Podcast
Questions and Answers
Which of the following individuals or groups would NOT be considered external users of financial statements?
Which of the following individuals or groups would NOT be considered external users of financial statements?
- Owners
- Creditors
- Labor unions
- Managers (correct)
Which financial statement provides a snapshot of a company's assets, liabilities, and equity at a specific point in time?
Which financial statement provides a snapshot of a company's assets, liabilities, and equity at a specific point in time?
- The balance sheet (correct)
- The statement of retained earnings
- The statement of cash flows
- The income statement
Which of the following is generally NOT categorized as an external user when it comes to accounting information?
Which of the following is generally NOT categorized as an external user when it comes to accounting information?
- Factory managers (correct)
- Stockholders of a corporation
- Financial analysts
- Bank lending officers
All of the following are considered internal users of financial accounting information EXCEPT:
All of the following are considered internal users of financial accounting information EXCEPT:
What is the primary basis for valuing assets on the balance sheet?
What is the primary basis for valuing assets on the balance sheet?
How does a corporation paying for an expense with cash impact its accounting equation?
How does a corporation paying for an expense with cash impact its accounting equation?
If a company's total assets are $345,000 and total owners' equity is $120,000, what is the amount of the company's total liabilities?
If a company's total assets are $345,000 and total owners' equity is $120,000, what is the amount of the company's total liabilities?
What is the immediate impact on the accounting equation when a company purchases equipment for $70,000 cash?
What is the immediate impact on the accounting equation when a company purchases equipment for $70,000 cash?
Braun Corporation has the following balances: Accounts Payable $16,000, Accounts Receivable $40,000, Land $240,000, Cash ?, Capital Stock ?, Equipment $120,000, Building $180,000, Notes Payable $190,000, and Retained Earnings $160,000. If Capital Stock is $320,000, what are the total assets of Braun Corporation?
Braun Corporation has the following balances: Accounts Payable $16,000, Accounts Receivable $40,000, Land $240,000, Cash ?, Capital Stock ?, Equipment $120,000, Building $180,000, Notes Payable $190,000, and Retained Earnings $160,000. If Capital Stock is $320,000, what are the total assets of Braun Corporation?
Which of the following is NOT a typical outcome of a revenue transaction?
Which of the following is NOT a typical outcome of a revenue transaction?
Grande Home Improvement Store's cash account started with a $25,000 debit on June 1. There was a 10,000 credit on June 5, a $14,000 debit on June 16, and an $8,000 credit on June 27. What is the cash account balance at the end of June?
Grande Home Improvement Store's cash account started with a $25,000 debit on June 1. There was a 10,000 credit on June 5, a $14,000 debit on June 16, and an $8,000 credit on June 27. What is the cash account balance at the end of June?
How is the purchase of equipment on credit typically recorded?
How is the purchase of equipment on credit typically recorded?
Quality Galleries, Inc. had the following transactions in March: issued $360,000 capital stock for cash, purchased $180,000 of equipment with a $60,000 cash down payment and a note for the rest, a $35,000 cash payment on the note, and sold equipment for $18,000 cash at cost. What is the cash account balance at the end of March?
Quality Galleries, Inc. had the following transactions in March: issued $360,000 capital stock for cash, purchased $180,000 of equipment with a $60,000 cash down payment and a note for the rest, a $35,000 cash payment on the note, and sold equipment for $18,000 cash at cost. What is the cash account balance at the end of March?
Quality Galleries, Inc. had the following transactions in March: issued $360,000 capital stock for cash, purchased $180,000 of equipment with a $60,000 cash down payment and a note for the rest, a $35,000 cash payment on the note, and sold equipment for $18,000 cash at cost. What are their total assets at the end of March?
Quality Galleries, Inc. had the following transactions in March: issued $360,000 capital stock for cash, purchased $180,000 of equipment with a $60,000 cash down payment and a note for the rest, a $35,000 cash payment on the note, and sold equipment for $18,000 cash at cost. What are their total assets at the end of March?
