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Liabilities are generally classified on a balance sheet as:
a - small liabilities and large liabilities.
b - present liabilities and future liabilities.
c - tangible liabilities and intangible liabilities.
d - current liabilities and long-term liabilities.
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On the Balance Sheet, where does Accumulated Depreciation belong?
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On the Balance Sheet, where does Retained Earnings belong?
Stockholders'/Owner's Equity
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On the Balance Sheet, where does Interest Expense belong?
Not on the Balance Sheet
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On the Balance Sheet, where does Income Tax Payable belong?
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On the Balance Sheet, where do Dividends belong?
Not on the Balance Sheet
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On the Balance Sheet, where does Merchandise Inventory belong?
Current Assets
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On the Balance Sheet, where does Patent belong?
Intangible Assets
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On the Balance Sheet, where does Prepaid Insurance belong?
Current Assets
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On the Balance Sheet where does Mortgage Payable belong?
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On the Balance Sheet, where does Investment in long-term bonds belong?
Long-Term Investments
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What is the primary equation of an Income Statement?
Revenues - Expenses = Net Income (Loss)
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On the Income Statement, what are examples of Revenue?
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On the Income Statement, what are examples of Expenses?
- Cost of goods sold (COGS)
- Rent expense
- Depreciation expense
- Interest expense
- Miscellaneous expense
- Wages expense
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What is the time period of an Income Statement?
- Span of time
- Example: For the year ended or For the month ended
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What is the primary equation for the Balance Sheet?
Assets = Liabilities + Stockholders' Equity
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Cash, Inventory, Prepaid Rent, A/R, Trucks, N/R, Unexpired Insurance, and Property and Equipment are all examples of what?
Assets
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A/P, Dividends Payable, N/P, Long-term debt and other are all examples of what?
Liabilities
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Common Stock, Retained Earnings, and Paid-in Capital are examples of what?
Stockholders' Equity
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What is the layout for the Statement of Retained Earnings?
- R/E (Beginning)
- + Net Income (Loss)
- = Subtotal
- - Dividends
- R/E (Ending)
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What are the 3 main sections on the Statement of Cash Flows?
- Operating
- Investing
- Financial
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What are characteristics of the Direct method for the Statement of Cash Flows?
- GAAP recommended
- Cash-in (receipts)
- Cash-out (disbursements)
- Can be calculated from financial statements
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What are characteristics of the Indirect Method for the Statement of Cash Flows?
- Accrual net income
- + Depreciation
- +-Current assets/Current liabilities
- +-Gains/Losses
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On the Statement of Cash Flows, Property, Plant, and Equipment, Capital expenditures, and Proceeds from dispositions are examples of what?
Investing activities
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On the Statement of Cash Flows, Net Income, Depreciation, A/R, Inventories, A/P, and Int/P are examples of what?
Operating activities
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On the Statement of Cash Flows, Issuance of debt, Payment of dividends, Loans, borrowing, paying back, selling stock, and buying it back are examples of what?
Financial activities
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Does the Balance Sheet report a span of time or a specific date?
- Specific date
- Example: Dec 31, 2012
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Does the Statement of Stockholders' Equity cover a span of time or a specific date?
- Span of time
- Example: For the month ended Nov 30, 2012
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On the Classified Balance Sheet, what are characteristics of Current Assets?
- Cash
- Will become cash
- Will be consumed within 1 year or operating cycle (whichever is longer)
- Example: Cash, A/R, N/R, Inventory, Prepaid Rent
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What is the layout of the Assets on a Classified Balance Sheet?
- Current Assets
- Property, Plant, and Equipment
- Intangible Assets
- Noncurrent Assets
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On the Classified Balance Sheet, what are examples of Intangible Assets?
- Trademarks
- Copyrights
- Goodwill
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On the Classified Balance Sheet, what is a Current Liability?
- A liability that is due within 1 year
- Example: A/P
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What is the layout of the Liabilities on the Classified Balance Sheet?
