When should you recognize revenue?
If a company provides two goods/services how do you allocate the transaction price?
Who owns the goods:
oFOB Destination
oFOB Shipping Point
Credit Card Fees: Determining how much receive in cash/how much revenue to record/how
much expense to record
Sales Returns:
oWhat does Sales Returns and Allowances represent? What type of account is it?
Sales Discounts:
oWhat does it mean if an Invoice states: 1.5/10, n30? How much cash will be paid if the
discount is taken.
How do you calculate Net Revenue?
Accounts Receivables are amounts due from customers who purchased on credit.
oWhy would companies allow customers to purchase using credit?
oThe potential cost is customers not paying their bill; bad debt expense.
How do you calculate Net Accounts Receivable? What does it represent?
oNet A/R = Accts Rec – Allowance of Uncontrollable Funds – estimate of what will not be
collected
Allowance-Aging Receivables Method
oDetermine Uncollectible Account Expense/Bad debt expense by the amount that
allowance for doubtful accounts needs to be increase/decreased. If it is estimated that
$XX of A/R is uncollectible then that amount should be the ending balance in Allowance
for Uncollectible Accounts.
oBe able to determine Uncollectible Account Expense and Allowance for Uncollectible
Accounts.
Chapter 5 Receivables and Revenue
Exam #2 - Outline of Topics Covered
Notes Receivable
oRecording the Loan: What accounts are affected?
oCalculate Interest Revenue.
How is Gross Profit Calculated?
oRevenue – Cost of goods Sold
Analyze: Quick Ratio, Accounts Receivable Turnover/Days Sales Outstanding
Chapter 6 Inventory and Cost of Goods Sold
Inventory Costing Methods. Be able to calculate Cost of Goods Sold and Ending Inventory under
Perpetual system using FIFO
Calculate Cost of Goods Available for Sale
Lower of Cost or Market-determine whether inventory needs to be written down, and by how
much. If Market is lower than cost reduce by the difference. So if Cost is $182 and market is
$150, then wed have to write down inventory by $32
oDR COGS $30
CR inventory $30
Inventory Shrinkage-what is inventory shrinkage (vs Lower of Cost or Market)
oWhat is the journal entry to record Inventory Shrinkage/what accounts are
increased/decreased
When prices are increasing what does this mean for LIFO vs FIFO: COGS, Net Income, Income
Taxes, and Inventory (which is higher/lower)
When prices are decreasing what does this mean for LIFO vs FIFO: COGS, Net Income, Income
Taxes, and Inventory (which is higher/lower)
Analyze: Gross Profit %, Inventory Turnover/Days Inventory Outstanding
-Gross Profit/Sale = Gross Profit %
-
Chapter 7 Plant Assets, Natural Resources, and Intangibles
What is a long term Asset?
What is a Capital Expenditure?
What expenditures are considered Land Improvements
What’s the difference between a Fixed Asset and an Intangible Asset?
In general, what is included in the Cost of the Long Term asset, in other words what is
capitalized?
What is depreciation?
What is/how do you calculate the depreciable amount?
Using the Straight-Line method calculate depreciation for a full year and if purchased asset in the
middle of the year.
What type of account is accumulated depreciation?
What is net book value/book value/carrying value? How do you calculate it?
How do we determine if a long term asset is impaired? What is the amount of the impairment?
When disposing of a long term asset how do we determine if there is a gain or loss?
Analyze: Return on Assets, Net Profit Margin Ratio, and Total Asset Turnover
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