Acc 2 Final exam

Here’s a complete study guide based on the review PDF, with each topic broken down into key concepts and calculations you need to know:

Part I: Equity and Liability (Ch. 13–17)

Chapter 13: Accounting for Corporations

• Market value per share = Market Price ÷ Shares Outstanding

• Earnings per share (EPS) = (Net Income – Preferred Dividends) ÷ Weighted Avg. Common Shares

• Impact of transactions: Know how issuing stock, declaring dividends, or purchasing treasury stock affects assets, liabilities, and equity.

• Dividends: Know the difference between cash dividends, stock dividends, and stock splits.

Chapter 14: Bonds and Long-Term Liabilities

• Installment Note: Fixed payments; interest portion decreases and principal portion increases over time.

• Bond Price = Present Value of Principal + Present Value of Interest Payments (use market rate)

• Bond Interest = Face Value × Contract Rate (may be annual or semiannual)

Chapter 15: Investments

• Equity Method: Used when ownership is 20–50%; investor recognizes share of investee’s earnings.

• Insignificant Influence (<20%) → Use Fair Value method.

• Significant Influence (20–50%) → Use Equity method.

• Held-to-Maturity: Reported at amortized cost.

• Available-for-Sale: Reported at fair value; unrealized gains/losses go to equity.

• Trading Securities: Unrealized gains/losses go to income.

• Balance Sheet Reporting:

  • Trading → Current assets

  • AFS & HTM → Current or long-term depending on intent

  • Fair Value Adjustment Account used for fair value changes

Chapter 16: Statement of Cash Flows

• 3 Sections:

  • Operating: Net income + adjustments (depreciation, working capital)

  • Investing: Buying/selling PPE, investments

  • Financing: Borrowing, repaying, issuing stock, paying dividends

• Use indirect method for operating section

Chapter 17: Financial Statement Analysis

• Return on Total Assets = (Net Income + Interest Expense × (1 – Tax Rate)) ÷ Average Total Assets

• Know ratios: liquidity (current, quick), solvency (debt-to-equity), profitability (net margin, ROA, ROE)

Part II: Managerial Accounting (Ch. 18–21)

Chapter 18: Concepts and Principles

• Direct Costs: Traceable to a product (e.g., DM, DL)

• Indirect Costs: Shared across products (e.g., factory rent)

• Product Costs: DM + DL + MOH (go to inventory)

• Period Costs: Non-manufacturing (e.g., selling/admin) → expensed

Chapter 19: Job Order Costing

• Total Manufacturing Cost = DM + DL + Applied MOH

• Job cost sheet tracks costs by job

• Journal entries for materials, labor, and overhead (using POHR)

Chapter 20: Process Costing

• Use when products are homogeneous and mass-produced

• Weighted Average Method:

  • Cost/EUP = (Beg. Inv. Cost + Current Cost) ÷ (Beg. EUP + Current EUP)

• Journal entries for raw materials purchases and requisitions

Chapter 21: Cost Behavior and CVP Analysis

• Contribution Margin (CM) = Sales – Variable Costs

• CM Ratio = CM ÷ Sales

• Break-even Point = Fixed Costs ÷ CM per Unit or CM Ratio

• Margin of safety, operating leverage

Part III: Budgeting and Performance (Ch. 22–24)

Chapter 22: Master Budgets and Planning

• Budgeting: Planning future financial goals

• Benefits: Coordination, motivation, planning

• Production Budget = Budgeted Sales + Ending Inventory – Beginning Inventory

• Preliminary Cash Balance: Beg. Cash + Cash Inflows – Cash Outflows

Chapter 23: Flexible Budgets and Standard Costs

• Direct Materials Variance:

  • Price Variance = (AP – SP) × AQ

  • Quantity Variance = (AQ – SQ) × SP

  • Total DM Variance = Price + Quantity

• Flexible Budget Performance Report: Compares actual to budgeted at actual level of output

Chapter 24: Performance Measurement and Responsibility Accounting

• Cost Allocation: Use allocation base (e.g., square footage, labor hours)

• Residual Income = Operating Income – (Minimum Rate × Average Assets)

• Transfer Pricing:

  • With excess capacity: transfer price = variable cost

  • Without excess capacity: transfer price = market price or negotiated