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jeremy harmon > Financial Accounting Chapter 5 > Flashcards

Financial Accounting Chapter 5 Flashcards

1
Q

What is another name for accounting for short term investments

A

Marketable Securities

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2
Q

What are the 2 methods of estimating collectibles?

A

Percent of sales

Aging of receivables

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3
Q

What is the risk for extending credit to customers?

A

Some customers do not pay what is owed

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4
Q

Interest Formula

A

Principal x rate x time

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5
Q

Cost less than market price =

A

Unrealized loss

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6
Q

Investment revenue is from

A

Dividends or interest earned

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7
Q

Allowance Method

A

The estimated amount of uncollectible accounts

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8
Q

What is the time period of Accounting for short term investments?

A

1 year or less

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9
Q

In Notes Receivable terms what is Maturity Value?

A

Sum of principal and interest on note

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10
Q

In the allowance method what is recorded that reduces accounts receivable on the balance sheet?

A

A contra asset

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11
Q

Gains and losses are from….

A

Sales of Investments

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12
Q

What account goes on the balance sheet that is netted with accounts receivable?

A

Allowance for uncollectible accounts

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13
Q

Cost greater then market price =

A

Unrealized gain

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14
Q

What specific account goes on the income statement?

A

Uncollectible accounts expense

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15
Q

Percent of sales adjust allowance for uncollectible accounts by

A

The amount of uncollectible account expense

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16
Q

In Notes Receivable terms what is a principal?

A

Amount borrowed by debtor

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17
Q

What is reported on the balance sheet?

A

Trading investment

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18
Q

Contra-asset

A

Always paired with an asset and reduces its balance

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19
Q

Receivables

A

Monetary claims against others

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20
Q

What the difference between Accounts Receivable and Notes Receivable

A

Accounts Receivable
-Verbal promise

Notes Receivable
-written promise

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21
Q

What are 2 differences between realized and unrealized?

A

Realized

  • Investment sold to third party
  • Gain or loss = difference between selling price and cost

Unrealized

  • Company still owns investment
  • Gains or loss = difference between market value and cost
22
Q

In Notes Receivable terms what is Interest

A

Cost of borrowing money

23
Q

In Notes Receivable terms what is a creditor?

A

Party to whom money is owed

24
Q

What 3 major things are included in the Direct Write Off Method?

A

Revenues do not match expenses
Uncollectible accounts expense used for write offs
No allowance for uncollectible accounts

25
Q

What are the 3 categories of Accounting for Short Term Investments?

A

Trading Investments
Available for Sale
Held to Maturity

26
Q

Unrealized gain or loss is from

A

Entry to adjust to market value

27
Q

Unrealized Gains and Losses

A

Difference between market price and cost of investment at year-end

28
Q

In Notes Receivable terms what is a Maturity Date?

A

Date debtor must pay the note

29
Q

At year-end how are trading investments adjusted?

A

Adjusted to their equal market value

30
Q

The allowance is used to

A

Absorb specific accounts that are determined to be uncollectible

31
Q

Why is the direct write off method less preferred than allowance method? (2 things)

A

Does not match revenues with expenses

Accounts Receivable overstated

32
Q

In Notes Receivable terms what is a debtor?

A

Party that owes money

33
Q

What is the cost of extending credit to customers?

A

Uncollectible Accounts

34
Q

What is overstated in the direct write off method?

A

Accounts Receivable

35
Q

In Notes Receivable terms what is a creditor also known as?

A

Lender

36
Q

Trading investments

A

Held for a short time and then sold

37
Q

In Notes Receivable terms what is another name for a debtor?

A

Borrower

38
Q

In Notes Receivable terms what is a term?

A

Length of time money is borrowed

39
Q

What is the difference between percent of sales and aging of receivables?

A

Percent of Sales
Income Statement Approach

Aging of Receivables
Balance Sheet approach

40
Q

What 3 things are reported on the income statement?

A

Gains and losses
Investment Revenue
Unrealized gain or loss

41
Q

Aging of Receivables adjust allowance for uncollectible accounts by

A

The amount of uncollectible accounts receivable

42
Q

In the allowance method what is always recorded as part of the adjusting process?

A

An Expense

43
Q

If the cost is greater than the selling price it is a —-.

A

Gain

44
Q

If the cost is less than the selling price it is a —-.

A

Loss

45
Q

What is another name for a contra asset

A

Allowance

46
Q

Bad Debt Expense

A

What we are not expected to receive from credit sales

47
Q

What does bad debt expense always effect?

A

Allowance for undoubtful accounts

48
Q

What is another name for allowance for undoubtful accounts?

A

Uncollectible accounts

49
Q

What does bad debt expense always effect?

A

Allowance for undoubtful accounts

50
Q

What is another name for allowance for undoubtful accounts?

A

Uncollectible accounts

jeremy harmon (108 decks)

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