AAMI ACCOUNTING 2 FINAL EXAM QUESTIONS AND ANSWERS

AAMI ACCOUNTING 2 FINAL EXAM QUESTIONS AND ANSWERS The concept that prices rise over time - Correct Answer Inflation" "Sales - Cost of Goods Sold - Correct Answer Gross Profit" "In an inflationary period what method of inventory valuation would lower profits - Correct Answer LIFO" "In an inflationary period what method of inventory valuation would increase profits - Correct Answer FIFO" "In a deflationary period what method of inventory valuation would lower profits - Correct Answer FIFO" "In a deflationary period what method of inventory valuation would higher profits - Correct Answer LIFO" "What method of inventory valuation would we use as funeral directors - Correct Answer Specific Identification" "CGS/Average Inventory - Correct Answer inventory turnover" "net credit sales/average accounts receivable - Correct Answer accounts receivable turnover" "Sales-CGS-All other operating expenses - Correct Answer Net Profit" "Acquisition Cost-Accumulated depreciation - Correct Answer Book value" "All expenses appear on - Correct Answer Income statement" "Total cost/Total units available for sale - Correct Answer Weighted Average" "Best method of inventory valuation - Correct Answer Specific Identification" "Revenue-Expenses - Correct Answer Net Income" "What method on inventory valuation raises your taxable income - Correct Answer FIFO" "What method of inventory valuation lowers your taxable income - Correct Answer LIFO" "What are the 4 methods of inventory valuation - Correct Answer Specific Identification Weighted Average FIFO LIFO" "Another term for sales - Correct Answer Revenue" "Method used to determine the CGS for merchandise that is bought for resale in a retail or merchandising business - Correct Answer Inventory valuation" "What account does a company debit when it buys goods that it plans to sell to its customers - Correct Answer Merchandise purchases" "Beginning Inventory + Net purchases - Correct Answer Cost of goods available for sale" "Beginning inventory + Purchases - Ending inventory - Correct Answer Cost of goods sold" "The employees' withholding certificate is referred to as - Correct Answer W-4" "The wage and tax statement is - Correct Answer W-2" "Income before any payroll deductions is referred to as - Correct Answer Gross Pay" "Social security is financed by - Correct Answer FICA" "FICA stands for - Correct Answer Federal Insurance Contributions Act" "Gross pay less payroll deductions - Correct Answer Net Pay" "Employee's take home pay - Correct Answer Net pay" "Deductions from an employees' paycheck - Correct Answer Payroll tax" "Sales-CGS - Correct Answer Gross profit" "The periodic allocation of costs of assets is referred to as - Correct Answer Depreciation" "Land depreciates over time.....T or F - Correct Answer False" "An account used to record the deductions to the value of a related account is referred to as - Correct Answer Contra-account" "Depreciation expense appears in which financial statement - Correct Answer Income statement" "The periodic allocation of costs of natural resources is referred to as - Correct Answer Depletion" "The periodic allocation of costs of intangible assets is referred to as - Correct Answer Amortization" "The value of an asset expected to have at the end of its useful life - Correct Answer Salvage value" "The cost added to the value of an assets acquisition cost and thus depreciated is referred to as - Correct Answer Capitalized Cost" "Accumulated depreciation appears on which financial statement - Correct Answer Trial balance or Balance sheet" "What rate do we assume when we use the declining balance method of depreciation - Correct Answer .40" "What are the 4 methods of calculating depreciation - Correct Answer Straight line method Units of Output Sum of years digits Double declining method" "Acquisition cost-Accumulated depreciation - Correct Answer Book value" "What are the accelerated methods of depreciation - Correct Answer Double declining method Sum of years digits" "Which depreciation method establishes the same depreciation expense per year - Correct Answer Straight line method" "Which depreciation method establishes the same depreciation expense per use - Correct Answer Units of output method" "Acquisition cost-Salvage value/Useful life in years - Correct Answer Annual depreciation expense" "Acquisition cost-Salvage value/Units of output - Correct Answer Depreciation expense per use" "Journal Entry: purchase of goods to sell on account w/ a freight charge - Correct Answer Debit: merchandise purchases freight in Credit: Cash" "All accounts appear on - Correct Answer Trial balance" "A company that purchases finished goods for resale - Correct Answer Merchandising company" "Journal Entry: Payment on account and take advantage of early discount - Correct Answer Debit: Accounts Payable Credit: Cash Purchase discount" "Journal Entry: Company purchases goods to sell on account - Correct Answer Debit: Merchandise Purchases Credit: Accounts Payable" "Journal Entry: Returned purchased goods to sell that were originally bought for cash - Correct Answer Debit: Cash Purchase discount Credit: purchase returns and allowances" "Journal Entry: Sold merchandise on account w/ terms 2/10, n/30 and received payment within 10 days - Correct Answer Debit: Cash Sales discount Credit: Accounts receivable" "Journal Entry: Few days later customer comes back and returns goods - Correct Answer Debit: Sales returns and allowances Credit: Cash Sales discount" "A form used to record details of a sale and a bill to the customer - Correct Answer Invoice" "Journal Entry: Company bought goods to sell for cash - Correct Answer Debit: Merchandise purchases Credit: Cash" "a 2% discount if invoice is paid within 10 days, net due in 30 days - Correct Answer 2/10, n/30" "What concept is key to small business operations - Correct Answer Cash Flow" "Journal Entry: Simple sale of goods for cash - Correct Answer Debit: Cash Credit: Sales" "Journal Entry: Sold good on account w/ terms 2/10, n/30 - Correct Answer Debit: Accounts receivable Credit: Sales" "Journal Entry: Customer takes advantage of discount - Correct Answer Debit: Sales discount Cash Credit: Accounts receivable" "Journal Entry: Sold goods on account, not received payment yet and customer returns goods because they over ordered - Correct Answer Debit: Sales returns and allowances Credit: Accounts receivable" "Journal Entry: Sold goods for cash and have a sales tax on those items - Correct Answer Debit: Cash Credit: Sales Sales tax payable" "Journal Entry: What we pay the government - Correct Answer Debit: Sales tax payable Credit: Cash" "Current Assets-Current Liabilities= - Correct Answer Working Capital" "The ability of a company to pay its currently maturing debts - Correct Answer Liquidity" "Ability of a firm to pay its bills - Correct Answer Liquidity" "Fundamental measure of a company to meet its current obligations and represents the margin of security afforded short-term creditors - Correct Answer Working Capital" "A key measure in determining a firms ability to pay its current debts and is a good measure of the adequacy of working capital - Correct Answer Current Ratio" "Quick assets to currents liabilities - Correct Answer Acid test Ratio aka Quick Ratio" "Average accounts receivable/Average daily credit sales - Correct Answer Average collection period" "net credit sales/365 - Correct Answer Average daily credit sales" "