Final Exam

Question 1

CH 1 What is the basic accounting equation?

Answer 1

Assets=Liabilities+Stockholder Equity

Question 2

CH 1 How do you calculate net income?

Answer 2

Revenues - expenses=net income

Question 3

CH 2 How do you total a T account?

Answer 3

Include larger total at bottom - do not total out both! Do the difference.

Question 4

CH 2 Retained earnings falls where?

Answer 4

Under R - Revenue - credit side increase

Question 5

CH 2 Common stock falls where?

Answer 5

Under Owner Equity - credit side increase

Question 6

CH 3 How to adjust “Supplies” for the next month?

Answer 6

Look at past month’s balance, this months spending on them, and then the difference will be actual “supplies expense”

Question 7

CH 3 How is deferred revenue recorded?

Answer 7

Contra account - recorded on debit as increase side - credit would be for “service revenue”

Question 8

CH 3 How do you handle salaries to be paid?

Answer 8

Debit salaries expense, credit salaries payable

Question 9

CH 3 How do you round out Interest not yet paid for end of year?

Answer 9

Debit interest expense for accumulated months, credit interest payable

Question 10

CH 3 How is income statement (retained earnings) calculated?

Answer 10

All sales revenues vs all expenses - total will either be a net loss or net gain

Question 11

CH3 Stockholders equity statement

Answer 11

Always look at past and current numbers, add them ALL to chart and total out

Question 12

CH3 What type of asset is equipment?

Answer 12

Long term asset

Question 13

CH3 Where does accumulated depreciation go?

Answer 13

It is subtracted from equipment asset

Question 14

CH3 How do you calculate total stockholder equity?

Answer 14

Common stock plus retained earnings

Question 15

CH 3 How to close out various accounts?

Answer 15

Log numbers on the opposite side

Question 16

CH4 Weird items that are included in the year end cash to report?

Answer 16

Checks that still need to be deposited, short term investments that will mature within 3 months

Question 17

CH4 Bank vs cash reconciliation

Answer 17

Make sure to make numbers negative if they need to be- also the end balances should match the company ledger balance! - record a “bank error” for the difference

Question 18

CH 5 How to record a sales allowance?

Answer 18

Record sales allowance as an adjustment on the debit side, credit accounts receivable

Question 19

CH 5 How to record Uncollectible accounts

Answer 19

Debit BAD DEBT EXPENSE, credit ALLOWANCE FOR UNCOLLECTIBLE accounts - read whole problem for actual uncollectible numbers!

Question 20

CH 5 How to calculate net realizable value

Answer 20

Updated “Accounts Recievable” less allowance for uncollectible accounts = net realizable value

Question 21

CH 5 Notes vs accounts receivable

Answer 21

Make sure to pay attention to what type it is!

Question 22

CH 5 What if a customer signs a note to pay off an account?

Answer 22

Debit notes receivable, credit accounts receivable

Question 23

CH 6 How to record inventory sold in perpetual system?

Answer 23

Go back in final step and debit “COGS” and credit inventory for the actual cost that was spent on original items

Question 24

CH 6 How to record freight costs?

Answer 24

Included under “Inventory” debit

Question 25

CH 6 How are returns recorded?

Answer 25

As a debit under accounts payable

Question 26

Ch 7 What is allowed to be claimed for purchasing land?

Answer 26

Title insurance, leveling, tearing down structures, insurance for past

Question 27

CH 7 How to record new machine expenses?

Answer 27

Equipment, prepaid insurance separately, then cash and accounts payable as needed

Question 28

CH 7 When calculating depreciation, what should you keep in mind?

Answer 28

Start and end date, and divide by month etc

Question 29

CH 7 How to record sales with taxes?

Answer 29

Accounts receivable on debit side, sales and sales tax on credit side

Question 30

CH 8 How to record notes payable interest when it hasnt been paid yet BUT it is the end of the year?

Answer 30

Debit interest expense, credit interest payable

Question 31

CH 8 How to pay off the note at maturity? What is recorded?

Answer 31

Notes payable, interest payable, interest expense on debit, cash on credit

Question 32

CH 8 How to record contingent liabilities for warranties? How to record actual?

Answer 32

• Warranty expense on debit, warranty liability on credit

- Actual is recorded as warranty liability debit and cash credit

Question 33

CH 9 What is interest expense based on for bonds

Answer 33

Market value - IM (interest from market)

Question 34

CH 9 What is Cash paid value based on

Answer 34

Stated value (cash stated) CS

Question 35

CH 9 How is bond that is purchase for lower than stated value recorded during payments?

Answer 35

Include a “discount on bonds payable” layer as debit along with cash

Question 36

CH 10 How to record the “entry on date of record” for dividends?

Answer 36

None needed - tricked ya