Accounting 1120
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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

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Accounting 1120

Accounting 1120

Final Study Guide


1 what is depreciation which plant asset is not depreciated

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

    • 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

2. Amount of accumulated Depreciation

32,000-4,000=28,000

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


3 long term short term liabilities

3. Long-Term/Short-Term Liabilities

  • 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

4. Accrued Interest Expense

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


5 characteristics of a partnership

5. Characteristics of a Partnership


6 balance of retained earnings

6. Balance of Retained Earnings

  • 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


7 journal entry for sale of common stock

7. Journal Entry for Sale of Common Stock


8 journal entry for issuance of bonds

8. Journal Entry for Issuance of Bonds


9 statement of cash flow sections

9. Statement of Cash Flow Sections

  • 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


10 journal entry to record warranty expense

10. Journal Entry to Record Warranty Expense


11 amounts received in advance

11. Amounts Received in Advance

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


12 partnership equity balance

12. Partnership Equity Balance

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


13 cumulative preferred stock dividends

13. Cumulative Preferred Stock Dividends

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

14. Stock Split

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 stock dividend

15. Journal Entry to Record Stock Dividend


16 depreciation

16. Depreciation

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

17. Treasury Stock

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

18. Gain/Loss

$7,500 – 6,800 = $700 loss


19 journal entry to record payment of note

19. Journal Entry to Record Payment of Note


20 issuing bonds

20. Issuing Bonds

Discount

Premium

Discount

Premium


21 depreciation

21. Depreciation

Use the depreciation worksheet in Excel


22 net income partnership

22. Net Income - Partnership


22 journal entry to record income summary closing entry

22. Journal Entry to Record Income Summary Closing Entry


23 payroll

23. Payroll

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 payroll1

23. Payroll

Gross Pay = $76,860

Total Deductions = -18,840

Net Pay = $58,020


24 issuing stock

24. Issuing Stock

Cash Received 2,000*35 = 70,000

Common Stock 2,000*2 = 4,000

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


24 issuing stock1

24. Issuing Stock

Equipment Received 80,000

Inventory Received18,000

Preferred Stock – 3,000*3090,000

Paid-in-Capital in Excess of Par = 8,000 (98,000-90,000)


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