TEST 2 ACCT

Question 1

elected by the shareholders to represent their interests
- its audit committee is responsible for maintaining the integrity of the company’s financial reports

Answer 1

Board of Directors

Question 2

The procedures designed to ensure that the company is managed in the interest of the shareholders

Answer 2

Corporate Governance

Question 3

Predictions of earnings for the future accounting period, prepared by financial analysts

Answer 3

Earning Forecasts

Question 4

The private sector body given the primary responsibility to work out the details rules that become generaly accepted accounting principles

Answer 4

Financial accounting standards Board

Question 5

The report used by publicly traded companies to disclose any material event not previously reported that is important to investors

Answer 5

Form 8-K

Question 6

The annual report that publicly traded companies must file with the SEC

Answer 6

Form 10-K

Question 7

The quarterly report that publicly traded companies must file with SEC

Answer 7

Form 10-Q

Question 8

Net sales less cost of goods sold

Answer 8

Gross Profit (Gross margin)

Question 9

Managers of pension, mutual, endowment, and other funds that invest of the behalf of others

Answer 9

Institutional investors

Question 10

Suppliers and financial institutions that lend money to companies

Answer 10

Lenders(creditors)

Question 11

Amounts that are large enough to influence a user’s decision

Answer 11

Material Amounts

Question 12

A written public news announcement normally distributed to major news services

Answer 12

Press Release

Question 13

Individuals who purchase shares in companies

Answer 13

Private investors

Question 14

The private sector body given the primary responsibility to work out detailed auditing standards

Answer 14

Public company accounting oversight Board(PCAOB)

Question 15

The U.S government agency that determines the financial statements and other disclosures that public companies must provide to stockholders and the measurement rules that they must use in producing those statements

Answer 15

Securities and Exchange program

Question 16

Auditors statement that the financial statements are fair presentations in all material respects in conformity with GAAP and that the company maintained effective internal controls over financial reporting

Answer 16

Unqualified(Clean) Audit opinion

Question 17

Measures the excess of sales prices over the costs to purchase or produce the goods or services sold as a percentage

Answer 17

Gross profit percentage

Question 18

Measures how much the firm earned for each dollar of investment

Answer 18

Return on assets

Question 19

Credit card discounts and sales or cash discounts must be recorded as ______ that reduce net sales

Answer 19

contra-revenues

Question 20

sales return and allowances should be treated as ______

Answer 20

contra-revenue

Question 21

sales of bundled items must be accounted for using a _____ process to allocate sales price to perform obligations

Answer 21

5 step

Question 22

When recievables are material, companies must employ the allowance method to account for uncollectibles. The steps in process are:

Answer 22

• end of period adjusting entry to record bad debt expense estimates
  -writing off specific accounts determined to be uncollectible during the period

Question 23

This ratio measures the effectiveness of credit-granting and collection activities

Answer 23

Receivables turnover ratio

Question 24

When a net decrease in accounts receivable for the period occurs, cash collected from customers is always more than revenue and cash flows from operations increase

Answer 24

Effects on cash flow

Question 25

Measures the effectiveness of credit-granting and collection activites

Answer 25

receivables turnover ratio

Question 26

Open accounts owed to the business by trade customers

Answer 26

accounts recievable

Question 27

Estimates uncollectible accounts based on the age of each account receivable

Answer 27

Aging of accounts receivable methods

Question 28

Contra-asset account containing the estimated uncollectible accounts receivable

Answer 28

Allowance for doubtful accounts

Question 29

Bases bad debt expense on an estimate of uncollectible accounts

Answer 29

Allowance method

Question 30

Expense associated with estimated uncollectible accounts receivable

Answer 30

Bad debt expense( doubtful accounts expense, uncollectible accounts expense, or provision for uncollectible accounts)

Question 31

Process of verifying the accuracy of both the bank statement and the cash accounts of a business

Answer 31

bank reconciliation

Question 32

a monthly report from abank that shows deposits recorded, checks cleared, other debits and credits, and a running bank balance

Answer 32

Bank statement

Question 33

short-term investments with original maturities of three months or less that are readily convertible to cash and whose value is unlikely to change

Answer 33

Cash equivalents

Question 34

Fee charged by the credit card company for it services

Answer 34

Credit card discount

Question 35

The top line reported on the income statement.

Answer 35

Net sales
net sales= sales revenue- (credit card discounts + sales discounts + sales return and allowances)

Question 36

Written promise that requires another party to pay the business under specified conditions

Answer 36

Note receivable

Question 37

Base bad debt expense on the historical percentage of credit sales that result in bad debts

Answer 37

Percentage of credit sales method

Question 38

cash discount offered to encourage prompt payment of an account receivable

Answer 38

Sales (or cash) discount

Question 39

A reduction of sales revenues for return of or allowances for unsatisfactory goods

Answer 39

Sales return and allowances

Question 40

principle requires that revenues be recorded when earned. For most merchandisers and manufacturers this principle is the time of shipment or delivery of goods

Answer 40

Revenue recognition principle

Question 41

Revenue recorded at point of shipping, because title changes hands at shipment

Answer 41

Freight on Board shipping point

Question 42

revenue recorded at point of destination, because title changes hands on delivery

Answer 42

FOB destination

Question 43

companies accept credit cards for several reasons

Answer 43

credit card discounts

Question 44

credit card discount formula

Answer 44

sales* credit card fee rate

Question 45

If goods are defective, damaged, or unsatisfactory

Answer 45

sales return and allowance (x-tra rev account)

Question 46

credit card discounts, sales discounts, and sales return and allowances are ALL ____

Answer 46

Contra revenue accounts

Question 47

When a company sells on credit, it knows that some of these customers will NOT pay their debts

Answer 47

Accounting for bad debts

Question 48

requires recording of bad deb expense in the same accounting period in which the related sales are made, but at the end of the period of salem the company doesnt know which customers will not pay

Answer 48

Matching principle

Question 49

-make the end-of-period adjusting entry to record estimated bad debt expense
-write off specific accounts determinded to be uncollectible during the period

Answer 49

allowance method of accounting for bad debts

Question 50

contra-asset account containing the estimated uncollectible accounts receivable

Answer 50

allowance for doubtful accounts

Question 51

selling, general and adiminstrative expense in income statement

Answer 51

bad debt expense

Question 52

write-offs specific accounts deteermined to be ______ during the period

Answer 52

uncollectible

Question 53

two methods are allowed under GAAP to estimate bad debt expense

Answer 53

-percentage of credit sales
-aging of accounts receivable

Question 54

relies on the fact that as accounts receivable becomes older and more overdue, it is less likely that they will be collected

Answer 54

aging of accounts receivable method