Suppose that the estimate of uncollectible accounts is based on the aging of accounts receivable and that the Allowance for Uncollectible Accounts has a credit balance before the adjustment is made. Explain how this situation is handled.
> A company uses the LIFO inventory method to determine cost. One of the managers complains that this is improper. He states: “We always sell our oldest products first. So we should be using first-in, first-out inventory costing.” What would you say in res
> Explain the retail method of inventory estimation.
> Suggest two situations where it may be necessary or desirable to estimate the inventory without a physical count.
> 1. Assume that you are an accountant for a manufacturing firm. At the end of one year, there is a large overapplied overhead amount. How would you explain to management why this balance might exist? 2. The president of a fairly large manufacturing compan
> What accounting principle or constraint underlies the lower of cost or net realizable value rule for inventory valuation.
> What impact does the ending inventory have on net income for the period covered by the financial statements?
> Does the maintenance of a perpetual inventory eliminate the need for taking physical inventory? Explain.
> Why is a perpetual inventory easier to maintain today than it would have been 50 years ago?
> Under what circumstances is the specific identification method for determining cost of inventory items logical?
> Explain briefly the average cost method.
> Suggest some specific controls that management must provide over inventory in a business that sells diamonds.
> What is meant by “discounting a note receivable”?
> What is a dishonored note receivable?
> How, if at all, does computation of the maturity value of an interest-bearing note receivable differ from that for an interest-bearing note payable?
> 1. Why do managers need special manufacturing records and a separate statement reporting the costs involved in producing goods? 2. How can an inventory be taken if work in process items are in varying stages of completion at the end of the accounting per
> Explain why records must be kept of the due dates of all notes payable.
> Are notes payable likely to be given in borrowing money? The purchase of merchandise? The purchase of equipment? Why?
> How are notes payable maturing less than one year from the balance sheet date shown on the balance sheet?
> What is meant by “discounting a note payable”?
> What is the maturity value of a $9,000 note, bearing interest at 9 percent, and due 105 days after date of issue of the note?
> How does a note receivable differ from an account receivable?
> What is the face amount of a note? The maturity value?
> What are the requirements that must be met in order for a document to be negotiable?
> Explain a sight draft.
> Explain a cashier’s check.
> 1. Is the identification of purchases returns and allowances by department valuable to managerial control? Explain. 2. If one department consistently has a comparatively large amount of cash short in its operations, what management action might be approp
> When is a discounted note receivable considered a contingent liability?
> Explain how to compute the proceeds from discounting a note receivable.
> If a note dated February 28 has a three-month term, on what date must the note be paid?
> Explain how to record the collection of an account receivable in the same year in which it was previously written off if the allowance method of recording estimated doubtful accounts is used.
> What basic accounting concepts, assumptions, principles, or constraints support the allowance method?
> Under the allowance method, what entry is made when a specific customer’s account is deemed to be uncollectible?
> Under the allowance method, what account is credited in the adjusting entry to record estimated uncollectible accounts?
> What is meant by aging the accounts receivable?
> If a company is interested primarily in matching expenses and revenues each period, would it base its estimate of uncollectible accounts on sales (or net credit sales) or on accounts receivable? Explain.
> Suppose that the estimate of uncollectible accounts is based on credit sales and that Allowance for Doubtful Accounts has a debit balance before the adjustment is made. Explain how this situation is handled.
> 1. How can the statement of cash flows help management arrange for proper financing? 2. A corporation’s income statement shows a net income of $10,000 after income taxes for the year. Its statement of cash flows shows that its cash balance increased by $
> At December 31, 20X1, Gerald Company had accounts receivable of $1,500,000 and an allowance for doubtful accounts of $8,250. On January 1, 20X2, Gerald Company wrote off a $1,500 bad debt against the allowance for doubtful accounts. There were no other a
> Name three approaches to estimating losses from uncollectible accounts when the allowance method is used.
> List some common internal controls for accounts receivable.
> List some duties that should routinely be separated as part of the internal control procedures for accounts receivable.
> Under the direct charge-off method, what entry is made when a firm collects an account that was charged off in a prior year?
> What entry is made to record an uncollectible account under the direct charge-off method?
> Under what conditions would the direct charge-off method be appropriate?
> What are the major weaknesses of the direct charge-off method?
> Explain the direct charge-off method for recording uncollectible accounts expense.
> How is Allowance for Doubtful Accounts shown in the balance sheet?
> 1. Suppose that a vertical analysis of the income statement shows an item to be 18 percent of net sales. How would this information be used in order to make it meaningful? With what would it be compared? 2. In 2022, the cost of goods sold was 66 percent
> How is Uncollectible Accounts Expense shown on the income statement?
