ACC 221 RECENT EXAMS SCRIPT ALL QUESTIONS
AND ANSWERS SURE A+
✔✔Annuity - ✔✔A series of equal cash payments made at regular intervals over time.
✔✔Future Value of an Annuity - ✔✔The total value of a series of equal payments at a
future date, taking into account interest earned.
✔✔Compound Interest - ✔✔Interest calculated on the initial principal and also on the
accumulated interest from previous periods.
✔✔Future Value of a Single Amount - ✔✔The amount of money that an investment will
grow to over a period of time at a given interest rate.
✔✔Present Value of a Single Amount - ✔✔The current worth of a future sum of money
or stream of cash flows given a specified rate of return.
✔✔Discount Rate - ✔✔The interest rate used to determine the present value of future
cash flows.
✔✔Simple Interest - ✔✔Interest calculated only on the principal amount, or on that
portion of the principal amount which remains unpaid.
,✔✔Liquidity - ✔✔The availability of liquid assets to a company, enabling it to meet its
short-term obligations.
✔✔Working Capital Equation - ✔✔Working capital is calculated as current assets minus
current liabilities.
✔✔Current Ratio Equation - ✔✔The current ratio is calculated by dividing current assets
by current liabilities.
✔✔Debt to Equity Ratio - ✔✔A financial ratio indicating the relative proportion of
shareholders' equity and debt used to finance a company's assets.
✔✔Times Interest Earned Ratio - ✔✔A measure of a company's ability to meet its
interest obligations, calculated as (Net Income + Interest Expense + Tax Expense) /
Interest Expense.
✔✔Sinking Fund - ✔✔An investment fund established to set aside money to pay off
debt or a bond at maturity.
✔✔Preferred Stock Features - ✔✔Preferred stock may have features such as being
convertible, redeemable, and cumulative.
✔✔Return on Equity Equation - ✔✔Return on equity is calculated as net income divided
by average stockholders' equity.
✔✔Accounts Receivable - ✔✔Amounts owed to a company by customers for goods or
services sold on credit.
✔✔Sales Return - ✔✔A transaction in which a customer returns previously purchased
merchandise, resulting in a decrease in the vendor's accounts receivable.
✔✔Sales Allowance - ✔✔A reduction in the sales price granted to a customer for
merchandise that is not returned.
✔✔Notes Receivable - ✔✔Formal credit arrangements documented by a written
promissory note.
✔✔Trade Discounts - ✔✔A reduction from the list price of a product or service, often
offered to wholesalers or retailers.
✔✔Revenue Recognition Standard - ✔✔Requires a company to report revenues equal
to the amount of cash the company expects to be entitled to receive.
✔✔Effect of a Sales Allowance - ✔✔Results in a decrease to net income.
, ✔✔Net Revenues Calculation - ✔✔Net Revenue = Total Revenue - Sales Returns -
Sales Allowances - Sales Discounts.
✔✔Allowance Method (GAAP) - ✔✔Generally accepted accounting principles require
that we account for uncollectible accounts using the allowance method.
✔✔Allowance for Uncollectible Accounts - ✔✔Companies report their estimate of future
bad debts, representing a reduction in the balance of accounts receivable.
✔✔Net Accounts Receivable - ✔✔The difference between total accounts receivable and
the allowance for uncollectible accounts.
✔✔Allowance for Uncollectible Accounts Treatment - ✔✔It is subtracted from the
balance of Accounts Receivable in the balance sheet.
✔✔Writing Off Accounts Receivable - ✔✔When it becomes clear the customer will not
pay, the company writes off the customer's account balance as uncollectible.
✔✔Impact of Writing Off an Uncollectible Account - ✔✔Total assets are unchanged.
✔✔Percentage-of-Receivables Method - ✔✔Method of estimating uncollectible
accounts based on the percentage of accounts receivable expected not to be collected.
✔✔Aging Method - ✔✔Estimates future bad debts based on the ages of individual
accounts receivable, using a higher percentage for older accounts.
✔✔Subsidary Ledger - ✔✔A ledger that is summarized in a single general ledger
account.
✔✔Credit Balance in Allowance for Uncollectible Accounts - ✔✔Indicates that last
year's estimate of bad debts was too high.
✔✔Adjusting Entry for Bad Debts - ✔✔If bad debts are estimated to be 20% of accounts
receivable, the adjusting entry would include a debit to Bad Debt Expense for $20,000.
✔✔Interest Revenue from Notes Receivable - ✔✔For a $5,000 note at 6% maturing in
10 months, the interest revenue recorded will be $100 in 2024 and $150 in 2025.
✔✔Receivables Turnover Ratio - ✔✔Calculated as Net Credit Sales divided by Average
Accounts Receivable.
✔✔Average Collection Period - ✔✔Calculated as 365 divided by accounts receivable
turnover.
