acct 201 test 3

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Author:
bngriffin13
ID:
47880
Filename:
acct 201 test 3
Updated:
2011-02-23 17:56:56
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financial
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financial
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  1. Issues regaurding receivables
    • criteria to extent credit, run credit checks
    • establish credit terms
    • collection
    • factoring - sell receivables
  2. Direct Write-off method
    We right off an account when we know a particular customer cannot pay

    this is easy, mostly used for small companies

    Doesn't have the best results, doesn't follow the matching principle of GAAP
  3. Allowance Method
    We estimate the amount that is uncollectible when we think it's uncollectible

    Accounts are then valued at NRV- Net realizable Value - How much you think you're actually going to collect
  4. Conservatism
    Don't want to overstate our income or assets because it could mislead financial statement users
  5. Receivables Turnover
    Net Credit sales / averae net receivables
  6. Avg Collection Period
    365 / receivables turnover ratio
  7. Revenue Expenditures
    Costs that only benefit the current period

    • c:repairs and maintenance expense 300
    • d:cash 300
  8. Capital expenditures
    Costs that improve the asset or extend it's useful life

    • Asset improvements
    • c:delivery truck 5500
    • d:cash 5500

    • Extraordinary repairs
    • c:accum dep - forlift 4500
    • d:cash 4500
  9. Salvage Value
    residual value

    value of the asset at the end of it's life
  10. Straight Line Depriciation
    Annual Depriciation = (cost-salvage value)/life
  11. Unite of production Method
    find depriciation per unit = (cost - residual value)/total units of production

    depriciation expense = depriciation per unit * total units of production used
  12. Double declining balance method
    depriciation expense = (book value*2)/ life
  13. Depletion
    The cost of natural resourses to an expense account
  14. Amortization
    the amount of an intangible asset to transfer to expense
  15. Patents
    exculsive rights to produce and sell a good with one or more unique features

    amoritization is computed using the straightline method
  16. Copyright
    exclusive right to pubpish and sell literary, artistic or musical compositions
  17. Trademark
    a name, term, or symbol used to identify a business and its products

    these are not amortized
  18. Goodwill
    intangible asset of a business taht is created from such favorable factors as location, product quality, reputation, and managerial skill, allows a business to earn a greater rate of return than normal

    this is not amortized
  19. Bond
    a form of an interest bearing note, like a note, a bond requires periodic interest payments with the face amount to be repaid at the maturity date
  20. Bonds issued at face amount
    • c: cash xxx
    • d: bonds payable xxx
  21. Paying interest on a bond
    • c: interest expense xxx
    • d: cash xxx
  22. Bonds issued at a discount
    • c: cash 96406
    • c: discount on BP 3594
    • d: Bonds payable 100000

    When the market interest rate is higher than the bond interest rate

    Amortizing a bond discount

    • c:interest expense xxx
    • d:Discount on BP xxx
  23. Bonds issued at a premium
    • c:cash 104000
    • d:Premium on BP 4000
    • d:Bonds payable 100000

    When the market interest rate is lower than the bond interest rate

    Amortizing a bond premiun

    • c:Premium on BP xxx
    • d:interest expense xxx
  24. Bond Redemption
    Loss- acts like an expense, recorded if the price paid for the redemption is above the carrying amount

    gain- acts like a revenue, recorded if the price paid for the redemtion is below the bond carrying amount

    gain/loss on redemption of bond
  25. Straight line method for amortizing bonds
    total of discount or premium/ # of periods

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