ACCT 2121 Fall 2024 Exam #3 Study Guide PDF
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This is a study guide for accounting exam number 3. It covers topics like multiple-step income statements, financial statement ratios, inventory cost flow assumptions, and depreciation calculations. The topics are intended for undergraduate accounting students.
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Fall 2024 - ACCT 2121 - Exam #3 Study Guide Disclaimer: This is NOT a comprehensive list, but it will help you prepare for Exam #3. xam #3 has30 questions worth 3.5 points each, which means it’s possible to earn105%(5-point built-in E curve). The exam breakdown is evenly sp...
Fall 2024 - ACCT 2121 - Exam #3 Study Guide Disclaimer: This is NOT a comprehensive list, but it will help you prepare for Exam #3. xam #3 has30 questions worth 3.5 points each, which means it’s possible to earn105%(5-point built-in E curve). The exam breakdown is evenly split – 50% conceptual / 50% mathematical: 5 questions (50%) are conceptual, includingdefinitions, classifications (such as: correctly classifying 1 items as operating vs. non-operating within the Multiple-Step Income Statement), and other concepts (for example: legal title, consignment, etc.). 5 questions (50%) are mathematical, including correct utilization of the financial statement ratio 1 (FSR) formulas that are provided (listed below) and several longer questions that require step-by-step problem-solving (such as: calculating COGS vs. Ending Inventory under all three inventory cost flow assumptions; completing a Multiple-Step Income Statement in its entirety; etc.). Among the most important topics to master for this exam are: Multiple-Step Income Statement (4 questions) A/R Aging Table (3 questions) Inventory Cost Flow Assumptions (3 questions) Depreciation Calculations (2 questions) ************************************************************************************* On Exam #3, you will be provided with four financial statement ratio (FSR) formulas: Inventory Turnover = COGS ÷ Average Inventory Average Days in Inventory = 365 ÷ Inventory Turnover Gross Profit Rate (Net Sales – COGS) ÷ Net Sales,or = = Gross Profit ÷ Net Sales Profit Margin % = Net Income ÷ Net Sales 1 Fall 2024 - ACCT 2121 - Exam #3 Study Guide Disclaimer: This is NOT a comprehensive list, but it will help you prepare for Exam #3. Chapter 6: Merchandising Operations and the Multiple-Step Income Statement Periodic vs. Perpetual inventory systems Sales discounts/the discount period (e.g., 2/10, n/30) ree on Board (“FOB”): FOB shipping point vs. FOB destination point:conceptual & mathematical F questions!Remember: FOB is a shipment term used to indicate whether the seller or the buyer owns the goods (i.e., has “legal title” to the goods) and thus is liable for goods that are damaged or destroyed during shipping. o If the contractual terms & conditions (T&C) state that the shipment isFOB shipping point, then as soon as the shipment of goods leavesthe seller’s warehouse (the seller’s location), the seller records the sale as complete. The buyer owns the goods while they’re en route to their destination (the buyer’s location), and the buyer must pay for loading and transportation costs (called “freight-in”). o Conversely, if the T&C state that the shipment isFOB destination point,then the seller owns the goods while they’re en route to the buyer (i.e., the seller retains ownership until the goods arrive at the buyer’s location), and the seller must pay for loading and transportation costs (called “freight-out”). Key items/components/sections of the Multiple-Step Income Statement: Please refer to the in-class problem-solving relating to Dick’s Sporting Goods. How to calculate Net Sales: Gross Sales Revenue (Sales Returns & Allowances) (Sales Discounts) Net Sales Revenue How to classify items correctly in the “Operating” vs. “Non-Operating” sections 2 Fall 2024 - ACCT 2121 - Exam #3 Study Guide Disclaimer: This is NOT a comprehensive list, but it will help you prepare for Exam #3. Chapter 7: Reporting and Analyzing Inventory & Receivables Retailers/Merchandisers (1 type of inventory) vs. Manufacturers (3 types of inventory: RM → WIP → FG) Inventory methods:conceptual & mathematical questions! Specific identification Three **cost flow assumptions: o First in, first out (FIFO) o Last in, first out (LIFO) o Weighted average cost (WAC) *It’s important for you to know how to calculate Cost of Goods Available for Sale (COGAS), Cost of * Goods Sold (COGS), and Ending Inventory under all three cost flow methodologies. Accounts Receivable (A/R) Aging Table:conceptual & mathematical questions! How to read/interpret the table How to use the table to determine the correct dollar amount (i.e., account balance) for the Allowance for Doubtful Accounts (ADA) 3 Fall 2024 - ACCT 2121 - Exam #3 Study Guide Disclaimer: This is NOT a comprehensive list, but it will help you prepare for Exam #3. Chapter 8 (LOs 8.1, 8.2, and 8.3 only): Reporting and Analyzing Long-Term Assets (LTA) 4 subcategories of “plant assets” (aka: “fixed assets” or Property, Plant, and Equipment [“PPE”]): Land Land Improvements Buildings Equipment Remember: Land does NOT depreciate, but the other plant assets do. Computing the Historical Cost (HC) of Land, Land Improvements, Buildings, and Equipment: Remember to “capitalize” all the costs required to obtain the asset and get it ready for its intended use. “Capitalized” costs are added into the asset account balance on the Balance Sheet. Depreciation Methods: Straight-line (SL) Units-of-activity (UoA) Declining balance ou are responsible for the math for SL and UoA only. When I say the “math,” this means you are Y expected to know how to: (1) calculate the Depreciable Maximum; and (2) use that Depreciable Maximum to calculate the straight-line (SL) Annual Depreciation Expense for each 12-month period and/or the Depreciation Expense per Unit (under UoA). Remember: Historical Cost (Salvage Value) Depreciable Maximum If you’re asked to compute Depreciation Expense (for any given year) and/or Accumulated Depreciation (as of the end of Year 1 or any year during the asset’s useful life), then it might help to set up a depreciation expense calculation table. Pay close attention to depreciable assets that are purchased in the middle of the year!Please refer to the in-class problem-solving relating to Blue Ventures’ jet skis.SL Annual Depreciation Expense must be prorated for partial years. “Partial years” are those years when we do NOT own and operate the depreciable asset for all 12 months. Calculating the Gain or Loss on Sale of PPE: Compare the Cash Proceeds against the Net Book Value (NBV) of the asset to calculate the dollar amount of the Gain or Loss. ○ Note: The Net Book Value (NBV) is sometimes also called the Carrying Value (CV). In other words, NBV and CV are synonyms. 4