AND ANSWERS SURE A+
✔✔Annuity - ✔✔A series of equal cash payments made at regular intervals over time.
✔✔Future Value of an Annuity - ✔✔The total value of a series of equal payments at a
future date, taking into account interest earned.
✔✔Compound Interest - ✔✔Interest calculated on the initial principal and also on the
accumulated interest from previous periods.
✔✔Future Value of a Single Amount - ✔✔The amount of money that an investment will
grow to over a period of time at a given interest rate.
✔✔Present Value of a Single Amount - ✔✔The current worth of a future sum of money
or stream of cash flows given a specified rate of return.
✔✔Discount Rate - ✔✔The interest rate used to determine the present value of future
cash flows.
✔✔Simple Interest - ✔✔Interest calculated only on the principal amount, or on that
portion of the principal amount which remains unpaid.
,✔✔Liquidity - ✔✔The availability of liquid assets to a company, enabling it to meet its
short-term obligations.
✔✔Working Capital Equation - ✔✔Working capital is calculated as current assets minus
current liabilities.
✔✔Current Ratio Equation - ✔✔The current ratio is calculated by dividing current assets
by current liabilities.
✔✔Debt to Equity Ratio - ✔✔A financial ratio indicating the relative proportion of
shareholders' equity and debt used to finance a company's assets.
✔✔Times Interest Earned Ratio - ✔✔A measure of a company's ability to meet its
interest obligations, calculated as (Net Income + Interest Expense + Tax Expense) /
Interest Expense.
✔✔Sinking Fund - ✔✔An investment fund established to set aside money to pay off
debt or a bond at maturity.
✔✔Preferred Stock Features - ✔✔Preferred stock may have features such as being
convertible, redeemable, and cumulative.
✔✔Return on Equity Equation - ✔✔Return on equity is calculated as net income divided
by average stockholders' equity.
✔✔Accounts Receivable - ✔✔Amounts owed to a company by customers for goods or
services sold on credit.
✔✔Sales Return - ✔✔A transaction in which a customer returns previously purchased
merchandise, resulting in a decrease in the vendor's accounts receivable.
✔✔Sales Allowance - ✔✔A reduction in the sales price granted to a customer for
merchandise that is not returned.
✔✔Notes Receivable - ✔✔Formal credit arrangements documented by a written
promissory note.
✔✔Trade Discounts - ✔✔A reduction from the list price of a product or service, often
offered to wholesalers or retailers.
✔✔Revenue Recognition Standard - ✔✔Requires a company to report revenues equal
to the amount of cash the company expects to be entitled to receive.
✔✔Effect of a Sales Allowance - ✔✔Results in a decrease to net income.
, ✔✔Net Revenues Calculation - ✔✔Net Revenue = Total Revenue - Sales Returns -
Sales Allowances - Sales Discounts.
✔✔Allowance Method (GAAP) - ✔✔Generally accepted accounting principles require
that we account for uncollectible accounts using the allowance method.
✔✔Allowance for Uncollectible Accounts - ✔✔Companies report their estimate of future
bad debts, representing a reduction in the balance of accounts receivable.
✔✔Net Accounts Receivable - ✔✔The difference between total accounts receivable and
the allowance for uncollectible accounts.
✔✔Allowance for Uncollectible Accounts Treatment - ✔✔It is subtracted from the
balance of Accounts Receivable in the balance sheet.
✔✔Writing Off Accounts Receivable - ✔✔When it becomes clear the customer will not
pay, the company writes off the customer's account balance as uncollectible.
✔✔Impact of Writing Off an Uncollectible Account - ✔✔Total assets are unchanged.
✔✔Percentage-of-Receivables Method - ✔✔Method of estimating uncollectible
accounts based on the percentage of accounts receivable expected not to be collected.
✔✔Aging Method - ✔✔Estimates future bad debts based on the ages of individual
accounts receivable, using a higher percentage for older accounts.
✔✔Subsidary Ledger - ✔✔A ledger that is summarized in a single general ledger
account.
✔✔Credit Balance in Allowance for Uncollectible Accounts - ✔✔Indicates that last
year's estimate of bad debts was too high.
✔✔Adjusting Entry for Bad Debts - ✔✔If bad debts are estimated to be 20% of accounts
receivable, the adjusting entry would include a debit to Bad Debt Expense for $20,000.
✔✔Interest Revenue from Notes Receivable - ✔✔For a $5,000 note at 6% maturing in
10 months, the interest revenue recorded will be $100 in 2024 and $150 in 2025.
✔✔Receivables Turnover Ratio - ✔✔Calculated as Net Credit Sales divided by Average
Accounts Receivable.
✔✔Average Collection Period - ✔✔Calculated as 365 divided by accounts receivable
turnover.
