MGA 201 Final Exam Questions
with Answers (Latest Edition)
1. Assets - ANSWER Somothing a company owns which is valuable
2. Liabilities - ANSWER something a company Owes
3. Stockholders Equity - ANSWER the net worth of a company after all
liabilities are paid (Assets - Liabilities = Stockholders Equity)
4. Revenue - ANSWER income, profit
5. Expenses - ANSWER various costs of operation (Revenues - Expenses
=Net Income )
6. Adjustment Analysis - ANSWER -Determine the necessary adjustments to
make to the accounting records
-Without adjustments the financial statements present and incomplete and
misleading picture of the company's financial performance.
7. Deferral Adjustments - ANSWER An expense or revenue has been deferred
if we have postponed reporting it on the income statement util a later period.
8. Deferral Adj's for Expenses - ANSWER -Cash paid to a party in advance of
using goods or services, creating a future benefit(asset)
-Company will incur expense when it used the asset in the future
-Adjusting entries: Prepaid expenses
,-Credit asset: Debit expense
9. Deferral Adj's for Revenues - ANSWER -Cash received from customers in
advance of providing a good or service(creating a liability)
-Company will earn revenue when it fulfills its liability to provide
goods/services in the future
-Adjusting entries: Deferred Revenues
-Debit liability: credit revenues
10.Accrual Adjustments - ANSWER -Accrual adjustments are needed when a
company has incurred an expense or earned revenue in the current period,
but has not yet recorded it because the related cash will not be paid or
received until a later period
-Sept 1 incur income taxes -sept 30 adjust needed - Dec 31 cash paid for income
taxes
11.FOB Destination - ANSWER -Goods are owned by the seller until they are
delivered to the buyer
-Seller pays the shipping costs
12.Allowance Method - ANSWER -The allowance method follows a two-step
process:
Make an end-of-period adjustment to record the estimated bad debts in the
period credit sales occur.
Remove ("write off") specific customer balances when they are known to be
uncollectible.
,13.Net Realizable Value of Accounts Receivable - ANSWER Accounts
receivable - Accts receiv estimated to be uncollectible = accounts receivable,
net
14.Methods for Estimating Bad Debt - ANSWER -There are two acceptable
methods of estimating the bad debts in a given period.
1.Percentage of Credit Sales Method.(simpler to apply)
2.Aging of Accounts Receivable (more accurate)
15.Percentage of Credit Sales Method (Income Statement Approach) -
ANSWER The percentage of credit sales method estimates bad debt expense
by multiplying the historical percentage of bad debt losses by the current
period's credit sales.
16.Aging of Accounts Receivable (Balance Sheet approach) - ANSWER -The
aging method gets its name because it is based on the "age" of each amount
in Accounts Receivable at the end of the period. The older and more overdue
an account receivable becomes, the less likely it is to be collectible.
-The method includes three steps: (1) Prepare an aged list of accounts
receivable, (2) Estimate bad debt loss percentages for each category, and (3)
Compute the total estimated bad debts.
17.Purchase Discounts - ANSWER When customers purchase on
account(credit) they may be offered a discount by the seller to encourage
early payment
18.Early Payment Incentive - ANSWER 2/10, n/30 :Read as "Two ten, net
thirty"
-2-> discount percentage
-10-> number of days in discount period
, -n-> net(total sales less returns)
-30-> max credit period
19.Sales, Returns, and Allowances - ANSWER When goods sold to a customer
arrive in damaged condition or are otherwise unsatisfactory, the customer
can,
return them for a full refund
keep them and ask for a reduction in the selling price, called an allowance
20.Gross Profit - ANSWER Sales revenue - Cost of goods sold
21.Gross Profit Percentage - ANSWER Gross profit / Net sales x100
22.Primary Goals of Inventory Managers are to: - ANSWER 1. Maintain
sufficient quantity of inventory to meet customers' needs
Ensure quality meets customers' expectations and company standards
Minimize costs of acquiring and carrying the inventory
23.Types of Inventory: - ANSWER Merchandisers
Manufacturers
24.Merchandiser’s.. - ANSWER -buy finished goods
-sell finished goods
-Merchandise inventory
25.Manufacturers... - ANSWER -buy raw materials
with Answers (Latest Edition)
1. Assets - ANSWER Somothing a company owns which is valuable
2. Liabilities - ANSWER something a company Owes
3. Stockholders Equity - ANSWER the net worth of a company after all
liabilities are paid (Assets - Liabilities = Stockholders Equity)
4. Revenue - ANSWER income, profit
5. Expenses - ANSWER various costs of operation (Revenues - Expenses
=Net Income )
6. Adjustment Analysis - ANSWER -Determine the necessary adjustments to
make to the accounting records
-Without adjustments the financial statements present and incomplete and
misleading picture of the company's financial performance.
