Summary ACCT 212 Accounting Terms and Definitions- BEST 2021 STUDY GUIDE

Another name for short-term investments is:marketable securities. Investments in marketable securities fall into three categories, including: trading security for $12,000. The entry to record this transaction will include An unrealized gain: Trading securities are: Unrealized gains or losses on trading securities are reported on the: ABC Company has shipped goods to one of its customers FOB shipping point. ABC Company will recognize sales revenue when: When goods are shipped FOB destination: If a buyer takes advantage of a sales discount, the journal entry recorded by the seller will include a(n): Which of the following is a true statement about sales? If a buyer takes advantage of a sales discount, the journal entry recorded by the seller will include a(n): A ledger that contains a separate account for each customer is called a: The most important internal control over cash is to: The biggest risk of selling on credit is: The aging-of-receivables method is: Under the allowance method: Allowance for uncollectible accounts is classified as: Which account shows the amount of accounts receivable that the business does NOT expect to collect? The percent-of-sales method of computing uncollectible accounts is used for: The percent-of-sales method: The entry to write off an account under the allowance method for estimating uncollectible accounts: The aging-of-receivables method: Under the allowance method: Allowance for uncollectible accounts is classified as: Which account shows the amount of accounts receivable that the business does NOT expect to collect The percent-of-sales method of computing uncollectible accounts is used for: The percent-of-sales method: The entry to write off an account under the allowance method for estimating uncollectible accounts: The aging-of-receivables method: Under the allowance method, the entry to write off a $2,600 uncollectible account includes a: A company makes a journal entry to debit Uncollectible-Account Expense and credit Accounts Receivable. This entry indicates that they are using the ________ method. The entry to record accrued interest on a note receivable at year end includes a debit to: On a statement of cash flows, collections of accounts receivables are classified as: In 2012, Krane Company purchases $75,000 of U.S. Treasury bills. This purchase would be reported on Krane Company's 2012 statement of cash flows as: A three month, 10% note for $8,000, dated April 15, is received from a customer. The principal of the note is: The entry to record accrued interest on a note receivable at year end includes a debit to: On a statement of cash flows, collections of accounts receivables are classified as: In 2012, Krane Company purchases $75,000 of U.S. Treasury bills. This purchase would be reported on Krane Company's 2012 statement of cash flows as: A measure of the ability of an entity to pay all of its current liabilities if they come due immediately is the: Which of the following is considered to be a more stringent measure of a company's ability to pay its current liabilities than the current ratio? The quick ratio and the number of days' sales in receivables measure: When computing the acid test ratio, the numerator will include all of the following EXCEPT for :A) net current receivables. B) short-term investments. C) prepaid expenses. D) cash. Days' sales in receivables can be computed in two logical steps. In the second step: In a perpetual inventory system, The cost of the inventory that the business has sold to customers is called: The cost of inventory that is still on hand and has not been sold to customers is called: Another term for gross profit is: Sales revenue is based on the ________ price of the inventory, while cost of goods sold is based on the ________ of the inventory. Which is the correct order for items to appear on the income statement? A periodic inventory system: ABC Company purchases inventory from XYZ Company with the shipping terms FOB shipping point. This means that: How do purchase returns and allowances and purchase discounts affect gross purchases? When inventory is shipped from the seller to the buyer with shipping terms of FOB destination: Under a perpetual inventory system, the journal entry to record the purchase of inventory will include a: All of the following costs would be included in inventory EXCEPT for: A) freight-in. B) advertising. C) taxes paid on the purchase price. D) insurance while in transit. The cost of inventory is the: The specific-unit-cost method: ABC Auto Sales sells new Lexus vehicles. ABC will most likely use the ________ method to cost its ending inventory. To determine the average cost per unit: When inventory prices are increasing, the FIFO costing method will generally yield a cost of goods sold that is: Under the ________ method, ending inventory is based on the costs of the most recent purchases. A) average-cost When inventory prices are falling, the LIFO costing method will generally result in: When comparing the results of LIFO and FIFO when inventory costs are decreasing: When comparing the FIFO and LIFO inventory methods: A LIFO ________ occurs when inventory quantities fall below the level of the previous period. The ________ principle states that the financial statements of a business must report enough information for outsiders to make knowledgeable decisions about the business. A company uses LIFO in one year, then switches to FIFO and then to average-cost. This is a violation of the: The cost-of-goods sold model is: An error in the ending inventory for the year ended December 31, 2011: Ending inventory for the year ended December 31, 2011, is understated by $8,000. How will this affect net income for 2011? If the cost of goods sold is understated for the year, then: The journal entry to transfer the beginning inventory to cost of goods sold under the periodic inventory system is : The cost of assets purchased together in a lump sum should be allocated using the market value of each of the assets. TRUE OR FALSE: The cost of a building will include the costs to renovate the building for its intended use. TRUE OR FALSE: Any cost to get machinery up and running and ready for its intended use should be part of the cost of the asset and depreciated. An example of an intangible asset is: Long-lived tangible assets that are used in the operation of the business are called: The only plant asset that does not depreciate