ACCT201 Final Exam Study Guide

ACCT201 FINAL Exam Study Guide

Exam Format

  • 75 multiple choice questions
  • Total of 150 possible points
    • 50% calculation-based questions
    • 50% conceptual questions

Fixed Assets

  • Definitions

    • Fixed Assets = Plant Assets = Property, Plant & Equipment

  • Cost of a Fixed Asset

    • Includes all expenditures necessary to get the asset ready for use.

  • Depreciation

    • Not all fixed assets are depreciated. Identify which asset is generally not depreciated.
    • Book Value of Asset:
    • Formula: Book Value = Cost - Accumulated Depreciation
    • Salvage Value:
    • Definition: Estimate of the asset's value at the end of its useful life.

  • Depreciation Methods

    • Straight-Line Depreciation:
    • Formula: Depreciation Expense = (Cost - Salvage Value) / Useful Life
    • Adjust for assets purchased partway through the year:
      • Multiply by the fraction of the year that the asset is in use: (* # months / 12 months)
    • Units of Activity Method of Depreciation:
    • Formula: Depreciation Expense = (Cost - Salvage Value) / Total Units of Activity over Asset's Life
    • Multiply by the actual units of activity for each year.

  • Ordinary Repairs:

    • Expensed as incurred.

  • Disposal of Fixed Assets:

    • Gain or Loss Entry:
    • Compare Book Value (BV) to Sale Price (SP):
      • If SP > BV, record a GAIN (credit).
      • If SP < BV, record a LOSS (debit).

Intangible Assets

  • Acquisition of Goodwill:
    • Identify methods of acquiring goodwill.
  • Research and Development Costs:
    • Expensed as incurred.
  • Patents:
    • Determine what fees are included and the legal life of a patent.
  • Characteristics of Intangible Assets:
    • Have no physical substance.

Amortization and Asset Turnover

  • Amortization Expense Calculation:
    • Use a straight-line method similar to fixed assets.
  • Asset Turnover Ratio:
    • Formula: Asset Turnover = Net Sales / Average Total Assets
    • Indicates efficiency of a company’s operations; higher ratios are preferable.
  • Property, Plant & Equipment vs. Intangible Assets:
    • Define categories and differences between each type of asset.

Liabilities

  • Issuance of Notes:
    • Procedures for recording.
  • Interest Calculation and Recording:
    • Formula: Interest = Principal (P) * Rate (R) * Time (T)
  • Payment of Notes and Accrued Interest:
    • Proper accounting methods.
  • Sales Transactions and Sales Taxes:
    • How to record sales with sales taxes (Sales Tax Payable).
    • Calculation method for sales taxes when total amount and percentage are given.

Types of Liabilities

  • Current Liabilities vs. Long-term Liabilities:

    • Definition and examples of each.

  • Payroll Recording:

    • Gross pay less deductions (FICA, Income tax, Medical insurance) equals Net pay.

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