7. Deferral Adjustments - ANSWER An expense or revenue has been deferred
if we have postponed reporting it on the income statement util a later period.
8. Deferral Adj's for Expenses - ANSWER -Cash paid to a party in advance of
using goods or services, creating a future benefit(asset)
-Company will incur expense when it used the asset in the future
-Adjusting entries: Prepaid expenses
,-Credit asset: Debit expense
9. Deferral Adj's for Revenues - ANSWER -Cash received from customers in
advance of providing a good or service(creating a liability)
-Company will earn revenue when it fulfills its liability to provide
goods/services in the future
-Adjusting entries: Deferred Revenues
-Debit liability: credit revenues
10.Accrual Adjustments - ANSWER -Accrual adjustments are needed when a
company has incurred an expense or earned revenue in the current period,
but has not yet recorded it because the related cash will not be paid or
received until a later period
-Sept 1 incur income taxes -sept 30 adjust needed - Dec 31 cash paid for income
taxes
11.FOB Destination - ANSWER -Goods are owned by the seller until they are
delivered to the buyer
-Seller pays the shipping costs
12.Allowance Method - ANSWER -The allowance method follows a two-step
process:
Make an end-of-period adjustment to record the estimated bad debts in the
period credit sales occur.
Remove ("write off") specific customer balances when they are known to be
uncollectible.
,13.Net Realizable Value of Accounts Receivable - ANSWER Accounts
receivable - Accts receiv estimated to be uncollectible = accounts receivable,
net
14.Methods for Estimating Bad Debt - ANSWER -There are two acceptable
methods of estimating the bad debts in a given period.
1.Percentage of Credit Sales Method.(simpler to apply)
2.Aging of Accounts Receivable (more accurate)
15.Percentage of Credit Sales Method (Income Statement Approach) -
ANSWER The percentage of credit sales method estimates bad debt expense
by multiplying the historical percentage of bad debt losses by the current
period's credit sales.
16.Aging of Accounts Receivable (Balance Sheet approach) - ANSWER -The
aging method gets its name because it is based on the "age" of each amount
in Accounts Receivable at the end of the period. The older and more overdue
an account receivable becomes, the less likely it is to be collectible.
-The method includes three steps: (1) Prepare an aged list of accounts
receivable, (2) Estimate bad debt loss percentages for each category, and (3)
Compute the total estimated bad debts.
17.Purchase Discounts - ANSWER When customers purchase on
account(credit) they may be offered a discount by the seller to encourage
early payment
18.Early Payment Incentive - ANSWER 2/10, n/30 :Read as "Two ten, net
thirty"
-2-> discount percentage
-10-> number of days in discount period
, -n-> net(total sales less returns)
-30-> max credit period
19.Sales, Returns, and Allowances - ANSWER When goods sold to a customer
arrive in damaged condition or are otherwise unsatisfactory, the customer
can,
return them for a full refund
keep them and ask for a reduction in the selling price, called an allowance
20.Gross Profit - ANSWER Sales revenue - Cost of goods sold
21.Gross Profit Percentage - ANSWER Gross profit / Net sales x100
22.Primary Goals of Inventory Managers are to: - ANSWER 1. Maintain
sufficient quantity of inventory to meet customers' needs
Ensure quality meets customers' expectations and company standards
Minimize costs of acquiring and carrying the inventory
23.Types of Inventory: - ANSWER Merchandisers
Manufacturers
24.Merchandiser’s.. - ANSWER -buy finished goods
-sell finished goods
-Merchandise inventory
25.Manufacturers... - ANSWER -buy raw materials
