Accounting 1 Exam 2 OSU Complete Questions And Answers 100% Verified

Sales Revenue - correct answers revenue earned from selling inventory What are the two adjustments to Sales Revenue? - correct answers Sales Return & Allowance and Sales Discount Sales Return - correct answers customers are dissatisfied with merchandise and are allowed to return the goods to the seller for credit or a refund Sales Allowance - correct answers customers are dissatisfied with merchandise and the seller allows a reduction from the selling price. Goods are not returned Sales Discount - correct answers offer of a cash discount to a credit customer for the prompt payment of a balance due 3/10 , n/50 - correct answers example of sales discount Bad Debt Expense - correct answers The amount of the adjustment to the allowance for uncollectible accounts, representing the cost of estimated future bad debts charged to the current period. Allowance For Doubtful Accounts - correct answers contra-asset account containing the estimated uncollectible accounts receivable Allowance For Doubtful Accounts formula/chart - correct answers Beginning Balance + Recoveries + Bad Debt Expense - Write-Offs = Ending Balance Net Credit Sales Method of Estimating Bad Debt Expense - correct answers Bad Debt Expense = Net Credit Sales * % expected to be uncollectible Net Realizable Value (NRV) - correct answers Accounts Receivable - Allowance for Doubtful Accounts Accounts Receivable Turnover Ratio - correct answers net sales revenue/average accounts receivable Average Accounts Receivable Formula - correct answers Beginning A/R + Ending A/R / 2 Average Collection Period - correct answers 365/accounts receivable turnover ratio Accounts Receivable Chart - correct answers Beginning A/R + Sales Revenue - Money Collected - Write-offs = Ending A/R Sales Returns & Allowances and Sales Discounts are all: - correct answers * Contra Revenue accounts * Decrease sales revenue * Normal Balance is debit When finding net sales revenue, you subtract... - correct answers Sales Returns & Allowances and Sales Discounts Bad Debt Expense is: - correct answers * classified as an expense account * found on the income statement * reduces net income Allowance For Doubtful Accounts is: - correct answers * a contra asset account (decreases assets) * normal balance is credit * found on the balance sheet as a decrease to A/R * represents the amount of A/R the company estimates it won't collect Write-offs - correct answers * No effect A/R * No effect on NRV Recovery - correct answers when money the company had written-off is paid Goods in Transit - correct answers goods being shipped from the seller to the buyer and are thus on board a truck, train, ship, or plane FOB Shipping Point - correct answers ownership of the goods passes to the buyer as soon as the goods are shipped FOB Destination Point - correct answers ownership of the goods remains with the seller until the goods reach the buyer Cost of Goods Available For Sale - correct answers beginning inventory + net purchases Cost of Goods Sold - correct answers Cost of Goods Available For Sale - Ending Inventory Net Purchases - correct answers purchases - purchase returns - purchase discounts + freight in Purchase Returns - correct answers represent inventory that was purchased and then returned to the seller Purchase Discounts - correct answers represents discounts received for paying your supplier early Freight-In - correct answers cost of transporting (shipping) inventory you have purchased to you Freight-Out - correct answers Represents the cost of transporting inventory to your customers but where you have agreed to pay the shipping costs First-In, First-Out (FIFO) - correct answers assigns the oldest inventory costs to COGS and assigns the newest inventory costs to Ending Inventory Last-In, First-Out (LIFO) - correct answers assigns the newest inventory costs to COGS and assigns the oldest inventory costs to Ending Inventory Weighted Average Assumptions - correct answers - assumes all inventory items have the same cost - thus, it does not matter if we assume old or new units are sold since all units have the same cost - this 'same cost' is called the weighted average cost per unit Weighted Average Cost Per Unit - correct answers (cost of beginning inventory + cost of purchases) / (units in beginning inventory + units purchased) Weighted Average Cost Per Unit - correct answers cost of goods available for sale/units available for sale Net Income - correct answers Revenues - Expenses Gross Profit - correct answers Sales revenue - cost of goods sold Inventory Turnover - correct answers Measures the number of times a company sells its average level of merchandise inventory during a period. Inventory Turnover Formula - correct answers Cost of goods sold / average inventory Average Inventory - correct answers (Beginning Inventory + Ending Inventory) / 2 Number of Days Sales in Inventory - correct answers measures the number of days on average between buying the inventory from suppliers and selling it to customers Number of Days Sales in Inventory Formula - correct answers 365 / inventory turnover Operating Cycle - correct answers measures the number of days on average between buying inventory from suppliers and collecting cash from selling inventory to customers Gross Margin Rate (Gross Profit Rate) - correct answers measures the percentage of the sales price of inventory that is gross profit Operating Cycle Formula - correct answers Number of Days' Sale in Inventory + Average Collection Period Gross Margin Rate Formula - correct answers gross margin (profit) / net sales revenue Statement of Cash Flows - correct answers A financial statement that provides financial information about the cash receipts and cash payments of a business for a specific period of time. 3 categories of cash inflows and outflows - correct answers operating activities, investing activities, financing activities Operating Activities - correct answers Cash flow activities that include the cash effects of transactions that create revenues and expenses and thus enter into the determination of net income. Operating Activities Cash Inflow Examples - correct answers * From sale of goods or services * From returns on loans (interest received) and on equity securities (dividends received) Operating Activities Cash Outflow Examples - correct answers * To suppliers for inventory * To employees for services * To government for taxes * To lenders for interest * To others for expenses Investing Activities - correct answers Includes cash transactions involving the purchase and sale of long-term assets and current investments Investing Activities cash inflow examples - correct answers * Sale of PPE * Sale of investments in other entities * Collection of principal on loans to other entities Investing Activities cash outflow examples - correct answers * Purchase PPE * Purchase investments in other entities * Making loans to other entities Financing Activities - correct answers Cash flow activities that include (a) obtaining cash from issuing debt and repaying the amounts borrowed and (b) obtaining cash from stockholders, repurchasing shares, and paying dividends. Financing Activities cash inflow examples - correct answers * Sale of company's stock to its stockholders * Borrowing money (bank loans) Financing Activities cash outflow examples - correct answers * Stockholders through dividends * Creditors as repayment of principal of funds borrowed A/R t-chart - correct answers Beginning A/R + Sales Revenue - Cash Collected From Customers = End A/R Inventory t-Chart - correct answers Beginning Inventory + Purchases - COGS = Ending Inventory Accounts Payable t-chart - correct answers Beginning Accounts Payable + Purchases of Inventory - Cash paid to suppliers = Ending Accounts Payable Prepaid Insurance T-chart - correct answers Beginning Prepaid Insurance + Purchases of Insurance - Insurance Expense = Ending Prepaid Insurance Salaries Payable T-chart - correct answers Beginning Salaries Payable + Interest Expense - Cash paid for interest = Ending Salaries Payable Interest Payable T-chart - correct answers Beginning Interest Payable + Interest Expense - Cash paid for interest = Ending Interest Papyable Income Taxes Payable T-chart - correct answers Beginning income taxes payable + Income tax expense - cash paid for taxes = Ending income taxes payable