A304 - Prof. Head IU Test Questions
And Answers.
What are the 2 fundamental qualities of financial reporting? - Answer Faithful representation
and Relevant
Historical Cost includes: - Answer Land, prepaid assets, intangible assets with indefinite life
Adjusted Historical Cost includes: - Answer Buildings, equipment, intangibles with limited lives
Market value/Fair value includes: - Answer Many investments
Net Realizable Value includes: - Answer Inventory or Accounts Receivable
What is the revenue recognition principle? - Answer requires that companies recognize
revenue in the accounting period in which the performance obligation is satisfied
Net Sales Equation - Answer Net Sales = Sales - Credit Card Discounts - Sales Discounts - Sales
Returns & Allowances
What are the contra revenue accounts? - Answer sales discounts, sales returns, sales
allowances
How do contra revenue accounts effect the income statement? - Answer Contra revenue
accounts appear at the top of the income statement and are deducted from the gross revenue
so they decrease net income/
Net AR Equation - Answer Net AR = Gross AR - Allowance for Doubtful Accounts
What value associated with AR is reported on the balance sheet? - Answer Net AR less
allowance for DA is what is reported on the BS
AR Aging Equation - Answer AR Aging = Calculate the ending balance for allowance for
, C. Allowance for doubtful accounts
When is bad debt expense recorded? - Answer Throughout the year, when the consumer is no
longer able to pay back that debt. Ex. Bankruptcy.
What is the journal entry for a write off? - Answer D. Allowance for Doubtful Accounts
C. Accounts Receivable
What is the journal entry for cash sales/collect? - Answer D. Cash
C. Accounts Receivable
What is the journal entry for bad debt recoveries? - Answer D. Accounts Receivable
C. Allowance for Doubtful Accounts
D. Cash
C. Accounts Receivable
What are the two ways bad debt expense is estimated? - Answer 1. Percentage of credit sales
method
2. Aging of accounts receivable method
What is the journal entry for sales on account? - Answer D. Accounts Receivable
C. Sales Revenue
What costs are included in inventory? - Answer all costs that are incurred to get inventory
ready for sale
e.g. freight charges, inspection costs, preparation costs
Bad Debt expense is what kind of expense? - Answer An operating expense
Contra revenue accounts have what kind of balance? - Answer A debit balance
And Answers.
What are the 2 fundamental qualities of financial reporting? - Answer Faithful representation
and Relevant
Historical Cost includes: - Answer Land, prepaid assets, intangible assets with indefinite life
Adjusted Historical Cost includes: - Answer Buildings, equipment, intangibles with limited lives
Market value/Fair value includes: - Answer Many investments
Net Realizable Value includes: - Answer Inventory or Accounts Receivable
What is the revenue recognition principle? - Answer requires that companies recognize
revenue in the accounting period in which the performance obligation is satisfied
Net Sales Equation - Answer Net Sales = Sales - Credit Card Discounts - Sales Discounts - Sales
Returns & Allowances
What are the contra revenue accounts? - Answer sales discounts, sales returns, sales
allowances
How do contra revenue accounts effect the income statement? - Answer Contra revenue
accounts appear at the top of the income statement and are deducted from the gross revenue
so they decrease net income/
Net AR Equation - Answer Net AR = Gross AR - Allowance for Doubtful Accounts
What value associated with AR is reported on the balance sheet? - Answer Net AR less
allowance for DA is what is reported on the BS
AR Aging Equation - Answer AR Aging = Calculate the ending balance for allowance for
, C. Allowance for doubtful accounts
When is bad debt expense recorded? - Answer Throughout the year, when the consumer is no
longer able to pay back that debt. Ex. Bankruptcy.
What is the journal entry for a write off? - Answer D. Allowance for Doubtful Accounts
C. Accounts Receivable
What is the journal entry for cash sales/collect? - Answer D. Cash
C. Accounts Receivable
What is the journal entry for bad debt recoveries? - Answer D. Accounts Receivable
C. Allowance for Doubtful Accounts
D. Cash
C. Accounts Receivable
What are the two ways bad debt expense is estimated? - Answer 1. Percentage of credit sales
method
2. Aging of accounts receivable method
What is the journal entry for sales on account? - Answer D. Accounts Receivable
C. Sales Revenue
What costs are included in inventory? - Answer all costs that are incurred to get inventory
ready for sale
e.g. freight charges, inspection costs, preparation costs
Bad Debt expense is what kind of expense? - Answer An operating expense
Contra revenue accounts have what kind of balance? - Answer A debit balance