Montauk Oil Co. has the following balances at the end of 2014: Accounts Payable $110,000, Land $200,000, Notes Payable $260,000, Equipment $160,000, Cash $80,000, Accounts Receivable $100,000, Buildings $240,000, Capital Stock $340,000, and Retained Earnings $70,000. On January 2, 2015, Montauk Oil collected $50,000 of its accounts receivable and paid $20,000 of its accounts payable. What are Montauk's total liabilities on January 3, 2015?
Montauk Oil Co. has the following balances at the end of 2014: Accounts Payable $110,000, Land $200,000, Notes Payable $260,000, Equipment $160,000, Cash $80,000, Accounts Receivable $100,000, Buildings $240,000, Capital Stock $340,000, and Retained Earnings $70,000. On January 2, 2015, Montauk Oil collected $50,000 of its accounts receivable and paid $20,000 of its accounts payable. What are Montauk's total liabilities on January 3, 2015?
Wilson Trucking, Inc. has the following balances on January 1, 2015: Accounts Payable $220,000, Accounts Receivable $200,000, Buildings $480,000, Capital Stock $680,000, Cash $160,000, Equipment $320,000, Land $400,000, Notes Payable $520,000, Retained Earnings $140,000. On January 5, Wilson Trucking collected $175,000 of its accounts receivable, paid $150,000 on its accounts payable and paid $11,000 on its note payable. After these transactions, what are the total liabilities on January 6, 2015?
Wilson Trucking, Inc. has the following balances on January 1, 2015: Accounts Payable $220,000, Accounts Receivable $200,000, Buildings $480,000, Capital Stock $680,000, Cash $160,000, Equipment $320,000, Land $400,000, Notes Payable $520,000, Retained Earnings $140,000. On January 5, Wilson Trucking collected $175,000 of its accounts receivable, paid $150,000 on its accounts payable and paid $11,000 on its note payable. After these transactions, what are the total liabilities on January 6, 2015?
Wilson Trucking, Inc. has the following balances on January 1, 2015: Accounts Payable $220,000, Accounts Receivable $200,000, Buildings $480,000, Capital Stock $680,000, Cash $160,000, Equipment $320,000, Land $400,000, Notes Payable $520,000, Retained Earnings $140,000. On January 5, Wilson Trucking collected $175,000 of its accounts receivable, paid $150,000 on its accounts payable and paid $11,000 on its note payable. What is the total of all assets on January 6, 2015?
Wilson Trucking, Inc. has the following balances on January 1, 2015: Accounts Payable $220,000, Accounts Receivable $200,000, Buildings $480,000, Capital Stock $680,000, Cash $160,000, Equipment $320,000, Land $400,000, Notes Payable $520,000, Retained Earnings $140,000. On January 5, Wilson Trucking collected $175,000 of its accounts receivable, paid $150,000 on its accounts payable and paid $11,000 on its note payable. What is the total of all assets on January 6, 2015?
What assurance does a trial balance provide when the debit and credit totals agree?
What assurance does a trial balance provide when the debit and credit totals agree?
How is Accumulated Depreciation classified in the financial statements?
How is Accumulated Depreciation classified in the financial statements?
When are shop supplies typically expensed?
When are shop supplies typically expensed?
Norma Company signed a 12-month lease with monthly rent of $550, paying four months in advance for $2,200, debiting Prepaid Rent and crediting Cash. At the end of June, what should be the balance of Norma's Prepaid Rent account?
Norma Company signed a 12-month lease with monthly rent of $550, paying four months in advance for $2,200, debiting Prepaid Rent and crediting Cash. At the end of June, what should be the balance of Norma's Prepaid Rent account?
Hahn Corp. pays three employees each $600 weekly for a five-day work week ending on Friday. If this month's last day is a Wednesday, what adjusting entry should the company make?
Hahn Corp. pays three employees each $600 weekly for a five-day work week ending on Friday. If this month's last day is a Wednesday, what adjusting entry should the company make?
Under what condition are assets considered current assets?
Under what condition are assets considered current assets?
When in the accounting cycle are the closing entries prepared?
When in the accounting cycle are the closing entries prepared?
How do you record a closing entry for an expense account?
How do you record a closing entry for an expense account?
A company has sales of $270,000, expenses of $220,000, and pays dividends of $30,000. After closing entries, what is the balance of the Income Summary account?
A company has sales of $270,000, expenses of $220,000, and pays dividends of $30,000. After closing entries, what is the balance of the Income Summary account?
Which of the following accounts will NOT appear on an After-Closing Trial Balance?
Which of the following accounts will NOT appear on an After-Closing Trial Balance?
Parkside Pool reports net sales of $625,000, a gross profit of $275,000, and net income of $15,000. What is Parkside Pool's cost of goods sold?
Parkside Pool reports net sales of $625,000, a gross profit of $275,000, and net income of $15,000. What is Parkside Pool's cost of goods sold?
Sutton Supplies reports net sales of $3,750,000, a net income of $375,000, and a gross profit of $900,000. What is Sutton’s cost of goods sold?
Sutton Supplies reports net sales of $3,750,000, a net income of $375,000, and a gross profit of $900,000. What is Sutton’s cost of goods sold?
In a perpetual inventory system, what are the two entries generally made to record each sales transaction?
In a perpetual inventory system, what are the two entries generally made to record each sales transaction?
The following data is available: Sales $2,850, Inventory-year-end $1,500, Purchases $1,950 and Cost of Goods Sold is $2,400. Calculate the gross profit.
The following data is available: Sales $2,850, Inventory-year-end $1,500, Purchases $1,950 and Cost of Goods Sold is $2,400. Calculate the gross profit.
Bremmer uses a periodic inventory system and the following information is available: Sales $230,400, Inventory - Beginning $21,200, Inventory - Ending $19,800, Purchases $132,200. What is the cost of goods sold?
Bremmer uses a periodic inventory system and the following information is available: Sales $230,400, Inventory - Beginning $21,200, Inventory - Ending $19,800, Purchases $132,200. What is the cost of goods sold?
Which account listed below is classified as a contra-revenue account?
Which account listed below is classified as a contra-revenue account?
What does the credit term "2/10, n/30" mean?
What does the credit term "2/10, n/30" mean?
Which of the following credit terms is the most advantageous to the purchaser of merchandise?
Which of the following credit terms is the most advantageous to the purchaser of merchandise?
If Bounder Dog Supplies, Inc. purchased inventory at a list price of $2,200 and the terms were 3/10, n/30, what value should be associated with the inventory if payment was made within 10 days?
If Bounder Dog Supplies, Inc. purchased inventory at a list price of $2,200 and the terms were 3/10, n/30, what value should be associated with the inventory if payment was made within 10 days?
While preparing the bank reconciliation, an accountant discovered that a $426 check returned with the bank statement had been recorded erroneously in the depositor's accounting records as $462. What is the appropriate action to correct this error?
While preparing the bank reconciliation, an accountant discovered that a $426 check returned with the bank statement had been recorded erroneously in the depositor's accounting records as $462. What is the appropriate action to correct this error?
To what does the term "cash equivalent" refer?
To what does the term "cash equivalent" refer?
When prices are increasing, which inventory method will produce the highest cost of goods sold?
When prices are increasing, which inventory method will produce the highest cost of goods sold?
In an environment of rising prices, which of the following inventory valuation methods will transfer the MOST RECENT purchase cost to the cost of goods sold and value the remaining items in inventory at the oldest acquisition costs?
In an environment of rising prices, which of the following inventory valuation methods will transfer the MOST RECENT purchase cost to the cost of goods sold and value the remaining items in inventory at the oldest acquisition costs?
Flashcards
External users
External users
Individuals who are not part of the company's management or operations.
Managers Classified
Managers Classified
Managers are not considered external users; they operate internally.
Balance Sheet
Balance Sheet
A snapshot of a company's assets, liabilities, and equity at a specific point in time.
