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Final Exam - Fuck Yeah! Flashcards

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1
Q

Sign Note to Extend Credit Period/ Maturity Date is before accounting year-end journal entry when note is signed

A

Accounts Payable - Name X

 Cash                                                         X

  Notes Payable - Name                           X
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1
Q

Withdrawal of a partner- no bonus journal entry

A

Withdrawing Partner, Capital X

        Cash                                                        X
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2
Q

Capital Deficiency/ Partner Cannot Pay Deficiency Journal entry

A

Partner(1), Capital X

Partner(2), Capital X

       Deficient Partner, Capital           X

Partner(1), Capital X

Partner(2), Capital X

        Cash                                        X
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3
Q

Borrow from bank/ Maturity date is before accounting year-end journal entries

A

Cash X

   Notes Payable          X

-Repays on maturity date:

Notes Payable X

Interest Expense (Notes Payable x %) X

       Cash       (Notes Payable + Interest Expense)    X
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3
Q

Borrow From Bank/ Maturity Date is After Accounting Year-End

A

-If a note is outstanding as of the end of an accounting period, an adjusting entry is made to record accrued (not yet paid) interest
to comply with the matching principle

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4
Q

Unearned Revenues Journal Entries

A

Cash X

   Unearned Ticket Revenue            X

When work is performed:

Unearned Ticket Revenue X

         Ticket Revenue                           X
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5
Q

Warranty Liabilities Journal Entry

A

Warranty Expense X

  Estimated Warranty Liability         X

The customer returns car for repairs, dealer replaces part

Estimated Warranty Liability X

       Auto Parts Inventory                                   X
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5
Q

New Partner Invests assets in Partnership

A
  • A new partner can gain partnership interest by contributing assets to the partnership
  • The new assets will increase the partnership’s net assets
  • As a result, the partnership’s assets and equity will increase
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7
Q

Accounts Payable

A

Amounts owed to suppliers for products or services purchased on credit

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8
Q

Organizations with some characteristics like partnerships

A
  • Limited Partnerships (LP)
  • Limited Liability Partnerships (LLP)
  • Limited Liability Corporations (LLC)
  • S Corporations
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9
Q

Payroll Liabilities

A

Category 1: Amounts withheld from employees’ paychecks

  • These amounts come “out of employees’ pocket,” but the company is required to withhold them and promptly remit them
  • Examples: Payroll taxes withheld, 401(k) retirement contributions withheld, medical insurance premiums withheld

Category 2: The company’s own expenses related to payroll

  • Salaries/wages
  • The company’s payroll taxes
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9
Q

Warranty Liabilities

A
  • Seller’s obligation to replace or correct a product (or service) that fails to perform as expected winthin a specified period
  • To comply with the full disclosure and matching principles, the seller reports all of the expected warranty expense in the period when the sale is reported.
  • No expense is recorded when repairs covered by the warranty are made
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10
Q

Limited Partnership (LP)

A
  • Two classes of partners
  • General partners assume management duties
  • Have unlimited liability for partnership debts
  • Limited partners are not involved in management
  • Their personal liability for partnership debts is limited to amount invested in partnership
  • Accounting procedures similar to those of a general partnership
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11
Q

Bonus to old partner journal entry

A

Cash X

   New Partner, Capital                  X

   Existing Partner(1), Capital         X

   Existing Partner(2), Capital        X

Debit to cash means new partner is joining

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12
Q

Health and Pension Benefits

A

Employer expenses for pensions or medical, dental, life, and disability insurance:

Employee Benedits Expense X

        Employee Medical Insurance Payable                  X

        Employee Retirement Program Payable               X
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12
Q

New Partner Purchases Partnership Interest From Existing Partner Journal Entry

A

Existing Partner, Capital X

  New Partner, Capital                X
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13
Q

New Partner Purchases Partnership Interest From Existing Partner

A
  • The cash goes to the existing partner, not the partnership
  • The new partner must be accepted by the current partners
  • The partnership’s total assets and equity do not change
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14
Q

Unlimited Liability

A
  • Each partner can be called on to pay the partnership’s debts
  • If a partnership cannot pay its debts, partners wil usually have to pay out of their personal assets
  • In a general partnership, all partners have unlimited liability
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14
Q

Bonus to new partner Journal entry

A

Cash X

Existing Partner(1), Capital X

Existing Partner(2), Capital X

New Partner, Capital                         X
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15
Q