is: An asset with no physical form, but that has special rights to current and expected future benefits is Which of the following should be included in the cost of land? ABC Company purchased land with an old building that they plan on demolishing so that they can construct a new, modern building. The cost of demolishing the building will be part of the cost of the: The cost of installing lights in the parking lot should be recorded as: Which of the following costs should NOT be added to the cost of the machine? Pat's Pets recently paid to have the engine in its delivery van overhauled. The estimated useful life of the van was originally estimated to be 4 years. The overhaul is expected to extend the useful life of the van to 10 years. The overhaul is regarded as a(n): Capital expenditures are not immediately expensed because these items: If a company capitalizes a cost that should have been expensed: ) TRUE OR FALSE: Obsolescence may cause an asset's useful life to be longer than the asset's physical life. TRUE OR FALSE: Book value equals the cost of the asset less the total accumulated depreciation. Which of the following depreciation methods best applies to those assets that generate greater revenue earlier in their useful lives? All of the following are needed to measure depreciation, EXCEPT for: A) cost. B) market value. C) estimated useful life. D) estimated residual value. Double-declining balance depreciation: A) is an accelerated method of depreciation. B) ignores the residual value in computing depreciation, except during the last year. C) is based on book value. D) is all of the above. When computing depreciation for a plant asset, which of the following must be estimated? ) The expected cash value of a plant asset at the end of its useful life is known as: When compared to the other methods of depreciation, the double-declining-balance method of depreciation gives depreciation expense that is: At the end of an asset's useful life, the balance in accumulated depreciation will be the same as the: When an asset is fully depreciated: If an asset is sold: Which of the following is a correct statement regarding the disposal of an asset for no proceeds? When plant assets are exchanged: TRUE OR FALSE: Intangible assets with finite lives that can be measured are amortized. Answer: TRUE OR FALSE: Goodwill is recognized only when the purchase price exceeds the value of the net liabilities in the acquisition of another company. The computation of depletion expense is most closely related to which method for computing depreciation? ________ are accounted for as long-term assets when purchased or developed, and their cost is transferred to expense through a process called depletion. Amortization expense: When an intangible asset is amortized: Goodwill: If a company has goodwill on its books: TRUE OR FALSE: If an asset is impaired, the company is required to adjust the carrying value downward from its book value to its fair value. The following is the proper order for assets on a balance sheet: All investments not classified as available-for-sale investments or trading securities are: TRUE OR FALSE: Available-for-sale investments are adjusted from cost to market value. TRUE OR FALSE: GAAP requires companies to adjust their available-for-sale-securities to market value as of the balance sheet date. On purchase date, Available-for-sale investments in stock are recorded at: On the balance sheet, Available-for-sale investments in stock are reported at: Unrealized gains and losses from available-for-sale investments arise from: The Unrealized Gain or the Unrealized Loss Account appears: Receiving a cash dividend affects what part of the balance sheet? Which of the following is the method used when one company owns less than 20% of the shares of another company? The method used to account for investments in which the investor has 35% of the investee's voting stock and can significantly influence the decisions of the investee is the: Under the equity method, the Long-Term Investment account is debited when the: A company that owns 40% of the common stock of another business recognizes revenue from the investment when: Under the equity method of accounting for stock investments, the Investment account is decreased for the receipt of a dividend because: Acme Company owns 35% of Superior Company. Superior Company paid $35,000 cash dividends for the year. Acme Company's journal entry to record the dividends includes a: Dodson Company owns 17,500 of the 50,000 shares of outstanding common stock of Ferguson Company. Dodson Company should account for this investment using the: Goodwill occurs when a parent company: A noncontrolling (minority) interest arises when: The company whose more than 50% of the stock is owned by a parent company is called the: When a company owns more than 50% of the common stock of another company: A consolidated balance sheet shows: A consolidated income statement will show: On the statement of cash flows, the cash paid for 40% of a corporation to be accounted for under the equity method is shown as a(n): TRUE OR FALSE: Present value is the value now of a given amount to be paid or received in the future, assuming compound interest. All of the following are necessary to compute the future value of a single amount except the: A) interest rate. B) number of periods. C) principal. D) maturity value. Which of the following discount rates will produce the smallest present value? A) 8%. B) 10%. C) 6%. D) 4%. The primary focus of horizontal analysis is: Period to period percentage change in comparative financial statements is often called: Horizontal analysis is performed on: In performing a vertical analysis, the base for sales returns and allowances is: Which of the following would be most helpful in the comparison of different size companies? Walton Company's return on sales for the most recent year was 5%. The industry leader reports a return on sales of 7%. The comparison of each company's return on sales is an example of: On a statement of cash flows, which is considered an investing activity? On a statement of cash flows, which is considered an operating activity? Purchases of fixed assets is a sign of: A measure of a company's ability to collect cash from credit customers is the: The ratio that provides an estimate of the number of days, on average, that it takes for customers to pay their account is the: If ABC Corporation's debt ratio is higher than its major competitors, ABC may: