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ADM 1340 FINAL EXAM QUESTIONS WITH
100% ACCURATE ANSWERS
financial assets - Accurate answers Receivables and investments that have a contractual right to receive cash or another financial asset trade receivables - Accurate answers notes and accounts receivables that result from sales transactions nontrade receivables - Accurate answers Receivables (such as interest receivable, loans to company officers, and income tax receivable) that do not result from the operations of the business. subsidiary ledger - Accurate answers A ledger used to manage the detailed information that would be difficult to track in a general ledger account control account - Accurate answers An account in the general ledger that summarizes the details for a subsidiary ledger and controls it. The balance in the control account must - Accurate answers equal the total of the subledger The entry in the control account is often - Accurate answers a summary entry containing the total of the subledger entries credit term - Accurate answers the interest-free period (usually 30 days) provided to customers purchasing on credit bad debts expense - Accurate answers accounts receivable that are uncollectible allowance method - Accurate answers A method of accounting for bad debts that involves estimating uncollectible accounts at the end of each period. entry to record bad debt - Accurate answers debit Bad Debts Expense, credit Allowance for Doubtful Accounts Allowance for Doubtful Accounts - Accurate answers contra-asset account containing the estimated uncollectible accounts receivable To determine the carrying amount of Accounts Receivable, it is - Accurate answers netted with Allowance for Doubtful Accounts percentage of receivables method - Accurate answers The analysis of customer balances by the length of time they've been unpaid
Aging of Accounts Receivable Method - Accurate answers A method of determining bad debts expense and allowance for doubtful accounts based on an analysis of customer balances by the length of time they have been outstanding aging schedule - Accurate answers A grouping of accounts receivable into age categories based upon the length of time they have been outstanding on the company record. once outstanding AR amounts have been grouped... - Accurate answers the probability of not collecting each group is estimated To determine total estimated uncollectible accounts for each age group... - Accurate answers multiply the estimated percentage by the the dollar amount of the group the total of all estimated uncollecitbles is - Accurate answers allocated to Allowance for Doubtful Accounts to determine bad debts expense Bad debts expense is determined by - Accurate answers calculating the difference between the required balance and the existing unadjusted balance in the allowance account If Allowance for Doubtful Accounts already has an unadjusted credit balance of $1,000, and total estimated uncollectibles is $11,000, how much will bad debts expense be adjusted for? - Accurate answers $10, If Allowance has an opening debit balance... - Accurate answers the debit balance is added to the required balance when the adjusting entry is made If Allowance for Doubtful Accounts already has an unadjusted debit balance of $1,000, and total estimated uncollectibles is $11,000, how much will bad debts expense be adjusted for? - Accurate answers $12, entry to write off uncollectible accounts - Accurate answers debit Allowance for Doubtful Accounts, credit Accounts Receivable Under the allowance method, every AR write off is debited to - Accurate answers the allowance account and not bad debts expense bad debt recovery - Accurate answers Accounting for a payment by a customer whose account had previously been written off. what are the two entries required to record bad debt recovery - Accurate answers 1. Reverse the write-off entry to reinstate the account
- Record the subsequent cash collection The recovery of bad debt only affects - Accurate answers statement of financial position accounts 1st entry to recover bad debt - Accurate answers debit Accounts Receivable, credit Allowance for Doubtful Accounts
the gross amount of receivables and allowance for doubtful accounts must be reported in - Accurate answers the statement of financial position or in notes to it if a company has significant risk of uncollectible accounts, it's required to - Accurate answers discuss this in the note to financial statements related to credit risk Bad debts expense is reported as - Accurate answers an operating expense on the income statement four key steps in managing accounts receivables - Accurate answers 1. Determine whom to extend credit to
- Establish a payment period
- Monitor collections
- Evaluate the liquidity of receivables if a company's credit policy is too tight... - Accurate answers revenue might be lost from denied customers going elsewhere if a company's credit policy is too loose... - Accurate answers credit may be extended to risky customers who pay late or not at all if accounts receivable rise faster than sales... - Accurate answers it may be an indication of collection problems receivables turnover - Accurate answers A measure of the liquidity of receivables, expressed as the number of times per year that accounts receivable are collected receivables turnover formula - Accurate answers net credit sales / average gross accounts receivable gross accounts receivable - Accurate answers the amount reported in AR before deducting allowance for doubtful accounts calculation for average gross accounts receivable - Accurate answers beginning AR balance + ending AR balance / 2 when companies don't report the amount of net credit sales... - Accurate answers net sales (including cash) can be used the higher the receivables turnover ratio... - Accurate answers the more liquid the company's recevables are average collection period - Accurate answers The average amount of time that a receivable is outstanding average collection period formula - Accurate answers 365 / accounts receivable turnover
