ACC 200 Exam 2 Flashcards

Questions and Answers

Adjusting entries are made to ensure that:

Balance sheet and income statement accounts have correct balances at the end of an accounting period.

Revenues are recorded in the period the performance obligation is satisfied.

All of these answer choices are correct. (correct)

Expenses are recognized in the period they are incurred.

Unearned revenue is classified as a(n):

liability

As prepaid expenses expire with the passage of time, the correct adjusting entry will be a:

Debit to an expense account and a credit to an asset account

Which of the following would not result in unearned revenue?

Services performed on account Signup and view all the answers

Which principle dictates that efforts (expenses) be recorded with accomplishments (revenues)?

Expense recognition principle Signup and view all the answers

Adjusting entries can be classified as:

Accruals and deferrals. Signup and view all the answers

If financial statements are prepared on July 31, the adjusting entry for Fisher Shoe Store will be:

Debit Rent Expense, $4000; credit Prepaid Rent, $4000 Signup and view all the answers

If a purchaser using a perpetual inventory system pays the transportation costs for goods purchased, then the:

Inventory account is increased. Signup and view all the answers

Indicate which one of the following would not appear on both a single-step income statement and a multiple-step income statement:

Gross profit Signup and view all the answers

The Sales Returns and Allowances account is classified as a(n):

Contra revenue account Signup and view all the answers

After gross profit is calculated, operating expenses are deducted to determine:

Net income Signup and view all the answers

Sales revenue less cost of goods sold is called:

Gross profit Signup and view all the answers

The entry to record the return of goods from a customer would include a:

Debit to Sales Returns and Allowances Signup and view all the answers

The entry to record the receipt of payment within the discount period on a sale of $900 with terms of 2/10, n/30 will include a:

Credit to Accounts Receivable for $900 Signup and view all the answers

The amount of net sales on the income statement would be:

$150000 Signup and view all the answers

What amount will be received as payment in full if collected on May 4 for a credit sale of $3800 with a return of $200?

$3528 Signup and view all the answers

Study Notes

Adjusting Entries

Ensures expenses are recognized in the period incurred and revenues match performance obligations.
Corrects balance sheet and income statement accounts at the accounting period's end.

Unearned Revenue

Classified as a liability on financial statements.

Prepaid Expenses

Adjusting entry for expired prepaid expenses includes debiting an expense account and crediting an asset account.

Services and Unearned Revenue

Services performed on account do not result in unearned revenue.

Expense Recognition Principle

Dictates recording expenses in conjunction with associated revenues.

Types of Adjusting Entries

Can be classified into accruals and deferrals.

Rent Expense Adjustment

For prepaid rent of $24,000 over 6 months, adjusting entry on July 31 is a debit of $4,000 to Rent Expense and a credit of $4,000 to Prepaid Rent.

Perpetual Inventory Costs

When a purchaser pays transportation costs, it results in an increase in the Inventory account.

Income Statement Formats

Gross profit does not appear on a single-step income statement but is included in multiple-step income statements.

Sales Returns and Allowances

Classified as a contra revenue account, affecting total revenue reported.

Calculating Net Income

Net income is determined by deducting operating expenses from gross profit.

Gross Profit Definition

Defined as sales revenue minus the cost of goods sold.

Recording Returns

The entry for customer returns includes a debit to Sales Returns and Allowances.

Payment Receipt with Discount

For a sale of $900 with terms 2/10, n/30, the entry includes crediting Accounts Receivable for the full $900.

Calculating Net Sales

Net sales are derived from total sales revenue of $160,000, subtracting sales returns and allowances ($3,000) and sales discounts ($7,000), resulting in $150,000.

Final Payment Calculation

A credit sale of $3,800 with a $200 return results in a payment received of $3,528 if collected on the due date after discount consideration.

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Description

Prepare for the ACC 200 Exam 2 with these flashcards that cover key concepts in accounting, including adjusting entries and classification of unearned revenue. Test your knowledge and ensure you understand how to apply these principles effectively.