ACG2021

• What happens when cash is received in advance from a customer?

  Liabilities and assets will increase
• What is the formula to calculate retained earnings from given balances?

  Retained earnings = Stockholders' equity - Common stock
• How do you calculate the balance of retained earnings given assets and liabilities?

  Retained earnings = Assets - Liabilities - Common stock
• What does a decrease in assets and stockholders' equity indicate about a transaction?

  It keeps the accounting equation in balance
• What happens to stockholders' equity when rent is paid?

  It decreases due to increased rent expense
• What is the formula for ending retained earnings?

  Ending retained earnings = Beginning retained earnings + Revenues - Expenses - Dividends
• What does posting involve in accounting?

  Accumulating effects of journalized transactions
• How is rent earned calculated from prepaid rent?

  Prepaid rent times the portion earned
• If a company collected $10,000 for six months of rent, how much revenue is reported in the current year?

  $3,333
• How do you determine net income from an adjusted trial balance?

  Net income = Revenues - Expenses
• What is the net income calculated from the given revenues and expenses?

  $98
• What is the formula for ending retained earnings after closing entries?

  Ending retained earnings = Beginning retained earnings + Revenues - Expenses - Dividends
• If a company has beginning retained earnings of $1,000 and earns $2,500, incurs $800 in expenses, and pays $400 in dividends, what is the ending retained earnings?

  $1,900
• What are the current assets of a corporation based on given balances?

  $410,000
• What is the significance of the terms 1/10, n/30 in a purchase transaction?

  Indicates a 1% discount if paid within 10 days
• How do you calculate the amount due after a purchase discount?

  Balance due minus discount on net amount
• Which account is classified as a contra revenue account?

  Sales Returns and Allowances
• What is the formula for calculating cost of goods sold?

  Cost of goods sold = Beginning inventory + Purchases - Purchase discounts - Ending inventory
• If a company has beginning inventory of $38,000, purchases of $360,000, and ending inventory of $31,000, what is the cost of goods sold?

  $359,000
• If net sales are $140,000 and cost of goods sold is $91,000, what is the gross profit?

  $49,000
• What should a company include in its ending inventory?

  • Goods in transit sold with terms FOB destination
  • Goods in transit purchased with terms FOB shipping point
• What is the total number of units and cost per unit for the beginning balance on December 1?

  40 units at $42 each
• If a company sold 100 units at $75 each, what is the sales revenue?

  $7,500
• How is gross profit calculated using LIFO for the given inventory purchases?

  Gross profit = Sales revenue - Cost of goods sold
• What is the tax rate mentioned for the company?

  25%
• What is the significance of the perpetual inventory system?

  It continuously updates inventory records
• If a company has sales revenue of $2,400,000, what is the context of this figure?

  It represents total sales before deductions
• What is the verifiable assumption in accounting?

  It requires that financial statements be based on objective evidence
• What is the monetary unit assumption in accounting?

  It assumes that all transactions can be measured in monetary terms
• What is the economic entity assumption in accounting?

  It assumes that a business's transactions are separate from its owners'
• What is unearned revenue?

  Cash received before services are performed
• What are contra revenue accounts?

  Accounts that reduce total revenue
• How do you calculate net sales?

  Net sales = Sales - Sales returns - Sales discounts
• How do you calculate gross profit?

  Gross profit = Net sales - Cost of goods sold
• What does FOB shipping point mean?

  Ownership transfers when goods are shipped
• What does FOB destination mean?

  Ownership transfers when goods are received
• What is the implication of using a perpetual inventory system?

  It continuously updates inventory records
• When does title transfer for goods shipped FOB shipping point?

  When the seller ships the goods
• Who owns goods in transit when sold FOB shipping point?

  The buyer
• When does title transfer for goods sold FOB destination point?

  When the buyer receives the goods