ACC 101 CHAPER 6-10 FINAL EXAM STUDY GUIDE || with Errorless Solutions 100%.
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Course
ACC 101 CHAPER 6-10
Institution
ACC 101 CHAPER 6-10
Merchandise inventory correct answers Goods a company intends to sell.
LIFO (last in, first out) correct answers Assumes last items purchased are the first sold.
FIFO (First In, First Out): correct answers Assumes first items purchased are the first sold. (Chronological)
Specific Identific...
ACC 101 CHAPER 6-10 FINAL EXAM STUDY GUIDE ||
with Errorless Solutions 100%.
Merchandise inventory correct answers Goods a company intends to sell.
LIFO (last in, first out) correct answers Assumes last items purchased are the first sold.
FIFO (First In, First Out): correct answers Assumes first items purchased are the first sold.
(Chronological)
Specific Identification correct answers Tracks each item's cost individually.
Weighted Average Cost Method: correct answers Averages cost of goods available for sale for
cost assignment.
FOB shipping point correct answers buyer owns goods in transit
FOB destination correct answers Seller owns goods in transit
Multi-Step Income Statement: Gross Profit calculation correct answers Sales revenue- Cost of
goods sold (COGS)
Inventory costing methods: Specific Identification: correct answers For unique identifiable items.
Inventory costing method: Weighted average cost correct answers COGAS (cost of goods
available for sale).
Inventory costing methods: FIFO correct answers First purchased items are sold first.
Inventory costing methods: LIFO correct answers Last purchased items are sold first.
Which method is good for Balance Sheet/Income Statement, to pay less taxes, to show more
income, etc. correct answers Balance sheet: FIFO shows higher inventory values in inflation.
Income Statement: LIFO shows lower net income in inflation (less taxes).
Less Taxes: LIFO during inflation.
More Income: FIFO during inflation
What are the effects on the financial statements for LIFO when prices are rising or falling correct
answers LIFO in Rising Prices: Higher COGS, Lower Gross Profit, Lower Taxes, Lower
Balance Sheet Inventory Value. If falling, reverse.
What are the effects on the financial statements for FIFO when prices are rising or falling correct
answers Lower COGS, Higher Gross Profit, Higher Taxes, Higher Balance Sheet Inventory
Value. If falling, reverse.
, What is the effect on net income and assets of misstating the ending merchandise inventory in
the 1st year? correct answers 1st Year: Overstated inventory leads to understated COGS,
overstated net income, and overstated assets. Understated inventory leads to the opposite.
What is the effect on net income and assets of misstating the ending merchandise inventory in
the 2nd year? correct answers 2nd Year: The effects are reversed because the error in beginning
inventory for the year corrects the misstatement impact from the previous year on COGS and net
income, but overall financial portrayal might still be affected.
Cash equivalents definition correct answers very liquid investments with original maturities of 3
months or less in which the company invests excess cash temporarily in order to earn interest.
EXAMPLE:U.S. treasury bills, Notes payable issued by major corps, Money market fund
Preparing a bank reconciliation: What is added/subtracted on Bank side? correct answers Add:
Deposits in transit
Subtract: Outstanding checks
Plus or minus: Bank errors
Preparing a bank reconciliation: What is added subtracted on Book side? correct answers Add:
Notes receivable collected by the bank, interest earned
Subtract: Bank service charges, NSF (non-sufficient funds) checks
Plus or minus: Book errors
How do you find the adjusted cash balance per bank and books? correct answers Per Bank: Start
with the bank statement balance, adjust for deposits in transit, outstanding checks, and any bank
errors to find the adjusted balance.
Per Books: Start with the book balance, adjust for any earnings (e.g., interest earned) and charges
(e.g., NSF checks, service fees), and book errors to find the adjusted balance. The goal is to
reconcile and ensure both adjusted balances match.
Allowance for Doubtful Accounts correct answers Contra assets to Accounts receivable.
Has a CR (credit) balance.
subtracted from AR on the balance sheet (AR, net = AR - Allowance for Doubtful Accounts)
It is the estimated amount of AR that the company won't be able to collect.
Accounts Receivable (AR) correct answers Money owed to a company by its customers.
Allowance for Doubtful Accounts definition correct answers Estimate of the amount of AR not
expected to be collected.
Accounts Receivable, Net correct answers The amount of AR a company expects to collect,
calculated as AR minus the Allowance for Doubtful Accounts.
Methods of accounting for uncollectible accounts: Percent of Sales Method correct answers
Estimates bad debts based on a percentage of the period's sales.
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