ISU ACCT 284 - Suggestions for the Final (5 pages)

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Suggestions for the Final



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Suggestions for the Final

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Pages:
5
School:
Iowa State University
Course:
Acct 284 - Financial Accountng
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Suggestions for the Final I have composed a list of suggestions for Exam II based on my attendance in class and key points that Dr Mazzitelli talks about None of these are certain topics questions on the exam and are based on my experience of accounting exams Chapter 1 1 Make sure you know the equations for the balance sheet Net Income Retained Earnings and cash flows statements 2 Under the cash flow statement any operating activities are on the income statement assets are under investing activities and liabilities and contributed capital come under financing activities 3 Management is responsible for the information in the financial statements 4 Know the difference between sole proprietorships and partnerships 5 Know advantages and disadvantages of corporations Chapter 2 3 1 Know the relationships between the 3 basic equations NI End RE and Balance sheet 2 Read over the accounting assumptions 3 Know the difference between the cash and accrual basis of accounting Chapter 4 1 If cash precedes the recognition of revenue or expense have a deferral 2 If cash is after the recognition of revenue or expense have an accrual 3 Make sure you know a few examples of each to aid in your understanding of the two 4 Adjustments NEVER involve cash and affect both the I S and the B S 5 Depreciation and amortization are non cash transactions Chapter 5 1 Two accounting constraints a Materiality is it large enough to influence decisions b Conservatism always understate assets and income 2 Par value a The amount to credit to common stock is calculated by multiplying the number of shares X PAR VALUE b Any amount in excess of PAR VALUE is credited to Paid In Capital 3 Three unique income items a Discontinued operations extraordinary items and the cumulative effect of change in accounting principle b Present ALL NET OF TAX c Extraordinary items are unusual in nature AND infrequent in occurrence 4 Profitability ratio a Return on Equity ROE Chapter 6 1 Credit card sales a Treat credit card sales as CASH sales b Always debit credit card discount if there is a credit card fee 2 Credit Sales a Calculate sales discount based on the credit terms b Ex 2 10 n 30 A 2 discount if paid within 10 days and nothing after 3 Net sales a Net sales is derived by deducting the contra revenue accounts from gross sales sales returns credit card and sales discounts 4 Bad debt expense a First increase bad debt expense and the allowance for doubtful accounts by the amount calculated estimated dr Bad debt exp cr Allowance b When writing off a bad debt dr ALLOWANCE cr The specific A R c Income is ONLY reduced when the allowance is created There is NO impact on income assets liabilities or equities from an actual WRITEOFF 5 Receivables turnover ratio RTO a A measure of liquidity b With sales discounts RTO should be higher 6 End A R Beg a r credit sales cash received from customers write off 7 End Allowance for D A beg Bal bad debt exp write offs 8 Internal controls a Separate duties of handling and recording cash 9 Bank reconciliation Look at SI handout Chapter 7 1 Periodic vs Perpetual inventory a Periodic debits a purchases account b Perpetual debits an inventory account 2 LIFO Last in First out fashion automobiles a Is more conservative b LIFO conformity Must use LIFO for BOTH tax and accounting purposes c Does a better job of matching the cost of replacement d In a period of rising prices LIFO results in a higher COGS lower ending inventory lower NI 3 FIFO First in Last out grocery stores a Learn how to compute FIFO ending inventory and COGS 4 Lower of Cost or Market LCM a Use LCM when LIFO or FIFO isn t specified and different costs are given to you market cost purchase cost etc b ALWAYS use the LOWER of cost or market c May be applied to the entire inventory or to each item separately d However when applied to each item separately will get the lowest cost more conservative 5 Inventory Turnover Ratio ITO a COGS Avg Inventory Chapter 8 1 Acquisition cost includes a Purchase price b Taxes paid at time of purchase c Transportation charges d Installation costs e Setup costs to prepare for use f NOT INSURANCE 2 Capital Revenue expenditures a Capital expenditure an asset i Extraordinary repair increase usefulness or extend life of the asset b Revenue expenditure an expense benefits current accounting period i Ordinary maintenance painting 3 Know the differences between depreciation depletion and amortization 4 Book value Acquisition cost accumulated depreciation a Know how to find the book value at the end of a stated year 5 Disposal of Assets a Gain Loss Sale price BV at date of sale b If sold for more than the BV we credit the gain on sale c If sold for less than the BV we debit the loss on sale d ALWAYS depreciate the asset up to the date of sale e I m pretty sure that there will be a problem where the asset is sold right in the middle of the year 6 Straight line depreciation a S L Cost Salvage Residual value estimated useful life of years 7 Double declining balance a DDB First find the S L per year b Then find the S L rate S L amount per year cost salvage residual c If the question asks for double the S L rate then multiply the S L rate by 2 d Use this new rate X the cost for the DDB amount for year 1 e For year 2 use the same rate found in 3 X cost accum depreciation 8 Units of Production a Units of prod cost salvage residual value estimated life of units Chapter 9 1 2 3 a 4 a i Current Assets less than 1 year Current Liabilities less than 1 year Current ratio most important measure of liquidity CR of at least 2 is preferred Time value of Money Two things to ask Are you looking for a PV or a FV ii Is it a single payment or a series of payments b If it is a sum you are looking to invest TODAY it is a PV c If it is a sum you are hoping to get in the future use FV d If you have bought equipment for 100 000 on account Find the amount to assign in your books for that equipment today i Use the PV table Chapter 10 1 Make sure you know the difference between bonds sold at a discount and bonds sold at a premium 2 If a 1 000 bond is sold at 96 it means that the 1 000 bond was sold for 96 of 1 000 or 96 X 1 000 sold for 960 which means that the bond was sold at a discount of 40 3 If a 1 000 bond is sold at 104 it means that the 1 000 bond was sold for 104 or 1 04 X 1 …


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