Accounting 221 Exam Final ReviewAssets = Liabilities + Equity Revenue ExpensesDebit Credit Debit Credit Debit Credit Debit Credit Debit Credit+ - - + - + - + + -Cash Accounts Payable Common Stock Service Revenue Salaries ExpensesAccounts Receivable Salaries Payable Retained Earnings Interest Revenue Insurance ExpensesInterest Receivable Notes Payable APIC Advertising ExpensesPrepaid Insurance Interest Payable Treasury Stock (Contraequity)Supplies ExpensesPrepaid Rent Unearned Revenue Operating ExpensesSupplies Warranty Payable Cost of Goods SoldLand Bonds Payable Transportation OutInventory(Transportation In)Discount on Bonds Payable (Contra Liability)Uncollectible AccountsExpenseAllowance for DoubtfulAccounts (contra asset)Premium on Bonds Payable ( Contra Liability)Depreciation Expense(Amortization Expense)Notes Receivable Warranty ExpenseInterest ReceivableAccumulated Depreciation (contra asset)Beginning RE + Net Income – Dividends = Ending REBeginning Supplies + Additions = Amount Available for use – Ending Balance = Usage During the PeriodAccrual = Event happens before the cash is exchangedDeferral= Event happens after cash is exchanged Income StatementRevenueExpensesNet IncomeMulti-Step Income StatementRevenueCOGSGross Margin Less: Operating ExpGains/LossesNet IncomeStatement of Stockholders EquityBeginning CSPlus: IssuedEnd CSBeginning REPlus : Net IncomeLess: DividendsEnd RETotal SEBalance SheetAssetsLiabilitiesSEStatement of Changes in Cash FlowCash flow from OACash flow from IACash flow from FABeg CashPlus REEnd cashClosing EntriesClose salary and expense accounts, move funds to RE2Beginning Inventory Balance + Purchases = Cost of Goods Available for SaleCost of Goods Available for Sale – End Inventory = Cost of Goods SoldSales Revenue – COGS = Gross Margin (Profit)Discounts - 2/10 , x/30 = discount %/ how many days discount is available, net amount/ due in x daysDiscount – Debit Accounts Payable, Credit Inventory FOB Shipping Point = Buyers payFOB Destination = Seller incurs costGain/Loss – come from transactions that don’t involve normal businessFIFO = First In, First OutLIFO = Last In, First OutWeighted Average = Total COGAFS – Total QuantityNet Realizable Value = A/R – Allowance for Doubtful Accounts Percentage of Sales Method/ Percentage of Receivables Method Journal Entry( MAKE T ACCOUNTS!!!)Dr. Uncollectible Accounts Expense xCr. Allowance xDirect Write Off MethodDr. Uncollectible Accounts Expense xCr. A/R xLower of cost or market rule 1. Decide which is lower (cost or market). 2. Make write down if market is lower (TC –TM). 3. Don’t do anything if cost is lower. Dr. COGS Cr. Inventory Ratios to knowCurrent Ratio = Current Assets/ Current LiabilitiesReturn on Assets = Net income/ Total assetsDebt to asset = Total debt / Total AssetsReturn on Equity = Net Income / Owners EquityGross Margin % Ratio = Gross Margin / Net SalesNet Income % = Net Income / Net SalesInventory Turnover = COGS/ Inventory  Average Number of Days in Inventory = 365/ Inventory TurnoverAccts Rec Turnover = Sales/ Accts Rec  Average Number of Days to Correct = 365/ Accts Rec Turnover3Cost – Salvage Value = Depreciation CostBook Value = Cost – Accumulated Depreciation 3 methods of calculating depreciation 1. Straight Line Method – same amount depreciated each yeara. Depreciation Cost/ Useful Life = Depreciation Expense2. Double Declining Method a. Calculate straight line rate = 1/Useful Lifeb. Multiply by 2 = 2/Useful Life = Double Declining ratec. Multiply DD rate x BV at beginning of period= depreciation expense for period3. Units of Productiona. Use table givenb. Determine cost per unit (Depreciation cost/units)c. Multiply by units of production for periodDr. Deprciation ExpCr. Accumulated DepreciationPatents – Grant owners exclusive legal rights to produce product with unique feature.Copyrights – Protect writings, musical compositions, art, or other intellectual property.Notes PayableAccounts Debit CreditCashNotes Payable--Interst ExpenseInterest Payable--Interest PayableNotes PayableCash---Contingent Liabilities – potential obligation arising from a past event1. Probable and reasonably estimated  recognized on financial statements2. Reasonably possible but not likely or cannot be reasonably estimated  not reported on FS, maybe in footnotes3. Remote possibility  Not reported on FSWarrantiesAccount Debit CreditWarranty ExpenseWarranty Payable--Warranties PayableCash--BondsFace Value Discount PremiumStated Rate = MR Stated Rate < MR Stated Rate > MRFace Value = Cash Face Value > Cash Face Value < CashBonds Issued at Face ValueAccounts Debit CreditCashBonds Payable--Interest ExpenseInterest Payable--Bonds PayableInterest PayableCashBonds Issued at a DiscountAccounts Debit CreditCashDiscount on Bonds PayableBonds Payable---Interest ExpenseBonds PayableCashDiscount on Bonds Payable----Bonds Issued at PremiumAccounts Debit CreditCashBonds PayablePremium on Bonds Payable---Interest ExpensePremium on Bonds PayableBonds PayableCash ----Straight Line InterestDiscount/ years = Discount per yearCash = FV x SRInterest Expense = Discount + cashBond EXDiscount: FV 75,000, 4% SR, 5% MR, 10 years75,000 x .6139 (taken from PV of $1 table using MR) = 46,0433,000 (interest) x 7.721 (taken from PV of annuity table using MR) = 23,165Cost to buy = 46,043 + 23,165 = $69,208Additional paid-in Capital in excess of par(stated value) (APIC) = Cash – par (stated)