Income Statement
Income Statement
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Asset Valuation
Asset Valuation
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Paying with Cash
Paying with Cash
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Accounting Equation
Accounting Equation
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Purchasing Equipment
Purchasing Equipment
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Balance Sheet Accounts
Balance Sheet Accounts
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Revenue Transactions
Revenue Transactions
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Equipment Purchase
Equipment Purchase
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Current Assets
Current Assets
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Adjusting Entries
Adjusting Entries
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Closing Entry
Closing Entry
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After-Closing Trial Balance
After-Closing Trial Balance
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Cost of Goods Sold
Cost of Goods Sold
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Sales Transactions
Sales Transactions
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Contra-revenue Account
Contra-revenue Account
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Credit Term 2/10, n/30
Credit Term 2/10, n/30
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Advantageous Credit Terms
Advantageous Credit Terms
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Cash Equivalent
Cash Equivalent
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LIFO Method
LIFO Method
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Study Notes
- Midterm review for Accounting 2001
External vs. Internal Users of Financial Statements
- Managers aren't considered external users of financial statements.
- Balance sheets report a business' financial position at a specific time.
- Factory managers aren't typically seen as external users of accounting data.
- Investors are not internal users of financial accounting information.
Transactions and Accounting Equations
- Total assets decrease when a corporation uses cash to pay for an expense.
- Total liabilities are $225,000 if total assets are $345,000 and total owners' equity is $120,000 ($345,000 - $120,000 = $225,000).
- Purchasing equipment for cash doesn't change total assets.
- Total assets for Braun Corporation on December 31, 2014 would be $686,000 if capital stock is $320,000; Accounts Payable ($16,000) + Notes Payable ($190,000) + Capital Stock ($320,000) + Retained Earnings ($160,000) equals $686,000.
- A revenue transaction does not result in an increase to liabilities.
Astoria Co. Transactions (August 2014)
- Cash received from bank loans : $20,000
- Dividends paid to stockholders in cash: $9,500.
- Revenues earned and received in cash: $33,500
- Expenses incurred and paid: $26,000
Cash Account Balance
- The cash account balance at the end of June for Grande Home Improvement Store is $21,000 debit; $25,000 + $14,000 - $10,000 - $8,000 = $21,000 debit
Recording Equipment Purchase
- The purchase of equipment on credit involves debiting Equipment and crediting Accounts Payable.
Quality Galleries, Inc. (March Transactions)
- Capital stock in exchange for cash: $360,000
- Equipment purchase: $180,000 with $60,000 cash down payment, and a note payable for the balance
- Cash payment on note payable: $35,000
- Equipment sold for cash (at cost): $18,000
Cash Balance and Assets for Quality Galleries
- The cash account balance at the end of March for Quality Galleries, Inc. is $283,000; $360,000 - $60,000 - $35,000 + $18,000 = $283,000
- Total assets for Quality Galleries at the end of March amount to $445,000. $283,000 + $180,000 - $18,000 = $445,000
Montauk Oil Co. (December 31, 2014 Account Balances)
- Accounts Payable: $110,000
- Land: $200,000
- Notes Payable: $260,000
- Equipment: $160,000
- Cash: $80,000
- Accounts Receivable: $100,000
- Buildings: $240,000
- Capital Stock: $340,000
- Retained Earnings: $70,000
Montauk Oil's Total Liabilities (January 3, 2015)
- Montauk Oil collected $50,000 of accounts receivable and paid $20,000 of accounts payable as of January 2, 2015.
- Total liabilities on January 3, 2015 are $350,000. $90,000 + $260,000 = $350,000
Wilson Trucking, Inc. (January 1, 2015 Account Balances)
- Accounts Payable: $220,000
- Accounts Receivable: $200,000
- Buildings: $480,000
- Capital Stock: $680,000
- Cash: $160,000
- Equipment: $320,000
- Land: $400,000
- Notes Payable: $520,000
- Retained Earnings: $140,000
Wilson Trucking Transactions (January 5, 2015)
- Wilson Trucking collected $175,000 of its accounts receivable, paid $150,000 on its accounts payable, and paid $11,000 on its note payable as of January 5, 2015.
