Fall 20 10
Copyright © J.A. Samuels, School of Accountancy, A SU
1
Exam 2 will include 40 multiple choice questions (many with calculations) each worth 5 points
plus two extra-credit multiple choice questions each worth 5 points. REMEMBER, the majority of
accounting cannot just be memorized. Accounting is a subject that you “learn by doing”. In order to be
successful on an accounting exam, you must understand the concepts and underlying accounting rules so
that you can APPLY them in various scenarios. Note that this class tests LEARNING rather than rote
memorization. To prepare for an exam, you should focus on what we do and say in class, problems
that you are assigned (class activities, homework and quizzes) and reading materials in your
Textbook and Course Materials Packet.
This is an of what you are responsible for this first module (see weekly materials for details): overview
1. Cost of Goods Sold Model
a. Understand how costs flow from purchase of goods to Cost of Goods Sold
b. Know how to calculate Cost of Goods Sold
c. Differentiate between a perpetual and periodic inventory system
d. Understand how to record journal entries for inventory transactions in a Perpetual System
(including purchase discounts, returns/allowances, shipping charges and know when title
transfers)
2. Revenue Recognition
a. Explain the criteria for revenue recognition
b. Record various sales transactions (including returns/allowances, discounts and shipping
charges and know when title transfers)
c. Calculate net sales revenue
3. Basic Financial Statements
a. Be able to differentiate between multi-step and single step Income Statements
b. Be able to differentiate between classified and unclassified Balance Sheets
c. Understand sequencing of current assets and current liabilities
4. Inventory Costing Methods
a. Identify and differentiate among the inventory costing methods (cost flow assumptions) of
First-In, First-Out (FIFO), Last-In, First-Out (LIFO), and Average Cost
b. Apply LIFO, FIFO and average cost to compute ending inventory and cost of goods sold
c. Understand the impact of costing (FIFO, LIFO, average cost) on Balance Sheet and Income
Statement when costs are increasing or decreasing
d. Identify the three primary issues related to LIFO (disclosure, conformity & International
issues)
5. Lower of Cost or Market
a. Understand the lower of cost or market rule
b. Apply lower of cost or market rule to the valuation of inventory
ACC231 - Exam 2 - General Preparation and How/What to Study
Fall 20 10
Copyright © J.A. Samuels, School of Accountancy, A SU
2
6. Accounts Receivable and Bad Debts
a. Understand why the direct write-off method is not GAAP
b. Measure and interpret bad debt expense and the allowance for uncollectible accounts
c. Differentiate between Percentage of Sales Method and Aging Method of allowance for
uncollectible accounts
d. Understand how estimates in allowance for uncollectible accounts can lead to ethical
issues
