Brainscape's Knowledge GenomeTM

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


See full index

Accounting 1 > Final Exam, Ch 9-11 (Plus partial Ch 4, 6, 8) > Flashcards

Final Exam, Ch 9-11 (Plus partial Ch 4, 6, 8) Flashcards

1
Q

Defn: A monetary claim against a business or an individual.

A

Receivable

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

A ________ occurs when a business sells goods or services to another party on account (on credit)

A

Receivable

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

Defn: The party to a credit transaction who takes on an obligation/payable.

A

Debtor

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

The (3) major types of receivables:

A
  1. Accounts receivable 2. Notes receivable 3. Other receivables
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Defn: The right to receive cash in the future from customers for goods sold or for services performed.

A

Accounts receivable

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

_________ receivables are usually collected within a short period of time, such as 30 or 60 days and therefore are reported as current assets on the balance sheet.

A

Accounts

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

Defn: A written promise that a customer will pay a fixed amount of principal plus interest by a certain date in the future.

A

Notes receivable

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

What is another name for a Notes receivable?

A

Promissory note

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

Defn: The date when a note is due

A

Maturity date

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

Notes receivable due within one year or less are considered ________ assets. Notes receivable due beyond one year are ____________ assets.

A
  • Current - Long-term
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Separate customer accounts receivable are called _________ accounts.

A

Subsidiary accounts

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

Defn: The cost to the seller of extending credit arising from the failure to collect from some credit customers.

A

Bad Debts Expense

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

Customers’ accounts receivable that are uncollectible must be ___________ from the books because the company does not expect to receive cash in the future.

A

removed or written-off

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

(2) methods of accounting for uncollectible receivables and recording the related bad debts expense:

A
  1. Direct write-off method 2. Allowances method
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Defn: A method of accounting for uncollectible receivables in which the company records bad debts expense when a customer’s account receivable is uncollectible.

A

Direct write-off method

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

When using the Direct write-off method, how does a company journalize the transaction?

A
  1. debiting “Bad Debts Expense” account 2. crediting customers “Accounts Receivable”
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Why is the direct write-off method not often used except by small, nonpublic companies?

A

Because it violates the matching principle

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

Defn: A method of accounting for uncollectible receivables in which the company estimates bad debts expense instead of waiting to see which customers the company will not collect from

A

Allowance Method

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

What is the contra account that is utilized by the Allowance Method?

A

Allowance for Bad Debts account

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

What account does the contra-account “Allowance for Bad Debt” reduce?

A

Asset account: “Accounts Receivable”

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

How does a company use the Allowance Method?

A
  • Estimates bad debt expense at the end of the reporting period - Records adjusting journal entry
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Defn: The net value a company expects to collect from its accounts receivable.

A

Net Realized Value

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

Formula: Net Realized Value

A

= Accounts Receivable - Allowance for Bad Debts

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

Which method for accounting for Bad Debt Expense is used under GAAP?

A

Allowance Method

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

What steps does a company take to journalize bad debt expense using the Allowance Method?

A
  • [AJE] Debit “bad debt expense account” Credit “allowance for bad debt” - Write off the account receivable: Debit “allowance for bad debt” Credit “accounts receivable”
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Defn: A method of estimating uncollectible receivables that calculates bad debt expense based on a percentage of net credit sales

A

Percent-of-sales Method

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

Formula: Percent-of-Sales Method

A

Bad Debts Expense = (Net credit sales) x (%)

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

Defn: The amount loaned out by the payee and borrowed by the maker of the note.

A

Principal

29
Q

Defn: The entity that signs the promissory note and promises to pay the required amount, also known as the “debtor”.

A

Payee of the note

30
Q

Defn: The revenue to the payee for loaning money - the expense to the debtor.

A

Interest

31
Q

Defn: The percentage rate of interest specified by the note.

A

Interest Rate

32
Q

Defn: The period of time during which interest is computed; extends from the original date of the note to the maturity date.

A

Interest Period

33
Q

Formula: Computing Interest

A

Amount of interest = (Principal) x (Interest rate) x (Time - fraction of 12 mos.)

34
Q

Defn: Long-lived, tangible asset, such as land, buildings, and equipment, used in the operation of a business

A

Plant Asset

35
Q

Defn: The process by which businesses spread the allocation of a plant asset’s cost over its useful life.

A

Depreciation

36
Q

Defn: A principle that states that acquired assets and services should be recorded at their actual cost.