- Current Liabilities
- Long-term Liabilities
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On the Statement of Cash Flows, an increase in A/R means what in terms of cash?
Decrease in Cash
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On the Statement of Cash Flows, an increase in Prepaid Insurance means what in terms of Cash?
Decrease in Cash
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On the Statement of Cash Flows, an increase in A/P means what in terms of Cash?
Increase in Cash
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On the Statement of Cash Flows, anywhere the word "Sale" is used typically means what in terms of Cash?
Increase in Cash
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On the Statement of Cash Flows, the words "payment" or "purchase" typically mean what in terms of Cash?
Decrease in Cash
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On the Statement of Cash Flows, what appears at the bottom after Operation, Investing, and Financial Activities?
- Beginning Cash
- Ending Cash
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On the Statement of Cash Flows, what appears after the Beginning and Ending Cash lines?
- Supplemental Schedule Non-cash Investing and Financial Accounts
- Example: Exchange of Common Stock for Equipment
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What account is Allowance For Uncollectable Accounts?
Contra-Asset
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What is the A/R Turnover Ratio?
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What is the equation for Average A/R?
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What is the equation for the Average Collection Period?
Days in Fiscal Year / A/R Turnover
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Interpret these sales discount terms:
- 2% discount, if paid in 10 days
- Net owe in 30 days
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How would you write the journal entry for a $10,000 purchase with sales discount terms 2/10?
- Cash 9,800
- Sales Discounts 200
- A/R 10,000
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What is the journal entry for when someone can't pay their bill for some reason?
- Bad Debt Expense XX
- Allowance for Uncollectable Accounts XX
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How does an accountant figure out how much cash to allocate the Allowance for Uncollectable Accounts?
A % of credit sales based on history.
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How are Perpetual Inventory changes recorded?
Real-time basis
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What is the journal entry for Perpetual Inventory sales?
- Costs of Goods Sold XX
- Inventory XX
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What do most businesses use to record inventory sales?
The Periodic method.
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What is GAAS?
Generally-Accepted Auditing Standards
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What is the extended Inventory equation?
- Sales
- - COGS
- = Gross Profit
- - Operating Expenses
- = Net Income
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What is the Specific Identification Method regarding Inventory?
Figuring out remaining inventory based on identity codes.
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What is LIFO?
- Last In First Out
- Remaining inventory will be the oldest items
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What is FIFO?
- First In First Out
- Remaining items will be the newest
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What is the equation for Cost of Goods Sold?
- Beginning Inventory
- +Purchases
- =Cost of Goods Available for Sale
- -Ending Inventory
- =Cost of Goods Sold
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Why is there more cash flow with LIFO?
Lower Net Income -> Lower Taxes -> More Cash Flow
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Why is there less cash flow with FIFO?
Higher Net Income -> Higher Taxes -> Less Cash Flow
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What is the Weighted Average method of ending Inventory?
Get the average cost and multiply by the ending inventory amount.
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What is F.O.B.?
Freight on Board
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What is F.O.B. Destination mean?
The seller pays for shipping.
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What does F.O.B. Shipping Point mean?
The buyer pays for shipping.
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What are Long-Term Assets?
- Whatever it takes to get the Asset ready for use.
- Installation
- Sales Tax
- Tear building down on land you bought.
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What is the concept behind Basket Purchases?
Purchasing a number of items at once and then pricing them according to Fair Market Value (FMV) of those items.
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A factory + land was purchased for $200,000. FMV of factory is $250,000 and land is $100,000. What are the allocated prices of the factor and land purchased?
- Total FMV = $250,000 + $100,000
- Total FMV = $350,000
- Factory FMV = $200 x $250/$350 = $142,857
- Land FMV = $200 x $100/$350 = $58,000
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What account type is Capital Expenditure?
- Asset
- Example: Carpeting, New Roof
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What account type is Revenue Expenditure?
- Expense
- Example: Patching parking lot, Fix stitching, Repair something
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