Withdrawal of a partner - bonus to remaining partners journal entry

A

Withdrawing Partner, Capital X

        Cash                                                        X

         Existing Partner(1), Capital                    X

         Existing Partner(2), Capital                    X
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15
Q

Capital Deficiency

A
  • at least one partner has a debit balance in his/her capital account prior to the final cash distribution
  • This deficiency may have been caused by:
  • excessive withdrawls before liquidation, net losses in prior periods, losses when liquidating assets
  • A partner with a capital defiiciency must, if possible, cover the deficit by paying cash into the partnership
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17
Q

Borrow From Bank/ Maturity Date is After Accounting Yeard Ned Entry On Maturity Date

A

Interest Expense X

Interest Payable X

Notes Payable X

       Cash                                  X
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18
Q

Characteristics of Liabilities

A

-A liability is a probable future payment of assets (in most cases, cash) or services that a company is currently obligated to make as a result of past transactions or events.

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18
Q

Characteristics of General Partnerships

A
  • Voluntary association
  • Partnership agreement
  • Limited Life
  • Taxation
  • Mutual agency
  • Unlimited Liability
  • Co-ownership of property
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19
Q

Liquidation of a partnership

A

A partnership dissolution requires four steps:

  1. sell noncash assets for cash and record a gain or loss on liquidations
  2. allocate gain and loss on liquidation to partners using their income-and-loss ration
  3. Pay or settle liabilities
  4. Distribute any remaing cash to partners based on their capital balances
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20
Q

Contingent Liabilities

A
  • A potential obligation that depends on a future event arising from a past transaction/event
  • example: an accident occured in the past. A lawsuit has been filed. The amount owed will not be known until the lawsuit is settled
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21
Q

Bonus Plans

A

Employee Bonus Expense X

      Bonus payable                                                X
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22
Q

Withdrawal of a partner - bonus to withdrawing partner journal entry

A

Withdrawing Partner, Capital X

Existing Partner(1), Capital X

Existing Partner(2), Capital X

              Cash                                                                        X
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23
Q

Sign note to extend credit period/ Maturity date is before accounting year-end journal entry on maturity date

A

Notes Payable - Name X

Interest Expense (Notes payable x %) X

  Cash   (Notes Payable + Interest Expense)           X
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23
Q

Journal Entry to record the company’s payroll expense and payroll deductions

A

Salaries Expense X

   FICA-Social Security Taxes Payable                    X

   FICA-Medicare Taxes Payable                             X

   Employee Federal Income Taxes Payable          X

    Employee Medical Insurance Payable                X

    Employee Union Dues Payable                           X

    Salaries Payable                                                    X
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23
Q

Payroll Reports, Records, and Procedures

A

Payroll Reports:

  • IRS Form 941
  • IRS Form 940
  • W-2

Payroll Records:

  • Payroll Register
  • Payroll Checks
  • Employee Earnings Report

Payroll Procedures:

  • Withholind taxes
  • W-4
23
Q

No Capital Deficiency Liquidation

A

Cash 46,000

    Land                                         40,000

    Partner(1), Capital                       2,000

     Partner(2), Capital                     2,000

     Partner(3), Capital                     2,000

Accounts Payable X

      Cash                                      X

Partner(1), Capital X

Partner(2), Capital X

Partner(3), Capital X

           Cash                                                      X
24
Q

Bonus to new partners

A

The partnership may grant a bonus to a new partner if the business is in need of cash or if the new partner has exceptiona talents

25
Q

Co-ownership Property

A
  • Partnership assets are owned jointly by all partners
  • Partners have a claim on partnership assets based on their capital account and the partnership contract
27
Q

Employee Benefits

A

Many companies provide benefits to their employees in addition to salaries/wages

  • can cost the employer up to 25% of employees’ gross pay

Examples:

  • Health (medical and dental)
  • Pension (retirement)
  • Vacation
28
Q

Sales Tax Payable

A

Cash X

      Sales                                                   X

      Sales Taxes Payable  (Sales x %)       X
29
Q

Reasonably Possible Contingent Liabilities

A
  • Potential Legal Claims: a potential claim is recorded if the amount can be reasonably estimated and payment for damages is probable
  • Debt guarantees: the guarantor usually discloses the guarantee in its financial statement notes. If it is probable that the debtor will default, the guarantor should record and report the guarantee as a liability
29
Q

Mutual Agency

A

Each partner individually is a fully authorized agent of the partnership.

