheet. set by the businesses choice
accumulated depreciation
the using up of an asset. it is a contra asset.
- straight line
- activity
- double declining
only thing not an estimate in depreciation
cost
current liability
a year or less. anything payable or unearned revenue
long term liability
more than a year. a note payable or bonds
bonds
long term liability. usually $1000 increments. worried about changing interests. (= par or face value) (>p= premium) (
issued stock
introduced to market
outstanding stock
active in the market - issue dividends
authorized stock
can be sold
treasury stock
co. buys back own stock. contra equity
dividends (account, where)
retained earnings. statement of retained earnings.
account receivable (account, where)
asset. balance sheet
unearned revenue (account, where)
liability. balance sheet
interest expense (where)
income statement
required after you journalize
transfer to ledger
make a trial balance
CR & DR
at least one CR for each DR transaction (and visa versa)
original charter
how many shares of stock have been authorized (can be sold)
intangible asset
amortization expense. straight line.
natural resource
depletion expense. activity method
income statement
revenues. expenses. net income
balance sheet
assets. liabilities. SE