A

Cost Principle

37
Q

Plant assets are recorded based on the ______ Principle.

A

Cost

38
Q

Defn: A depreciable improvement to land, such as fencing, sprinklers, paving, signs, and lighting.

A

Land improvement

39
Q

Defn: Recording the acquisition of land, building, or other assets by debiting (increasing) an asset account.

A

Capitalize

40
Q

When a company pays a single price for several assets as a group it is called a _______-____ purchase.

A

Lump-sum Purchase

41
Q

Defn: A method of allocating the total cost (100%) of multiple assets purchased at one time. Total cost is divided among the assets according to their relative market values.

A

Relative-Market-Value Method

42
Q

Defn: An expenditure that increases the capacity or efficiency of a plant asset or extends its useful life. Debited to an asset account.

A

Capital expenditure

43
Q

Defn: Repair work that generates a capital expenditure because it extends the asset’s life past the normal expected life.

A

Extraordinary repair

44
Q

Are expenses incurred to maintain the asset in working order, such as repair or maintenance expenses debited to the asset account as a part of capital expenditure?

A

No.

45
Q

What kind of expenditure are expenses incurred to maintain the asset in working order, such as repair or maintenance expenses?

A

Revenue expenditures

46
Q

Defn: An expenditure that does not increase the capacity or efficiency of an asset or extend its useful life. Debited to an expense account.

A

Revenue expenditures

47
Q

What are the (3) main factors used to calculate the depreciation of a plant asset?

A
  1. Capitalized cost 2. Estimated useful life 3. Estimated residual value
48
Q

Defn: Length of the service period expected from an asset.

A

Useful life

49
Q

Defn: The expected value of a depreciable asset at the end of its useful life.

A

Residual value

50
Q

Defn: The cost of a plant asset minus its estimated residual value.

A

Depreciable cost

51
Q

Formula: Depreciable cost

A

Depreciable cost = (Cost) - (Estimated residual value)

52
Q

What are the (3) depreciation methods for plant assets?

A
  1. Straight-line method 2. Double Declining Balance (DDB) method 3. Units-of-production method
53
Q

Defn: A depreciation method that allocates an equal amount of depreciation each year.

A

Straight-line method

54
Q

Formula: Straight-line method

A

= (Cost - Residual value) / Useful life

55
Q

Forumula: Units-of-Production method

A

= (Cost - Residual Value) x Current Years Production

Total Estimated Production

56
Q

Defn: A depreciation method that expenses more of the asset’s cost near the start of its useful life and less at the end of its useful life.

A

Accelerated depreciation method

57
Q

Defn: An accelerated depreciation method that computs annual depreciation by multiplying the depreciable asset’s decreasing book value by a constant percent that is two times the straight-line depreciation rate.

A

Double-declining balance method

58
Q

Formula: Double-declining balance method

A

= (Cost - Accum. Deprc. @ beginning of year) x 2 Useful Life

59
Q

How does the DDB method account for the residual value of the plant asset?

A

Switch to the STRAIGHT-LINE METHOD halfway through the assets useful life

60
Q

FORMULA: Net Book Value (NBV)

A

= Cost - Accumulated Depreciation

61
Q

(4) steps of journalizing the disposal of a plant asset?

A
  1. Bring depreciation up to date
  2. Remove old asset and accumulated depreciation from books
  3. Record value of cash received/paid for disposal
  4. Determind amount of gain or loss
62
Q

Comparing cash received and the market value of any other assets received with the book value of the asset disposed of is the way to determine what?

A

Gain or loss from disposal of plant asset

63
Q

Defn: The total amount of salary, wages, commissions, and any other employee compensation before taxes and other deductions.

A

Gross pay

64
Q

Defn: Gross pay minus all deductions.

The amount of compensation that the employee actually takes home.

A

Net pay

65
Q

“Take-home pay” is another name for ______.

A

Net pay

66
Q

Amounts withheld from paychecks are called __________.

A

Withholding deductions

67
Q

How does a company journalize employee payroll?

Debit/Credit

A

Debit: “Salaries and Wages expense”

Credit: “Various tax payables” and “Salaries and Wages payables

Debit: “Salaries and Wages payables”

Credit: “Cash”

68
Q

Employers must pay at least (3) types of payroll taxes:

A
  1. FICA tax (SSN and Medicare)
  2. State unemployment tax
  3. Federal unemployment tax
69
Q
A

Accounting 1 (3 decks)

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