Exam 3 Review (with answers)

Exam 3 Review (with answers) - Slide One Matching...

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Slide One – Matching Instructions: Write the following words on an overhead or on the board (note that they are not supposed to match the order of the definitions). Read the definitions and ask students to identify the correct word. Occasionally, there is auxiliary information to share after students identify the correct word. Words: Debenture Bad Debt Expense Amortization Merchandise Inventory Cash Discount Allowance for Doubtful Accounts Goods Available for Sale Goodwill FIFO Replacement Cost Definitions: 1) Discount offered to encourage prompt payment. Cash Discount 2) Contra-asset account containing the estimated uncollectible accounts receivable. Allowance for Doubtful Accounts 3) Expense associated with expected uncollectible accounts receivable. Bad Debt Expense 4) Assumes that the oldest units are the first units sold. FIFO 5) The sum of beginning inventory and purchases for the period. Goods Available for Sale 6) The current purchase price for identical goods. Replacement Cost 7) Goods held for resale in the ordinary course of business. Merchandise Inventory How do you determine the cost of inventory? We capitalize all the costs incurred to purchase inventory, get it to us, and prepare it to be sold. These include the purchase price, transportation- in, transit insurance, etc. When you buy inventory, you capitalize these costs. What does capitalize mean? It just means that these costs go through an asset account before they become expenses. What asset account do they go through? Inventory. What expense account do they end up in? COGS When do we transfer them from Inventory to COGS? At the point of sale.
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However, it isn’t always as simple as “at the point of sale” because we have several cost flow 8) Systematic and rational allocation of the acquisition cost of an intangible asset over its estimated useful life. Amortization When we allocate the cost of an intangible asset, we call it amortization. What do we call it when we allocate the cost of a natural resource? Depletion. 9) The excess of the purchase price of a business over the market value of the business’s assets and liabilities. Goodwill. What type of asset is goodwill?
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Exam 3 Review (with answers) - Slide One Matching...

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