  • Can commit or bind the partnership to any contract within the scope of the partnership’s business
  • Exposes partners to the risk of unwise actions by other partners
  • In a General Partnership, all partners have mutual agency
30
Q

Unearned Revenues

A
  • Amounts received from customers in advance for future products or services
  • Liability account, even though does not include the word “payable”

Examples:

Unearned concert ticket revenue

Unearned season ticket revennue - NFL team

31
Q

Accounting for Partnerships

A
  1. Separate capital and withdrawal accounts are maintained for each partner
  2. Each partner’s withdrawals are debited to his/her own withdrawal account
  3. When closing entries are recorded at the end of the period:
    - Each partner’s capital account is credited for his/her share of net income (or debited for his/her share of net loss)
    - Each partner’s withdrawal account is closed to his/her capital account
33
Q

Contingent Liabilties: Future Event is Probable

A
  • If the amount owed can be estimated, record the expense and liability now
  • Example: warranties
  • If the amount owed cannot be estimated, do not record an expense and liability now
  • but disclose the liability in footnotes to the financial statements
34
Q

Multi-Period Known Liabilities

A

Liability extends over more than one accounting period

36
Q

Who Pays Payroll Taxes

A

Employee Employer

Federal income taxes withheld X

FICA-Social Security X X

FICA-Medicare X X

Federal unemployment taxes (FUTA) X

State Unemployment taxes (SUTA) X

38
Q

Short-Term Notes Payable

A

A written promise to pay a specified amount on a definite future date

  • within one year or the company’s operating cycle, whichever is longer
  • in most cases, are interest bearing
  • at maturity date, borrower pays principal + interest
  • In this course, calculate interest based on a 360 day year
39
Q

Limited Liability Partnerships (LLP)

A
  • Protects innocent partners from negligence or malpractice claims related to other partners’ actions
  • Most states hold all partners personally liable for partnership debts
  • Accounting procedures are the same as for a general partnership
41
Q

Multi-Period Known Liabilities Current Portion of Long-term installment Debt

A
  • Assume a company borrows $7,500 with repayment in 5 annual installments of $1500 + interest
    - The $1500 installment due within the next year is reported as a current liability
    - The installments due more than a year in the future are reported as long-term liabilities
42
Q

Partnership Financial Statements

A
  • Income statement
  • Statement of Partner’s Equity
  • Balance sheet
  • Statement of Cash Flows
43
Q

Investing assets in a Partnership Journal Entry

A

Cash X

  New Partner, Capital            X
44
Q

Classifying Liabilities

A

Current Liabilities: Expected to be paid within one year or the company’s operating cycle, whichever is longer

Long-term Liabilities: Not expected to be paid within one year or the company’s operating cycle, whichever is longer.

46
Q

Short-Term Notes Payable: 3 Cases

A

Reason signed note/Maturity Date

  1. Extend credit period on existing accounts payable/ Before accounting year-end
  2. Borrow from bank/ Before accounting year-end
  3. Borrow from bank/ After accounting year-end
47
Q

Partners Do Not receive Salaries

A
  • Partners are not employees of the partnership but instead are its owners.
  • There are no partners’ salaries reported as expense on the income statement
  • However, the partners can agree to allocate “salaray allowances” reflecting the relative value of services each partner provides
  • Als, the partners can agree to allocate “interest allowances” based on the amount of each partner’s capital
  • Are not reflected as interest expense on the income statement
48
Q

Multi-Period Known Liabilities Note Payable Due in Three Years

A
  • Notes Payable often extend over more than one accounting period
  • Assume a company borrows via a note due in three years. No amount is owed until the maturity date.
    • For the first two years, the note would be reflected as a long-term liability
    • In the third (and last) year, the note would be reflected as a current liability
49
Q

S Corporations

A
  • A corporation with < 100 stockholders
  • Can elect to be treated as a partnership for income tax purposes
  • Stockholders have limited legal liability
  • If stockholders woro for the corporation, their salaries are treated like expenses
49
Q

Allocation on stated Ratios Journal Entry

A

Income Summary X

  Owner (1), Capital                    X

   Owner(2), Capital                   X
51
Q

Multi-Period Known Liabilities Unearned Revenues - Magazine Subscriptions

A
  • Unearned revenues from magazine subscriptions often cover more than one accounting period
  • On the balance sheet, the liability related to the next 12 month subscription period is reported as a current liability
    • The liability related to periods more than a year in the future is reported as a long-term liability
      - In each period, a portion of the earned revenue is recognized as follows:
    • Debit Unearned Revenue; Credit Revenue
52
Q

Vacation Benefits

A

Vacation Benefits Expense X

       Vacation Benefits Payable                   X
54
Q

Partnership Accounting

A
  • Because ownership rights in a partnership are divided among partners, partnership accounting:
  • uses a separate capital account for each partner
  • uses a separate withdrawal account for each partner
  • allocates net income according to the partnership agreement
55
Q

Taxation

A

a partnership does not file an income tax return. Instead, a partnership is a “pass through entity”. Each year, the partnership’s net income is allocated to partners according to the partnership agreement and is reflected on partners’ individual income tax returns, even if no cash was distributed to partners.