> Explain the purpose of the allowance method of accounting for losses from uncollectible accounts.
> It can be argued that the cost principle is dependent on the going concern assumption. Why?
> How is the matching concept related to the accrual basis of accounting?
> Explain the qualitative characteristic of comparability.
> What is meant by the concept of neutrality in accounting?
> How will U.S. companies be affected by IFRS?
> Why is it desirable to have a set of fundamental concepts to be used in developing accounting standards and rules?
> What are the two most important bodies or organizations involved in developing generally accepted accounting principles in the United States?
> 1. What would cause corporate management to obtain cash by issuing bonds instead of selling stock? 2. Which type of bonds would give management greater flexibility in formulating and controlling a corporation’s financial affairs? 3. In what situations wo
> What is meant by full disclosure?
> What criteria must exist in order for revenues to be recognized by public entities for reporting periods beginning after December 15, 2017?
> What two tests must be met in order for revenues to be recognized by public entities for reporting periods beginning before December 15, 2017?
> Many current assets are not shown at historic cost in the financial statements. For example, inventories are usually shown at the “lower of cost or market.” What concepts or conventions warrant this practice?
> In recent years, there have been many charges, some of them substantiated, that large companies have manipulated business transactions and accounting records to move income from one year to another in order to change the income reported in different year
> What is the periodicity of income concept?
> How are the concepts of materiality and cost-benefit related?
> How does the materiality convention affect day-to-day accounting?
> Why is a conceptual framework necessary in developing accounting standards and rules?
> What is the purpose of the postclosing trial balance?
> 1. Three individuals are planning to form a new business. What are the five major types of entities that they can use to operate their business? 2. Assume that you are the controller of a corporation. Some members of the board of directors have asked you
> What account balances or other amounts are included on two different financial statements for the period? Which statements are involved?
> What information is provided by the statement of owner’s equity?
> How do current liabilities and long-term liabilities differ?
> Give examples of some current assets that usually are classified as Current Assets on the balance sheet.
> What is the purpose of the balance sheet?
> What are operating expenses? Are financing expenses included in operating expenses?
> Which section of the income statement contains information about the purchases made during the period and the beginning and ending inventories?
> Fuji Company had a current ratio of 2.0 in 20X1 and 2.2 in 20X2. Does this signify an improvement or decline in Fuji Company’s liquidity from 20X1 to 20X2?
> Jarrett Company’s inventory turnover ratio was nine times in 20X1 and eight times in 20X2. Did Jarrett Company sell its inventory more quickly, or more slowly, in 20X2 compared to 20X1?
> What are the steps in the accounting cycle?
> 1. Anna Claire and Baker are establishing a new restaurant and discussing whether to organize as a partnership or a corporation. What are some of the most important characteristics of these two types of organizations that they should weigh in making the
> 1. After examining financial data for a monthly period, the owner of a small business expressed surprise that the firm’s cash balance had decreased during the month even though there was substantial net income. Do you think this owner i
> If the owner invests additional capital in the business during the month, how would that new investment be shown in the financial statements?
> Various adjustments made at Adams Company are listed below. Which of the adjustments would normally be reversed? a. Adjustment for accrued payroll taxes expense b. Adjustment for supplies used c. Adjustment for depreciation on the building d. Adjustment
> On December 31, Klein Company made an adjusting entry debiting Interest Receivable and crediting Interest Income for $300 of accrued interest. What reversing entry, if any, should be recorded for this item on January 1?
> What types of adjustments are reversed?
> If the totals of the adjusted trial balance Debit and Credit columns are equal, but the postclosing trial balance does not balance, what is the likely cause of the problem?
> What types of accounts, permanent or temporary, appear on the postclosing trial balance?
> Give an example of an expense that is classified as Other Expense in the income statement.
> What adjustment is made to record accrued salaries?
> What is an accrued expense? Give three examples of items that often become accrued expenses.
> What adjustment is made for depreciation on office equipment?
> 1. The owner of an accounting practice is considering establishing a partnership with two other persons to carry on the business. What are the major disadvantages of the partnership form of organization that she should consider in making her decision? 2.
> Explain the meaning of the following terms that relate to depreciation: a. Salvage value b. Depreciable base c. Useful life d. Straight-line method
> What types of assets are subject to depreciation? Give three examples of such assets.
> Why is depreciation recorded?
> Income Summary amounts are extended to which statement columns on the worksheet?
> How does the worksheet help the accountant to prepare financial statements more efficiently?
> Unearned Fees Income is classified as which type of account?
> When a specific account receivable is deemed uncollectible, it is written off by debiting __________ and crediting __________.
> What is the alternative method of handling unearned income?
