D102 Financial Accounting Quizlet Import

What information is contained in a balance sheet?

Report of a company's financial position as of a point in time.

What is an owners' equity item?

Accounts receivable
Loans payable
Capital stock
Cash

Capital Stock

A company ended July with assets of $150,000 and owner's equity of $60,000.
What is the amount of liabilities at the end of July?

$90,000

What is reported in a multiple-step income statement that is not reported in a single-step income statement?

Gross Profit

How is gross profit computed?

Sales minus cost of goods sold.

The following are some accounts from a company's financial statements:
(accounts receivable, cost of goods sold, cash, retained earnings, sales, inventory, income tax expense, accounts payable)
Which set is a list of all of the items that are used in computing this company's net income?

Sales, cost of goods sold, and income tax expense.

What cash flow category contains activities whereby cash is obtained from or repaid to owners or creditors?

Financing

Here are some financial statement items for the year for a company.
Cash received from customers
Cash received from the sale of land
Cash paid for dividends
Cash paid to employees for wages
Cash paid to purchase a new building
Cash paid for rent
Cash received as new investment from owners
Which set of items is a list of items that are used in computing the company's financing cash flow for the year?

Cash paid for dividends and cash received as new investment from owners.

Here are some financial statement items for a company.
Net income
Cash flow from financing activities
Cash balance at the beginning of the year
Sales Cash flow from investing activities
Accounts receivable
Retained earnings at the beginning of the year
Cash flow from operating activities
What items are used in computing the company's ending cash balance for the year?

Cash balance at the beginning of the year, cash flow from operating activities, cash flow from investing activities, and cash flow from financing activities.

How is revenue typically recorded with debits and credits?

As a credit, representing an increase in equity.

What is the proper way to record an increase in an asset account and an increase in an equity account?

Asset, debit

equity, credit

How are expenses typically recorded with debits and credits?

As a debit, representing an increase in assets.

A company purchased inventory for $5,000. The company paid $1,000 cash and the remainder of the purchase was made on account.
What is included in the journal entry necessary to record this inventory purchase?

Credit to accounts payable for $4,000.

A company sold inventory that cost $1,300 for $2,000. It received $500 cash and the remainder was on account.
What is included in the journal entry or entries necessary to record this sale of inventory?

Debit to accounts receivable for $1,500.

On August 1 of Year 1, a company paid $7,200 for two years' rent. The rental period starts on August 1 of Year 1.
Which debit or credit is correctly included in the adjusting journal entry necessary on December 31 of Year 1?

Debit to rent expense for $1,500.

The revenue recognition principle states that revenues are recorded when two main criteria have been met. One of those criteria is that cash has been collected or collectability is reasonably assured.
What is the other criterion?

The earnings process is substantially complete.

What is the matching principle?

Expenses are recorded in the same period in which the corresponding revenue is recorded.

For large, publicly traded companies, why is accrual basis accounting preferred over cash basis accounting?

Accrual basis accounting provides a more accurate picture of a company's economic profitability.

At the end of the year, before any closing entries are made, which account has a debit balance?

Cost of Goods Sold

What is a nominal account?
Capital stock
Long-term debt
Salaries
Equipment

Salaries

In preparing a bank reconciliation, what is the proper treatment of a deposit in transit?

Add it to the reported cash balance in the bank statement.

A company rents a building that it uses in its operations. The accountant for the company mistakenly input a $1,000 rental payment on the building as $10,000 in the accounting records.
What is the impact of this error on the financial statements?

Expenses are too high, so reported net income is too low.

The accountant for a company mistakenly posted an expense amount as an asset in the general ledger.
What is the financial statement impact of this error?

Assets are too high, and retained earnings are too high.

The accountant for a company mistakenly posted a liability amount as a revenue in the general ledger.
What is the financial statement impact of this error?

Liabilities are too low, and retained earnings are too high.

Proper segregation of duties requires that one person not perform three specific separate functions with respect to a single transaction. Two of those functions are authorization and record keeping.
What is the third function that should be performed by a different person if proper segregation of duties is to be maintained?

Custody of assets

Why are daily cash deposits important?

They prevent the accumulation of a large amount of cash.

On July 10, goods were sold for $10,000. Cash of $4,000 was received, and the $6,000 remainder was on account. The customer returned the goods before paying any of the remaining $6,000 on account.
Which debit or credit should be included in the journal entry on the seller's books to record the return of the goods?

Credit accounts receivable for $6,000

What is the direct write-off method with respect to bad debts?

Recognizing bad debt expense after confirming that a specific customer is not going to pay.

On January 6, a credit sale was made for $1,000. Terms for the sale were 4/10, n/30. Cash for the sale was collected on January 25.
Which debit or credit should be included in the journal entry to record the cash collection on January 25?

