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# Accounting 1120 - PowerPoint PPT Presentation

Accounting 1120. Final Study Guide. 1. What is depreciation? Which plant asset is not depreciated?. Depreciation is the allocation of a plant asset’s cost to expense over its useful life. It is NOT a process of valuation

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### Accounting 1120

Final Study Guide

• Depreciation is the allocation of a plant asset’s cost to expense over its useful life.

• It is NOT a process of valuation

• It does NOT mean that the business sets aside cash to replace an asset when it is used up

• LAND is not depreciated.

2. Amount of accumulated Depreciation depreciated?

32,000-4,000=28,000

28,000 / 4 (years of useful life) = 7,000

3. Long-Term/Short-Term Liabilities depreciated?

• Long Term Liabilities

• Obligations not expected to be paid within the longer of one year or the company's operating cycle

• Short Term Liabilities

• Obligations that will be paid within one year or less

4. Accrued Interest Expense depreciated?

4,000*.06*2/12 = \$40

6. Balance of Retained Earnings depreciated?

• Beginning Retained Earnings + Net Income = New Balance Retained Earnings

• 72,000+8,000 = \$80,000

• Retained Earnings – Dividend Payment

• 80,000-7,450 = 72,550

9. Statement of Cash Flow Sections depreciated?

• Cash flows from operating activities

• Depreciation, increases and decreases in inventory, accounts receivable, accounts payable, accrued liabilities

• Cash flows from investing activities

• Acquisition or sale of plant assets

• Cash flows from financing activities

• Notes payable, stocks (including dividends, treasury stock), bonds – borrowing money and repaying creditors

Amounts received in advance from customers for future products or services are __liabilities___.

12. Partnership Equity Balance depreciated?

\$72,000 (agreed upon market value of the asset) – 15,000 (note payable secured by the asset) = 57,000

13. Cumulative Preferred Stock Dividends depreciated?

1,500 (shares) * 25 (par value) * .04 = 1,500 dividends owed to preferred stockholders

First year – paid 1,100 dividends – still owe 400

Second year – paid 400 from last year + 1,500 from this year = 1,900

14. Stock Split depreciated?

The par value = \$4 (\$12 / 3)

Number of shares outstanding = 45,000 (15,000 * 3)

Market Value = \$8 (\$24 /3)

15. Journal Entry to Record depreciated?Stock Dividend

16. Depreciation depreciated?

32,000-2,000=30,000

30,000/10 = 3,000

Three years of straight line depreciation = 9,000

30,000-9,000 = 21,000

21,000/5 = 4,200

17. Treasury Stock depreciated?

100*3 (profit made on stock 33-30=3) \$300

100*-2 (loss from selling stock 28-30 =-2) = -200

Balance = \$100

18. Gain/Loss depreciated?

\$7,500 – 6,800 = \$700 loss

20. Issuing Bonds depreciated?

Discount

Discount

21. Depreciation depreciated?

Use the depreciation worksheet in Excel

23. Payroll depreciated?

INCOME

6,100 (monthly salary) * 12 = 73,200

73,200 * .05 = 3,660 Bonus

Total Salary and Bonus – 73,200+3,660 = 76,860

DEDUCTIONS

Federal Income Tax 810*12 = 9,720+932 = 10,652.00

State Income Tax 80*12 = 960+70 = 1,030.00

FICA Tax 76,860*.08 = 6,148.80

United Fund 76,860*.01 = 768.60

Insurance \$20*12 = 240.00

TOTAL DEDUCTIONS 18,840.00

23. Payroll depreciated?

Gross Pay = \$76,860

Total Deductions = -18,840

Net Pay = \$58,020

24. Issuing Stock depreciated?

Common Stock 2,000*2 = 4,000

Paid-in-Capital in Excess of Par = 66,000 (70,000-4,000)

24. Issuing Stock depreciated?