the lower the average collection period... - Accurate answers the more liquid a company's receivables are generally, the collection period for receivables shouldn't.. - Accurate answers exceed the credit term period most companies record PPE at historical cost which includes - Accurate answers 1. The purchase price, including certain kinds of non-refundable taxes and duties, less any discounts or rebates
- The expenditures necessary to bring the asset to its required location and to make it ready for its intended use
- An estimate of any future obligations required to dismantling, removing, or restoring the asset at the end of its useful life operating expenditures - Accurate answers Expenditures that benefit only the current period. They are immediately charged against revenues as an expense. capital expenditures - Accurate answers Expenditures that benefit future periods. They are recorded (capitalized) as long-lived assets. which costs related to assets are capitalized? - Accurate answers the cost to purchase an asset and isnure it while being shipped which costs related to assets are expensed? - Accurate answers insurance paid against fire or theft are it's situated and used, and any costs to train employees on how to operate it asset retirement costs - Accurate answers The amount added to the cost of a long-lived asset that relates to obligations to dismantle, remove, or restore an asset when it is retired future costs like environmental costs in clean up and restoration at the end of useful life must be - Accurate answers estimated and added to acquisition cost and be depreciated over life four classes of PPE - Accurate answers land, land improvements, buildings, equipment costs related to purchase of land that are added - Accurate answers - closing costs like survey, title search, and legal fees
- additional work to prepare it for use (capital expenditures)
- if the land has a building that must be removed
- all costs incurred up to the time of excavation for new buildings when land is purchased to construct a building entry for acquisition of land - Accurate answers debit Land, credit Cash/Accounts Payable once land is ready for intended use, recurring costs are - Accurate answers recorded as operating expenditures land improvements - Accurate answers Improvements to land such as paving, lighting, and landscaping that, unlike land itself, are subject to depreciation
three methods to calculate depreciatoin - Accurate answers 1. Straight-line
- Diminishing-balance
- Units of production straight line - Accurate answers A depreciation method where the expense is calculated by dividing an asset's depreciable amount by its estimated useful life straight-line method calculation - Accurate answers cost - residual value / useful life a depreciation rate can be calculated by - Accurate answers dividing 100% by useful life using the depreciation rate, the depreciation expense is taken by (straight-line) - Accurate answers multiplying the depreciable amount by the depreciation rate when an asset is purchased during the year, it's necessary to - Accurate answers prorate the annual depreciation for the part of the year when the asset is available for use diminishing-balance method - Accurate answers A depreciation method in which depreciation expense is calculated by multiplying the carrying amount of an asset by a depreciation rate diminishing-balance uses the - Accurate answers carring amount instead of the depreciable amount when determingin the amount for diminishing-balance, residual value is... - Accurate answers not used diminishing-balance depreciation stops when - Accurate answers the carrying amount equlas the expected residual value double-diminishing balance method - Accurate answers A diminishing-balance method of depreciation that uses a rate equal to two times the straight-line rate. calculation for depreciation expense using diminishing balance method - Accurate answers straight-line depreciation rate * multipler * carrying amount at beginning of year calculation for final year depreciation using diminishing balance method - Accurate answers carrying amount - residual value accelerated depreciation method - Accurate answers A depreciation method that produces higher depreciation expense in the early years than the straight-line approach. with diminishing balance, the ______ and _____ ______ each year - Accurate answers carrying amount; depreciation expense; decrease the diminishing-balance method is applied when - Accurate answers more of the asset's economic benefits are used up or consumed in early years
units of production method - Accurate answers A depreciation method where useful life is expressed in terms of the total units of production or total use expected steps for unit of production method - Accurate answers 1. Estimate the units of production in total over the asset's entire useful life
- Divide the depreciable amount (cost less residual value) by the estimated units of production to determine the depreciable amount per unit
