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13 Cards in this Set
- Front
- Back
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As interest payments are received on a note payable, companies eliminate the difference between the original payment and the face value of the note. |
Amortization |
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In financial accounting, what does it mean to use accounts receivable as collateral? |
To pledge accounts receivable to cover a loan |
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Why was the allowance for bad debt created? |
The record the amount of accounts receivable that will most likely never be paid |
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When companies purchase new inventory, they can’t record it in their inventory account until which of the following conditions have been met? |
They have legal title to the inventory |
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At the end of the current year, Bamboo Co. included $1,420,000 of recent purchases still in transit shopped F.O.B destination in their ending inventory. How will including this value affect Bamboo CO’s financial statements? |
COGS will be too low |
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What is the correct equation for COGS? |
Beg inv + purchases - discounts + freight in - end inv = COGS |
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The Retail Inventory Management (RIM) allows us to use the LIFO, FIFO, Average Cost, or LCM assumptions for our calculations. What small adjustment do we have to make in the RIM process to switch between inventory assumptions ? |
Change the cost to retail ratio used |
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When inventory is purchased in a basket purchase, several steps are required. What is one of the steps NOT required? |
Compare the allocated costs to the traditional historical cost and use the lower value |
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Why might a company estimate ending inventory instead of performing a physical count? |
The mathematical estimates can determine if inventory has been lost. |
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A company uses the gross method to account for cash discounts offered to its customers. If payment is made before the discount period expires, which of the following is correct? |
Sales discount is debited for the amount of discounts taken by customers. |
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International financial reporting standards allow companies to use each of the following inventory valuation methods except: |
LIFO |
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Which inventory method typically most closely matches the actual flow of inventory being sold? |
FIFO |
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For purposes of accounting for inventory, net realizable value is defined as: |
Estimated selling price less any costs of completion, disposal, and transportation |
