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Review for Comprehensive Final Exam
B.Installment notes with equal total payments (principle payments increase, interest decreases)
1. Calculation of payment amount
2. Amortization table to determine amount of principal and interest paid
3. Journal entries at issuance and payment dates
4. Understanding of change in component of payment over time (interest portion
decreases and principal portion increases)
C. Installment notes with equal principal payments
- principle payment is consistent, but interest payment on top of that decreases with each
period
D. Calculation of amount of principal payments
E. Amortization table to determine amount of principal and interest paid
II. Chapter 11
3. Rights of stockholders
- Vote at stockholder’s meetings
- Sell stock
- Purchase additional shares of stock
- Receive dividends (if any)
- Share equally in assets after creditors are paid in a liquidation
5. Issuance of common stock with par value, no-par value, or stated value – know journal
entries
- Par value is an arbitrary value assigned upon issuing of the stock
- Par value does not equal market value
- Par value stocks
o Debit cash, credit Common stock for par value stock issued, credit
Contributed capital excess of par (value of stock over par)
o If contribution is non-cash simply debit the asset and credit for its value
7. Know order of payments upon liquidation to creditors and stockholders (see class notes).
shit
9. Cash dividends:
Know significance of date of declaration, date of record, and date of
payment.
(When do they become a liability?)
(Who determines whether they will be paid or not and timing of payment?)
10. Treasury stock transactions:
Know journal entries for purchasing and reissuing.
Know what types of account both “Treasury stock” and “Contributed
Capital, Treasury stock” are.
IV.Chapter 2
A.Accounting books and records – Account, ledger, trial balance
Account = record of increases and decreases in a specific asset, liability, or whatever
Ledger = record containing all accounts of the company
B.Assets, liabilities, revenues, expenses, equity, dividends accounts
Assets = land, buildings, cash, accounts receivable, notes receivable, prepaid stuff, etc
And yeah – not gonna list all of these – I know them
C.Double-Entry Accounting/Characteristics of an Account
1.debits and credits
T accounts - left and right…debits increase assets and so on
2.Normal balances of each account type, increases and decreases of each account type
D.Accounting Process – Journal entries/Posting to Ledger/Trial Balance/Financial Statements
Balance ledgers are typically used instead of T accounts – but whatever
E.Demonstration problem at end of chapter.
V.Chapter 3
A.Accrual Basis versus Cash Basis
Transactions are recorded when incurred (accrual basis), not when cash is exchanged
(cash basis)
B.Accounting Period Concept
Quarterly, Semiannual, Annual
C.Adjustment Process – Deferrals and Accruals
Deferrals - Paid or received cash before expense (prepaid) or revenue (unearned) was
incurred
Accruals – Paid or received cash after expense or revenue was incurred
D.Revenue is recognized when earned and expenses matched with revenues (matching
principle)
E.Closing Entries (all temporary accounts are closed)
Temporary accounts may include income statement accounts (revenue and
expense), dividends accounts, and the income summary account….expenses and revenues
closed to the income summary account – income summary closed to retained earnings
account…dividends closed to retained earnings (which is permanent)
F.Post-Closing Trial Balance
G.Overall Accounting Cycle – Journal entries/Posting to Ledger/Trial
Balance /Adjustments/Adjusted Trial Balance /Financial Statements/ Closing
Entries/Post-Closing Trial Balance
H.Demonstration problem at end of chapter.
VII.Chapter 5 – Inventories
A.Inventory Costing under Perpetual System using Specific Identification, FIFO, LIFO, and
weighted average methods.
FIFO - first in first out – assumes costs flow in the order occurred
LIFO – last in first out – assumes costs flow in reverse order occurred
Weighted Average – assumes costs flow at an average of the costs available
Specific Identification – Cost of specific units are added to COGS when sold
B.Financial Statements Effects of Costing Methods
Weighted Average – smoothes out pricing changes
FIFO – ending inventory approximates current replacement cost
LIFO – better matches current cost of goods sold with revenue (can understate income
in a time of rising costs…overestimate in a time falling cost – exact opposite for FIFO)
--- if LIFO is used for tax purposes it must be used in financial statements
C.Lower of Cost or Market rule (LCM)
- Inventory must be reported at market value if it is lower than cost – this market
value is called current replacement cost – not marked up if market is higher though
- can be applied to individual items – groups of items – or the entire inventory
D.Demonstration problem at end of chapter.
IX.Chapter 7 – Receivables
A.Allowance Method of Accounting for Receivables – know entries using the percent of
receivables method (page 285).
- separate accounts for each customer
- direct write-off – debit bad debt expense, credit account receivable that is deemed
uncollectible
- allowance estimates total bad debt expense for the year – debit bad debt expense,
credit allowance for doubtful accounts (contra-asset) – can be done as percent of
sales, percent of receivable, or aging accounts – need to know percent receivable
- estimate bad debt expense as a percent of accounts receivable by crediting that
amount to allowance for doubtful accounts, then credit unadjusted balance in
allowance for doubtful accounts = estimated bad debt expense for the year which will
be debited as a bad debt expense
- to write of in allowance method – simply debit to allowance, and credit receivable
account
B.Accounting for Notes Receivable including interest accrual at year-end
- Notes Receivable (debit) recorded on sale (credit)…then upon payment interest is
recorded as a revenue credit and cash is debited for amount paid
- If unable to pay it transfers over to account receivable
- If not yet paid – interest may be recorded as interest receivable (debit) and int.
revenue (credit)
- When paid – debit cash – credit appropriate interest revenue (if not yet recorded as
receivable), interest receivable (writing it off), and note receivable (also writing it off)
C.See homework.