- Multiply the depreciable amount per unit by the units of production during the period and the result is the depreciation expense calculation for units of production method - Accurate answers ((cost - residual value) / estimated total units of activity) * units of activity during the year when an asset is purchased during the year, using units of production... - Accurate answers no prorating is needed for depreciation when the current value of an asset is less than the carrying amount... - Accurate answers the asset is impaired and its carrying amount must be reduced if impairment indicators are present... - Accurate answers an impairment test is required which involves determining an estimate of the asset's recoverable amount recoverable amount for impaired asset - Accurate answers the greater of the asset's fair value less costs to sell and the asset's value in ues impairment loss (writedown) - Accurate answers The amount by which the carrying amount of an asset exceeds its recoverable amount entry to recrod impairment loss - Accurate answers debit an Impairment Loss acount, credit Accumulated Depreciatoin impairment loss acounts are - Accurate answers operating expenses Under ____ most impairment losses can be reversed - Accurate answers IFRS revaluation model - Accurate answers A model for accounting for a long-lived asset that carries the asset at its current value less accumulated depreciation revaluation gains and write-ups are record in - Accurate answers other comprehensive income on the statement of comprehensive income reasons for revising periodic depreciation - Accurate answers 1. capital expendirues during the asset's useful life
- impairment losses
- changes in the estimated useful life or resiudal value
- changes in the pattern in which the asset's economic benefits are consumed
financial liability - Accurate answers A form of financial instrument, represented by a contractual obligation to pay cash in the future. a current liability is settled through - Accurate answers payment by cash, transfer of goods or services, or by creation of other current liabilities operating line of credit (credit facility) - Accurate answers a pre-arranged agreement to borrow money at a bank, up to an agreed-upon amount floating interest rate - Accurate answers an interest rate that changes with the market collateral - Accurate answers assets pledged as security for a loan collateral for an operating line normally includes - Accurate answers some of the company's current assets the amount of sale and sales tax collected are recorded by - Accurate answers separately crediting Sales and Sales Tax Payable entry to remit sales tax - Accurate answers debit Sales Tax Payable, credit Cash while property taxes are generally for a calendar year... - Accurate answers bills aren't usually issued until the spring of each year if a company receives a property tax bill in march... - Accurate answers the months that have passed need to be record in adjusting entries (multiply tax amount by months/12) entry to record initial property tax liability - Accurate answers debit Property Tax Expense, credit Property Tax Payable when a company pays off property tax, it not only pays the initial liability... - Accurate answers it prepays the taxes for the next of the year entry for payment of property tax - Accurate answers debit Property Tax Payable (for initial liability) Property Tax Expense (for the months that passed in between), and Prepaid Property Tax, credit Cash after the payment of property taxes... - Accurate answers the company has a zero balance in the liability but has prepaid assets as employees perform services, employers incur three types of liabilities... - Accurate answers 1. amount owed to employees
- employee payroll deductions
- employer payroll obligations salaries - Accurate answers a specific amount per week payed to employees wages - Accurate answers pay on an hourly basis or by work produced
gross pay - Accurate answers Total compensation earned by an employee before any deductions. payroll deduction - Accurate answers deductions from gross pay to determine the amount of a paycheck net pay - Accurate answers gross pay minus deductions employee benefits - Accurate answers Payments made by an employer for pension, insurance, health, and/or other benefits paid on behalf of its employees employee benefits aren't withheld from an employee's pay and are instead - Accurate answers additional expenses incurred by the employer entry for when employeer pays employees - Accurate answers debit Salaries Payable and credit Cash trade payables - Accurate answers Accounts payable and notes payable that result from transactions with suppliers certain liabilities - Accurate answers liabilities with a known payee, due date, and amount payable provisions - Accurate answers liabilities of uncertain timing or amount provisions are recorded because - Accurate answers 1. their outcome is probable
- the amount owed can be estimated examples of provisions - Accurate answers warranties, gift cards, customer loyalty programs contingent liabilities - Accurate answers Existing or possible obligations arising from past events. The liability is contingent (dependent) on whether or not some uncertain future event occurs that will confirm either its existence or the amount payable, or both. contingent liabilities are - Accurate answers disclosed in the notes to financial statements on financial statements, current liabilites are listed in the order... - Accurate answers in which they're due typical order for current liabilities - Accurate answers bakn indebtedness, accounts payable, other payables, unearned revenue, current portions of loans with regards to recording operating leases... - Accurate answers only rent expense is recorded and no asset/liability related to future rent payments is shown characteristics of a corporation - Accurate answers - separate legal existence
- limited liability of shareholders
- transferable ownership rights
- ability to acquire capital