Debit cash for $1,000

A company's controller estimated bad debt expense using the percentage of accounts receivable method. Total sales for the year were $1,500,000. The ending balance in accounts receivable was $300,000. An examination of the outstanding accounts at the end of the year indicates that approximately 7% of these accounts will ultimately prove to be uncollectible. Before any adjustment, the balance in the allowance for bad debts is $4,000 (credit). Total accounts written off as uncollectible during the year were $15,000.
Which debit or credit is included in the adjusting entry to record bad debt expense for the year?

Credit allowance for bad debts for $17,000

Which costs are included in work-in-process inventory?

Materials, labor, and overhead

Who owns goods in transit?

If the shipping terms are FOB destination, the goods belong to the seller while in transit.

On November 1, a company purchased inventory costing $1,000 on account. The payment terms are 2/10, n30. The company paid on November 6 to receive the 2% discount.
What is the impact on the company's financial statements of the cash payment of this account within the discount period?

Decrease inventory by $20

With a LIFO inventory cost flow assumption, what is assumed about the units that are sold and the units that remain in ending inventory?

New units sold, old units in ending inventory

When a machine is purchased, what is the proper accounting for the amount paid for sales tax on the purchase price?

As part of the cost of the machine

How does a company report an externally purchased trademark in its financial statements?

As an asset in the balance sheet

A company purchased a patent from another company for $5,000 cash.
What is needed in the journal entry to record this patent purchase?

Debit to patent for $5,000

On January 1 of Year 1, a company purchased a franchise for $100,000. The franchise is expected to have a 20-year economic useful life. The franchise is assumed to have zero salvage value at the end of its economic useful life. The company uses straight-line amortization.
What is needed in the journal entry to record amortization expense on this franchise at the end of Year 1?

Credit to franchise for $5,000

The following are payroll data for the employees of a company:
Salaries Withholding Taxes Payable $20,000
Salaries Payable 400,000
Federal Withholding Taxes Payable 48,000
FICA Taxes Payable, Employees26,000
What is needed in the journal entry to record the given employee payroll data?

Credit to federal withholding taxes payable for $48,000

William is an employee of a company and earns a salary of $300 per day. In addition, for every 10 days that he works, William earns the right to take a paid sick day at some point in the future. Ignore any payroll taxes and assume that William's salary has not yet been paid in cash.
What is needed in the journal entry to record William's salary for the most recent pay period, which involved 20 working days?

Debit to salaries expense for $6,600

A company made retail sales of $20,000 to its customers. The sales tax rate is 8.0%. All sales are cash sales.
What is needed in the journal entry to record these sales?

Debit to cash for $21,600

How does a mortgage loan differ from an ordinary loan?

A mortgage loan is related to a specific asset.

A company borrowed $10,000 in cash by signing a $10,000, five-year note payable with a 10% annual interest rate.
What is needed in the journal entry to record this borrowing of $10,000?

Debit to cash for $10,000

A company has a long-term loan on which it is making annual payments of $10,000. This year, the $10,000 payment is composed of $8,000 in interest and $2,000 that goes toward repaying the loan.
What is needed in the journal entry to record this $10,000 cash loan payment?

Debit to loan payable for $2,000

A company has a five-year, $200,000 note payable on which it has been making annual interest payments of $15,000. This is the final year of the note, and the company has made a $215,000 payment to pay this year's interest as well as to repay the note itself.
What is needed in the journal entry to record this $215,000 cash payment?

Debit to interest expense for $15,000

A company has issued 300,000 new shares to shareholders in exchange for $5,000,000 cash. The shares are $1 par common shares.
What is needed in the journal entry to record this issuance of shares?

Credit to paid-in capital in excess of par for $4,700,000

On March 23, a company declared a dividend of $3.00 per share to be paid on July 12 to shareholders of record on June 6. There are 20,000 shares outstanding.
What is needed in the journal entry to record the declaration of the dividends on March 23?

Debit to dividends for $60,000

On March 23, a company declared a dividend of $3.00 per share to be paid on July 12 to shareholders of record on June 6. There are 60,000 shares outstanding.
What is needed in the journal entry to record the payment of the dividends on July 12?

Debit to dividends payable for $180,000

Where and when should an expense already paid in cash be reported if it cannot be directly matched with an associated revenue?

In the income statement as an expense in the accounting period in which it is incurred

Which one of these items is a nominal account?

Sales Revenue

Nominal accounts are Revenues, Expenses, and Dividends. Real accounts are Asset, Liability, and Owners' Equity accounts.

Which item is closed to a zero balance at the end of each accounting period?

COGS

At the end of the year, before any closing entries are made, which account typically has a debit balance?

Dividends
Correct! The accounts that typically have debit balances are Assets, Expenses, and Dividends. Conversely, the accounts that typically have credit balances are Liabilities, Owners' Equity (Capital Stock and Retained Earnings), and Revenues.