Accounting II 5 Flashcards

Terms Definitions
T or F
Earnings distributed to stockholders
component percentage
percentage relationship between one financial statement item and the total that includes that item
A document that creates a corporation.
T or F: The weighted-avergage inventory costing method is based on assumption that each iteam in the ending inventory has a cost equal to the average price paid for similar items
subsidiary ledger
single type on all credit customer
income statement
a financial statement showing the revenue and expenses for a fiscal period
Comprehensive income
All changes in stockholders' equity during a period, except those resulting from dividends and stockholders' investments. 620
A business organized as a legal entity separate and distinct from its owners under state corporation
Cash Accounting
Transactions recorded when actual cash is received.
When employees are paid a percentage of sales in addition to their regular salary, the earnings are often refered to as
T or F: Records of departmental operating expenses are necessary to determine departmental fross profit from operations
merchandising business
a business that purchases and sells goods
Bad Debt Expense
The operating expense incurred because of the failure to collect receivables.
Business combinations
A business making an ivestment in another business by aquiring a controlling share, often greater than 50%, of the outstanding voting stock of another corpration by paying cash or exchanging stock. 627
The purchase of treasury stock
decreases common stock outstanding.
Declaration date
The date the board of directors formally declares a dividend and announces it to stockholders.
If $800,000, 6% bonds are issued on January 1, and pay interest semiannually, the amount of interest paid on July 1 will be $24,000.
A form prepared by the customer showing the price deduction taken by the customer for returns and allowances
Debit Memorandum
A deduction from total earnings for each person legally supported by a taxpayer
Withholding allowance
controlling account
an account in a general ledger that summarizes all accounts in a subsidiary ledger
The excess of the issue price of a stock over its par value or the excess of the issue price of bonds over their face amount. 573, 653
When Tresury stock is sold for less then it was purchased and thier is no more in Paid-in excess of Tresury stock account the defiency is debit to
Retained earnings
Prior period adjustment
The correction of an error in previously issued financial statements
Secured bonds
Bonds that have specific assets of the issuer pledged as collateral
T or F: Businesses that sell on n/30 terms make special effort to collect accounts receivable that are more than 60 days old.
The length of time for which a business summarizes and reports financial information
fiscal period
The source document for recording a transaction in a departmental sales journal is
a sales invoice
T or F The function of the Partners' Capital Statement is to explain the changes in partners' capital account balances during a period.
Par value stock
Capital stock that has been assigned a value per share in the corporate charter
Times interest earned ratio
A solvency measure that indicates a company's ability to meet interest payments; computed by dividing income before income taxes and interest expense by interest expense.
T or F: Because there is no way of knowing for sure which customer accounts will become uncollectible, an estimate is made based on past history of uncollectible accounts expense
T or F: If the cost of the ending merchandise inventory is overstated, the net income will be understated
An amount of cash kept on hand and used for making small payments
petty cash
Tresury Stock is located after__________and is ( deducted)
Retained earnings 610,000 Total paid-in capital and retained earnings 2,387,000 Less: Treasury stock—common (50,000)
The number of times the average amount of merchandise inventory is sold during a specified period of time
merchandise inventory turnover ratio
The most appropriate basis for dividing partnership net income when the partners do not plan to take an active role in daily operations is
on a ratio based average capital balances.
Revenue Records the _______ NOT the________.
Revenue Records the activity NOT the cash collection.
Slaton Company originally issued 3,000 shares of $10 par value common stock for $90,000 ($30 per share). Slaton subsequently purchases 300 shares of treasury stock for $27 per share and resells the 300 shares of treasury stock for $29 per share. In the en
credit to Common Stock for $8,100. credit to Treasury Stock for $3,000. debit to Paid-In Capital in Excess of Par Value of $9,000. credit to Paid-In Capital from Treasury Stock for $600.
Using the lower of cost or market price to calculate the cost of ending merchandise inventory
lower of cost or market inventory costing method
Rebel Inc. issued 3,000 shares of no-par common stock with a stated value of $3 per share. The market price of the stock on the date of issuance was $12 per share. The entry to record this transaction includes a
A. debit to Cash for $9,000. B. credit to Common Stock for $36,000. C. credit to Common Stock for $9,000. D. debit to Paid-in Capital in Excess of Par Value for $36,000.
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