Ch 8-10 Accounting

What is the formula for Cost of Goods Sold in a periodic inventory system?

Beginning Inventory + Purchases - Ending Inventory

What is a perpetual inventory system?

A system that updates inventory and cost of goods sold continuously after every transaction.

What is a periodic inventory system?

A system that updates inventory only at the end of the accounting period.

Under perpetual inventory, how is a purchase recorded?

Debit Inventory, Credit Accounts Payable/Cash.

Under periodic inventory, how is a purchase recorded?

Debit Purchases, Credit Accounts Payable/Cash.

Under perpetual inventory, how is a sale recorded?

Debit Accounts Receivable/Cash, Credit Sales Revenue AND Debit Cost of Goods Sold, Credit Inventory.

Under periodic inventory, how is a sale recorded?

Debit Accounts Receivable/Cash, Credit Sales Revenue only.

What does FIFO stand for?

First-In, First-Out.

Under FIFO, what inventory is sold first?

The oldest inventory purchased.

What is Weighted Average Cost?

Total Cost of Goods Available for Sale divided by Total Units Available.

What is Specific Identification?

A method where each specific inventory item is tracked individually.

What does LC/NRV mean?

Lower of Cost and Net Realizable Value.

What is the direct method for LC/NRV write-down?

Debit Cost of Goods Sold, Credit Inventory.

What is the indirect method for LC/NRV write-down?

Debit Loss on Inventory Decline, Credit Allowance to Reduce Inventory to NRV.

What are the two main types of investments?

Debt investments and Equity investments.

What is a debt investment?

An investment where the investor lends money and receives repayment plus interest.

What is an equity investment?

An ownership investment in another company.

What percentage ownership usually indicates significant influence?

20% to 50%.

What percentage ownership usually indicates control?

More than 50%.

What is AOCI?

Accumulated Other Comprehensive Income.

Where is AOCI found?

In shareholders' equity section of the balance sheet.

What is FV-NI?

Fair Value through Net Income.

What is FV-OCI?

Fair Value through Other Comprehensive Income.

What is amortized cost?

Investment recorded at cost adjusted for repayments/amortization.

What is recycling in accounting?

Reclassifying gains/losses from OCI into net income when realized.

What does PPE stand for?

Property, Plant, and Equipment.

What is the difference between inventory and PPE?

Inventory is held for sale; PPE is used in operations.

What is depreciation?

Allocation of the cost of tangible assets over useful life.

What is amortization?

Allocation of the cost of intangible assets over useful life.

What is depletion?

Allocation of natural resource costs over extraction/use.

What costs are included in PPE cost?

Purchase price, freight, installation, testing, taxes, legal fees.

What is componentization?

Separating major parts of an asset and depreciating each separately.

What is aggregation?

Combining similar small assets into one group for accounting.

What are the 3 PPE models?

Cost model, Revaluation model, Impairment model.

What does IAS 16 cover?

Accounting treatment for PPE under IFRS.