dividend preference - Accurate answers right of preferred stockholders to receive a dividend before a corporation pays a dividend to common stockholders a preferred claim doesn't guarantee that - Accurate answers dividends will be paid cumulative dividend feature - Accurate answers stipulates that preferred stockholders must be paid both current-year dividends and any unpaid prior-year dividends before common stockholders are paid dividends noncumulative dividends - Accurate answers preferred shares entitled to the current dividend, but not any undeclared and unpaid amounts from prior years dividends in arrears - Accurate answers Dividends that were not declared on cumulative preferred shares during a period. dividends in arrears wouldn't be considered - Accurate answers liabilities the amount of dividends in arrears should be disclosed in - Accurate answers notes to financial statements liquidation preference - Accurate answers preferred stocks have a preference on corporate assets if the corporation fails the price for a common share is usually more _____ than the price for preferred shares - Accurate answers volatile convertible preferred shares - Accurate answers Preferred shares that the shareholder can convert into common shares at a specified ratio. rate reset preferred shares - Accurate answers preferred shares issued with the right for a corporation to reset the dividend rate on their preferred shares redeemable preferred shares - Accurate answers Preferred shares that give the issuer the right to purchase the shares from shareholders at specified future dates and prices. retractable preferred shares - Accurate answers Preferred shares that give the shareholder the right to sell the shares to the issuer at specified future dates and prices, at the shareholder's option not the corporation's cash dividend - Accurate answers a pro rata (proportional to ownership) distribution of cash to stockholders two-part solvency test to declare and pay cash dividends - Accurate answers 1. Must have sufficient cash or resources to pay liabilites as they become due after the dividend is declared and paid
- Net realizable value of assets must exceed the total of liabilities and share capital three important dates for paying cash dividends - Accurate answers 1. declaration date
- record date
- payment date declaration date - Accurate answers the date on which the board of directors officially approves a dividend Entry to declare cash dividend - Accurate answers debit Dividends Declared, credit Dividends Payable record date - Accurate answers the date when the company determines ownership of outstanding shares for dividend purposes payment date - Accurate answers the date of the actual cash distribution of dividends entry for payment date of cash dividends - Accurate answers debit Dividends Payable, credit Cash stock dividend - Accurate answers A pro rata (proportional to ownership) distribution of the corporation's own stock to stockholders. a stock dividend doesn't change - Accurate answers assets, liabilities, or total shareholders' equity stock dividends increase _____ and decrease ____ - Accurate answers share capital; retained earnings reasons for issuing a stock dividend - Accurate answers 1. To satisfy shareholders' dividends expectations while conserving cash
- To increase the marketability of shares and make them more affordable
- To emphasize that a portion of shareholders' equity has been permanently reinvested in the legal capital of business the percentage stock dividend is applied to ______ not the ______ - Accurate answers number of shares; dollar value of shares stock dividends are recorded at - Accurate answers fair value entry to declare stock dividend - Accurate answers debit Dividends Declared, credit Dividends Distributable Stock Dividends Distributable is a _____ account - Accurate answers equity entry for payment of stock dividends - Accurate answers debit Stock Dividends Payable, credit Common Shares stock split - Accurate answers the division of each single share of a company's stock into more than one share a stock split is usually _____ than a stock dividend - Accurate answers much larger
investing activities include - Accurate answers the acquisition and disposal of non-current assets and investments not held for trading financing activities result in - Accurate answers changes in the size and composition of the equity and borrowings of a company financing activities include - Accurate answers obtaining cash from using debt and repaying borrwed amounts, cash received from issuing sharers, and cash paid for dividends and buying back shares investing and financing activites not reported on statement of cash flow - Accurate answers - issue of shares to purchase assets or reduce liabilities
- conversion of debt into equity
- exchanges of property, plant, and equipment significant investing and financing activities that don't affect cash are.. - Accurate answers not reported in the body of statement of cash flows, and instead are disclosed in notes indirect method - Accurate answers a method of determining net cash provided by operating activities by adjusting net income for items that don't affect cash direct method - Accurate answers A method of determining net cash provided by operating activities by adjusting each item in the income statement from the accrual basis to the cash basis. sources of info for the statement of cash flows - Accurate answers 1. comparative statement of financial position
- income statement
- additional information for how cash was provided or used the end balance on the statement of cash flows should - Accurate answers agree with the cash balance on the balance sheet noncash expenses like depreciation are _____ to net income for the statement of cash flows - Accurate answers added cash received from disposing long-lived assets should be reported as - Accurate answers investing activities all losses and gains from asset disposal must be ____ from operating activities - Accurate answers eliminated if a loss on disposal occurs, the amount is _____ to/from net income - Accurate answers added if a gain on disposal occurs, the amount is ____ to/from net income - Accurate answers subtracted when accounts receivables decreases, cash collected from customers is ______ than the amount of sales to the customers - Accurate answers greater