56
Q

Limited Life

A

Partnership ends when a partner dies or withdraws

57
Q

Estimated Liabilities

A

-An estimated liability is a known obligation of an uncertain amount
but the amount can be reasonably estimated

Examples: pensions, health care, warranties

58
Q

Withdrawal of a Partner

A

A partner may withdraw from the partnership in two ways:

  1. Selling his/her partnership interest to another person for cash and/or other assets
  2. Receiving cash and/or assets from the partnership
60
Q

Beginning a partnership Journal entry

A

Cash X

Boarding Facilities X

            Notes Payable                X

            Owner(1), Capital            X

Cash X

             Owner(2), Capital          X
61
Q

Liabilities in the Chart of Accounts

A
  • Balance sheet accounts
  • Normal balance: credit
62
Q

No Capital Deficiency

A

All partners have a zero or credit balance in their capital accounts

64
Q

Limited Liability Companies (LLC)

A
  • Has some features like a corporation, whereas other features are like a limited partnership
  • Owners are called members
  • Typically has limited life
  • Like a corporation, owners have limited liability
  • Like a partnership, usually elects to be a “pass through entity” for tax purposes, which means: LLC does not file income tax return. Instead, net income is divided among members. Members pay taxes for their share of LLC’s net income on their personal income tax returns
65
Q

Dividing Income or Loss

A

The partnership’s profit (or loss) is divided as specified in the partnership agreement

Three methods frequently used to divide income or loss are allocation based on: 1. Stated ratios (ratio or %s) 2. Capital balances 3. Services, capital, and started ratios

-If the partnership agreement is silent about dividing income, income is divided equally between partnerss

66
Q

Borrow From Bank/ Maturity Date is after accounting Year-End End End-of-Period adjusting Entry

A

Interest Expense X

Interest Payable                          X
67
Q

Partnership Agreement

A

Called partnership contract or articles of partnership. Governs operating details, such as division of net income, partners’ withdrawals for personal use, partners’ deaths, and admission and withdrawal of partners

68
Q

Beginning a Partnership

A
  • Partners can invest both assets and liabilities in a partnership
  • Assets and liabilities are recorded at an agreed-upon value, normally fair market value
  • a partner’s asset contributions increase his/her capital account
  • A partner’s withdrawals decrease his/her capital account
69
Q

Death of a Partner

A
  • A partner’s death dissolves a partnership
  • A deceased partner’s estate is entitled to receive his or her equity
  • The partnership agreement should contain provisions for setttlement. These provisions usually require:
    1. Closing the partnership’s books to determine income or loss since the end of the previous accounting period
    2. Determining and recording current market values for both assets and liabilities
  • Settlement of the deceased partner’s estate can involve selling the equity to the remaining partners or an outsider, or it can involve withdrawal of assets
71
Q

End-of-Period Adjusting Entry to Record Interest Expense

A

Note Date————- End of Accounting Period ———Maturity Date

An adjusting entry is required to record Interest Expense incurred todate

72
Q

Capital Deficiency/ Partner Can Pay Deficiency Journal Entry

A

Cash X

  Deficient Partner, Capital                      X

Partner(1), Capital X

Partner(20< Capital X

             Cash                                             X
73
Q

Bonus to old partner

A

When the partnership’s current value is greater than the recorded amounts of equity, the old partners usually require a new partner to pay a bonus when joining

74
Q

Journal Entry to record employer’s payroll taxes

A

Payroll Taxes Expense X

     FICA-Social Security Taxes Payable                      X

     FICA-Medicare Taxes Payable                               X

      State Unemployment Taxes Payable                    X

      Federal Unemployment Taxes payable                X
75
Q

General Partnerships

A

An unincorpororated association of two or more co-owners to establish a business for profit

76
Q

Contingent Liabilities: Future Event is reasonably possible

A

-The liability should be disclosed in footnotes to the financial statements

77
Q

Payroll Liabilities

A

Employers incur expenses and liabilities from having employees

accounting (4 decks)

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