accounting exam 2

Net sales formula

Sales revenue- sales discounts- sales returns and allowances = net sales

Gross profit formula

Net sales- cost of goods sold= gross profit

Net realized value formula

Accounts receivable- allowance of doubt = net realized value

Bad debt expense (allowance) formula

Sales x % uncollected = bad debt expense (decreases Net income and assets)

Aging Receivables formula

Desired balance- current allowance

Interest formula

Principal x Rate x Time= Interest

Receivables Turnover Formula

Net sales/ average accounts receivable = receivables turnover

Avg AR = beginning + ending /2

Cost of Goods sold formula

Beginning inventory + purchases - ending inventory= COGS

Inventory system (Perpetual)

Recorded every sale or purchase

Inventory system (periodic)

Only recorded at end of period

FIFO

First in first out, old price x units

LIFO

last in first out, units x new price

Lower cost or market (LCM)

Inventory recorded as lower of two values

Inventory Turnover formula

COGS/avg inventory

Book value formula

Cost - accumulated depreciation

Straight line depreciation formula

(Cost-salvage)/useful life yrs

Double declining depreciation formula

2/useful life yrs x book value, (subtract book value from previous yr value each yr)

Selling assets formula

Cash received - book value = gain or loss

Goodwill formula

Cash paid - fair value of net assets