ac101_rev04-06 - Revised July 2008 EXAM REVIEW ACCOUNTING...

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Revised July 2008 Page 1 of 12 EXAM REVIEW ACCOUNTING 101 - UNIT II - CHAPTERS 4, 5 & 6 STUDY SUGGESTIONS Review your class notes, homework exercises and problems. Be sure to review any chapter appendicies assigned on the General Course Outline. Review Demonstration Problem, Summary and Key Terms at the end of each chapter. Answer the Multiple Choice Quiz at the end of each chapter. Answer Multiple Choice Quiz A and B on the textbook website www.mhhe.com/wild . Know accounting terms and concepts by answering the Discussion Questions at the end of each chapter. Know the account classification (i.e. asset, liability, or owner's equity) and normal balance of all accounts. Know the what the financial ratios mean and how to calculate them. Other online help is available ay a variety of sites such as: http://www.cliffsnotes.com/WileyCDA/Section/id-305261.html http://www.simplestudies.com/ Chapter 4 - Accounting for Merchandising Operations Know that the revenue account is Sales (not Fees Earned). Multiple-Step Income Statement Sales - Sales Returns and Allowances - Sales Discounts = Net Sales Net Sales - Cost of Merchandise Sold = Gross Profit Gross Profit - Operating Expenses = Net Income Know the new accounting terms in this chapter: Merchandise Inventory Perpetual inventory system Periodic inventory system Physical inventory Merchandise Inventory Shrinkage Understand Credit Terms, such as 2/10, n/30 and the credit period. Know how transportation costs (FOB Shipping Point or FOB Destination) are determined and recorded by buyer and seller. Understand the new accounts for a merchandising business. Know how to journalize merchandise transactions for both buyer and seller. Chapter 5 – Accounting for Inventories Know the effect of inventory errors on the financial statements. Understand the three inventory cost flow assumptions: FIFO, LIFO and Average Cost. Know how to compute the cost of inventory under the perpetual inventory system using FIFO and LIFO and Average Cost.
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Revised July 2008 Page 2 of 12 Know how to compute the cost of inventory under the periodic inventory system using FIFO and LIFO and Average Cost. Compute the proper valuation of inventory using the Lower of Cost or Market rules. Estimate the cost of inventory using the retail method. Estimate the cost of inventory using the gross profit method. Chapter 6 – Accounting for Cash and Internal Controls Know how to prepare the bank reconciliation and the related journal entries. Know how to prepare the journal entries to open, replenish and adjust the balance for a petty cash fund. Know what the cash short and over account is and how it is used. SAMPLE PROBLEMS Problem 1 - Purchase related transaction Merchandise is purchased on account from a supplier, List price $15,000, trade discount 40%, terms 2/10, n/30 FOB shipping point with transportation costs of $150 paid by the seller, and added to the invoice. The purchaser returned $1,000 of the merchandise prior to payment. The invoice was paid within the discount period; what is the amount of cash paid by the buyer?
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