if accounts receivables decreases, the decrease is _____ to/from net income - Accurate answers added if accounts receivables increase, the increase is _____ to/from net income - Accurate answers deducted when accounts receivables increases, cash collected from customers is ______ than the amount of sales to the customers - Accurate answers less when inventory increases during the year, cost of goods purchased is ____ than COGS expense recorded
- Accurate answers greater (perpetual system) if inventory increases, the increase must be _____ to/from net income - Accurate answers deducted (perpetual system) if inventory decreases, the increase must be _____ to/from net income - Accurate answers added the deduction of an inventory increase does what? - Accurate answers converts COGS to COGP, but doesn't tell how much cash was paid when prepaid expenses increase, the amount of cash spent _____ the accrual-based operating expenses
- Accurate answers exceeds if prepaid expenses increase, the increase is _____ to/from net income - Accurate answers deducted if prepaid expenses decrease, the decrease is _____ to/from net income - Accurate answers added when prepaid expenses decrease, the amount of cash spent _____ the accrual-based operating expenses - Accurate answers is less than an increase in current liabilities is ____ to/from net income - Accurate answers added a decrease in current liabilities is ____ to/from net income - Accurate answers deducted when accounts payable increases, expenses on an accrual basis are ____ than on a cash basis - Accurate answers higher two steps to convert COGS from accrual basis to cash basis - Accurate answers 1. The change in Inventory adjusts COGS to COGP
- The change in Accounts Payable adjusts COGP to payments to suppliers A change in Income Tax payable reflects the - Accurate answers difference between income tax expense incurred and paid an increase in current assets is ___ to/from net income - Accurate answers deducted
if a company has combined cash equivalents with cash, it must... - Accurate answers disclose those componenets and a reconciliation of amounts reported on cash flow statement with those reported on balance sheet corporate life cycle - Accurate answers The four phases in the life of a business: introductory, growth, maturity, and decline. In each phase, the nature of the company's cash flows changes. in the introductory and growth phases, we expect cash from operating activities to be... - Accurate answers negative in the introductory and growth phases, we expect cash to be used by - Accurate answers investing activities in the introductory and growth phases, we expect financing activities to be... - Accurate answers positive during maturity and decline, operating activites tends to be - Accurate answers positive during maturity and decline, financing activities tends to be - Accurate answers negative in decline, cash from operating activities tends to - Accurate answers decrease in decline, investing activities tends to be - Accurate answers positive in decline, cash is mainly used for - Accurate answers financing activities free cash flow - Accurate answers a cash-based measure used to evluate solvency free cash flow formula - Accurate answers net cash provided by operating activities - net capital expenditures - cash dividends paid free cash flow helps to understand... - Accurate answers how much discretionary cash flow a company has left from operating activities to expand operations, reduce debt, or pay additional dividends net capital expenditures can be found in the ____ section - Accurate answers investing (direct method) If accounts receivables decrease, the decrease is ______ to/from _______ - Accurate answers added; sales revenue (direct method) If accounts receivables increases, the increase is ______ to/from _______ - Accurate answers deducted; sales revenue (direct method) If unearned revenue decreases, the decreases is ______ to/from _______ - Accurate answers deducted; unearned revenue
(direct method) If unearned revenue increases, the increase is ______ to/from _______ - Accurate answers added; unearned revenue (direct method) If interest receivable decrease, the decrease is ______ to/from _______ - Accurate answers added; interest revenue (direct method) If interest receivables increases, the increase is ______ to/from _______ - Accurate answers deducted; interest revenue (direct method) If inventory decreases, the decrease is ______ to/from _______ - Accurate answers deducted; cost of goods sold (direct method) If inventory increases, the increase is ______ to/from _______ - Accurate answers added; cost of goods sold (direct method) If accounts payable decreases, the decrease is ______ to/from _______ - Accurate answers added; cost of goods sold (direct method) If account payable increases, the increase is ______ to/from _______ - Accurate answers deducted; cost of goods sold other operating expenses are - Accurate answers total operating expenses exclusive of noncash depreciation and loss on disposal (direct method) If prepaid expenses increase, the increase is ______ to/from _______ - Accurate answers added; operating expenses (direct method) If prepaid expenses decrease, the decrease is ______ to/from _______ - Accurate answers deducted; operating expenses (direct method) If accrued liabilities decrease, the decrease is ______ to/from _______ - Accurate answers added; operating expenses (direct method) If accrued liabilities increase, the increase is ______ to/from _______ - Accurate answers deducted; operating expenses (direct method) If salaries payable increases, the increase is ______ to/from _______ - Accurate answers deducted; salaries expense (direct method) If salaries payable decreases, the decrease is ______ to/from _______ - Accurate answers added; salaries expense (direct method) If interest payable increases, the increase is ______ to/from _______ - Accurate answers deducted; interest expense (direct method) If interest payable decreases, the decrase is ______ to/from _______ - Accurate answers added; interest expense
