Accounting Exam #3 Study Guide

Exam #3 Study Guide Chapter 8 1. What are the potential advantages and disadvantages of extending credit? 2. What is the journal entry to record when a company (the lender) signs an agreement to lend a customer (the borrower) money to be repaid in one year? 3. What are some potential similarities between accounts receivable and notes receivable? 4. What is the journal entry to record bad debt expense? a. Debit Bad Debt Expense, Credit Allowance for Doubtful Accounts 5. What is the purpose of the matching principle as it relates to bad debt expense? 6. Is Bad Debt Expense a permanent or temporary account? What is the difference between permanent and temporary accounts? 7. What is the journal entry to write-off a specific customer account? a. Debit Allowance for Doubtful Accounts, Credit Accounts Receivable 8. We learned two methods of estimating bad debts, the percentage of sales method and the allowance method. Which one is easier to use? Which one is more accurate? 9. Given a series of information, calculate Bad Debt Expense using the percentage of credit sales method. 10. Given a series of information, calculate the ending balance in the Allowance for Doubtful Accounts using the percentage of credit sales method. 11. Given a series of information, calculate Bad Debt Expense using the aging of accounts receivable method. 12. Given a series of information, calculating the adjusting journal entry required at the end of the year to record interest receivable? a. Remember, if it’s an adjusting journal entry, NO CASH exchanged hands. b. Debit Interest Receivable, Credit Interest Revenue c. Principal x Rate x Time Page 1 of 4 Exam #3 Study Guide Chapter 9 1. What are some examples of long-lived assets? 2. What are fixed assets and where are they reported on the balance sheet? 3. What are intangible assets? 4. What does it mean to say an accounting is “capitalizing a cost”? Chapter 9 (continued) 5. If you acquired a basked purchase of tangible assets, how would you allocate the purchase price amongst those assets? 6. What types of costs get capitalized into the value of an asset purchase? 7. What should you do with freight costs? capitalize or expense? 8. How are ordinary repair and maintenance costs recorded? Capitalize or expense? 9. What is the purpose of depreciating a long-lived asset? 10. What is accumulated depreciation? 11. Given a series of information, calculate straight-line depreciation expense? 12. Given a series of information, calculate the gain or loss on the sale of a tangible depreciable asset. Chapter 10 1. What is a current liability? 2. Given a series of information, calculate total payroll expense. 3. Given a series of information, calculate the ending balance in Accounts Payable. 4. Who is required to pay FICA taxes? The employee, the employer, or both? 5. What is the journal entry recorded when you borrow money using a promissory note? Debit Cash, Credit Note Payable 6. Given a series of information, calculating the adjusting journal entry required at the end of the year to record interest payable? a. Remember, if it’s an adjusting journal entry, NO CASH exchanged hands. b. Debit Interest Expense, Credit Interest Payable Page 2 of 4 Exam #3 Study Guide c. Principal x Rate x Time 7. What is the journal entry recorded when you sign a note payable to purchase equipment? Debit Equipment, Credit Note Payable 8. When is interest expense recorded on an obligation?... with the passage of time 9. Given a series of information, calculate interest expense on a note payable. a. Principal x Rate x Time 10. Bonds – record the journal entry relative to one of the following scenarios a. Bonds Issued > Stated Rate = Premium b. Bonds Issued < Stated Rate = Discount c. Bonds Issued at Face Value = No Premium or Discount Chapter 11 1. What are the advantages and disadvantages of corporate formation? 2. What is a preemptive right? 3. What are the advantages and disadvantages of debt financing? 4. Given a series of information, calculate the number of treasury shares? Outstanding shares? 5. What does the par value of stock represent? 6. Know the common stock triangle from your Chapter 11 PowerPoint presentation. 7. What is an IPO? 8. What is the journal entry to record the sale stock of issued at an amount in excess of par? a. Debit Cash, Credit Common Stock, Credit APIC b. Given a series of information, record the journal entry required to record the sale of stock issued at an amount in excess of par. 9. What are some reasons why a company may want to repurchase its stock (i.e., treasury stock)? 10. What is the journal entry to record the declaration of a dividend? a. Debit Dividends, Credit Dividends Payable Page 3 of 4 Exam #3 Study Guide b. Given a series of information, record the journal entry required to record the declaration of a dividend. 11. Given a series of information, calculate Earnings per Share (EPS). General The exam is 50 multiple choice questions worth 2 points each. In addition to this study guide and the in-class review I conduct, there are a series of practice multiple choice questions and answers in Canvas labeled as “At-Home Review”. These questions will help you get comfortable with the format of the exam questions. Lastly, in each Canvas chapter module is a PowerPoint presentation labeled, “Extra Solved Problems”. These are also a great study tool. Page 4 of 4