Wilson Trucking's Total Liabilities (January 6, 2015)
- Total liabilities on January 6, 2015 are $579,000. $70,000 + $509,000 = $579,000
Wilson Trucking's Total Assets (January 6, 2015)
- Total assets on January 6, 2015 are $1,399,000. ($200,000 - $175,000 = $25,000) + $480,000 + ($160,000 + 175,000 - $150,000 - $11,000 = $174,000) + $320,000 + $400,000 = $1,399,000
Trial Balance
- The agreement of debit and credit totals in a trial balance confirms that total debits equal total credits.
Accumulated Depreciation
- Accumulated Depreciation is a contra-asset account.
Shop Supplies
- Shop supplies are expensed when consumed.
Norma Company's Prepaid Rent Account Balance
- Norma Company's Prepaid Rent account at the end of June is $1,650; $550 ï‚´ 3 = $1,650 after signing a 12-month lease for warehouse space.
Hahn Corp Adjusting Entry
- Hahn Corp should make an adjusting entry debiting Wage Expense for $1,080 and crediting Wages Payable for $1,080; $600 ï‚´ 3/5 ï‚´ 3 = $1,080
Current Assets
- Assets are considered current assets if they are cash or will usually be converted into cash within a year or less.
Timing of Closing Entries
- Closing entries should be prepared before an adjusted trial balance.
Closing Entry for Expense Account
- The closing entry for an expense account includes a Debit to Income Summary and a Credit to the expense account.
Income Summary Balance
- If sales are $270,000, expenses are $220,000, and dividends are $30,000, the Income Summary will have a credit balance of $50,000; $270,000 - $220,000 = $50,000
Accounts on After-Closing Trial Balance
- Dividends will not appear on an After-Closing Trial Balance.
Parkside Pool's Cost of Goods Sold
- Parkside Pool's cost of goods sold is $350,000 if net sales are $625,000 and gross profit is $275,000; $625,000 - $275,000 = $350,000
Sutton Supplies' Cost of Goods Sold
- Sutton Supplies' cost of goods sold is $2,850,000 if net sales is $3,750,000 and gross profit is $900,000; $3,750,000 - $900,000 = $2,850,000
Perpetual Inventory System Entries
- In a perpetual inventory system, one entry recognizes sales revenue, while the other recognizes the cost of goods sold for each sales transaction.
Gross Profit Calculation
- The gross profit is $450 with sales of $2,850 and cost of goods sold of $2,400; $2,850 - $2,400 = $450
Cost of Goods Sold with Periodic Inventory System
- Bremmer's cost of goods sold is $133,600 using a periodic inventory system; Beginning Inventory ($21,200) + Purchases ($132,200) = Goods Available ($153,400) - Ending Inventory ($19,800) = Cost of Goods Sold ($133,600)
Contra-Revenue Account
- Sales Discounts is classified as a contra-revenue account.
Credit Terms Explained
- The credit term "2/10, n/30" means a 2% discount if payment is within 10 days, otherwise full payment is due within 30 days.
Advantageous Credit Terms
- Credit terms of "5/10, n/60" are the most advantageous to a purchaser of merchandise.
Inventory Value with Discount
- The inventory value for Bounder Dog Supplies, Inc. would be $2,134 if payment was made within 10 days, given a $2,200 list price and terms of 3/10, n/30; $2,200 ï‚´ 97% = $2,134
Bank Reconciliation
- When preparing a bank reconciliation, deduct $36 from the balance per the depositor's records to correct a $426 check erroneously recorded as $462.
Cash Equivalent Definition
- Cash equivalent refers to very liquid short-term investments like U.S. Treasury Bills and commercial paper.
Inventory Valuation Methods
- LIFO will produce the highest cost of goods sold when prices are increasing.
Inventory Approaches
- LIFO transfers the most recent purchase cost to the cost of goods sold and values the remaining inventory items at the oldest acquisition costs.
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