The document is a detailed review guide for Financial Accounting, covering key topics like adjusting journal entries , factors in computing depreciation, book value, the types of taxes there are and different types of bonds. It includes sample exam questions similar to how it is on the test.
Q23-Q26 Adjusting Journal Entries Definition Matching
- Accrued Revenue: Revenue recorded, not received
- Prepaid Expense: record expiration of a prepaid account
- Unearned Revenue: revenue received in advanced of product/service
- Accrued Expense: recorded expenses, owed, but not paid
Q35-Q40 Completion
- Temporary Accounts: accounts that close at the end of each accounting period
- Permanent Accounts:accounts that carry their balances to the next period
- Adjusting Journal Entries: required at the end of a period.
- Accounting Cycle:steps to prep financial statements
- Income Summary: ONLY used in the closing process.
Factors in computing depreciation:
(1)Cost: includes all expenditures necessary to get the asset in place and ready for use.
(2)Salvage value:an estimate of the asset’s value@the end of its useful life.
(3)Useful life:the length of time it is productively used in a company’s operations; = new useful life - passed
(MACRS): Depreciation system required by federal income tax law; NOT acceptable - financial
Book Value = the asset’s total cost - accum. Depr.
OG $ - depreciated - sale $ = Gain/Loss on Sale
Book Value > selling $ ←→ Loss on sale of asset;
Book value < selling $ ←→ Gain on sale of asset;
Book value = selling $ ←→ No gain or loss recognized
STR8-LINE Depr.:charges the same amt of depreciation expense in each period of the asset’s useful life.
Units-of-production: depreciation based on units produced.
Double-declining: method in which depreciation expense for a period is determined by applying a constant depreciation rate
each period.
Q56-70 > Ch9 > M/C (Conceptual)
Current liabilities(or short-term liability): obligations due within one year.
Accounts payable:amounts owed for goods/services purchased on credit
Interest: difference between amt received from issuing note and amount paid.
- Payroll taxes employees and employers are required to pay: state, local, federal
- Times interest earned: divide income before interest expense and any income tax by interest expense
FICA taxes: SS and Medicare FUTA taxes: federal unemployment taxes & SUTA taxes: state unemploymen
Employer: pays half of FICA; withholds half of FICA
Pays unemployment taxes to the federal gov’t
Pays unemployment taxes to both state & federal gov’t
Employer responsibility:
- Provide each employee w annual report of wages subject to FICA and federal income tax (W-2)
- Filling forms 940 and 941
- Individual earnings records for each employee
Selling goods in advance (ticket sales); DR. → Cash; CR. → Unearned Revenue
Q71-85 > Ch10 > M/C
Callable bonds: bonds that have the options to be called, exercisable by the issuer
Coupon bonds: bonds that have interest coupons attached to their certificates, which holders bring to banks during interest
period.
Bond indenture: contract between bond issuers and holders that identity the right and obligations of both parties
- If issuer sells a bond on a date other than an interest payment date, the buyer will pay the issuer the purchase price + interest
accrued
- Discount on bonds payable is a contra liability
- Amortizing a bond discount allocates a part of the total discount to each interest period
- Bonds sold at premium: contract rate is above market rate; Bonds sold at discount: contract rate is below market rate
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