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    Exam Prep 2

    Uploaded by

    Sesali Heidi

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    © All Rights Reserved
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    Exam Prep 2

    Uploaded by

    Sesali Heidi
    2 views26 pages

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    Exam prep 2

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    Copyright:

    © All Rights Reserved
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    Download as xlsx, pdf, or txt
    2 views26 pages

    Exam Prep 2

    Uploaded by

    Sesali Heidi

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 26

    Talk about Prepaid/income tax

    Calculating net income under cash basis vs accural basis


    Date Particulars Debit
    1-Jan Computer equipment 30,000.00
    Cash

    31-Dec Depreciation expense 10,000.00


    Accumulated depreciation - Computer equipment
    (30000/3=10000)

    Computer Equipment
    1-Jan 30000
    balance 30000

    Depreciation expense
    31-Dec 10000
    Balance 10000

    know how they will be shown on the balance sheet


    have your balance sheet title

    Assets
    PPE
    Vehicles
    less Acc
    Carry amount
    Credit

    30,000.00

    10,000.00

    Accumulated Depreciation - Computer


    Equipment
    31-Dec 10000
    Balance 10000
    why are closing entries required
    Bank balance is actually 13,474
    Preparing income statement from a case/ paragraph
    Date Particulars
    Accounts receivables
    Sales

    Cash
    Accounts receivables

    Allowance for uncollectible accounts


    Accounts receivables

    Bad debt expense


    Allowance for uncollectible accounts

    How to record when you recover an accounts receivable

    AR
    AFDA
    Cash
    AR
    Debit Credit
    1,000,000.00
    1,000,000.00

    880,000.00
    880,000.00

    16,000.00
    16,000.00

    15,000.00
    15,000.00

    an accounts receivable

    x
    x
    same amount
    x
    x
    1) The balance should be:
    (110000 x 0.005)+(60000 x 0.01)+(50000 x 0.06)+(15000 x 0.4)
    $ 10,150.00

    Current balance is only $6500

    2) Date

    3)

    professional judgment and past experience with collections to arrive at the percentages to use for estimating
    uncollectible accounts.
    Particulars Debit Credit
    Bad debt expense 3,650.00
    Allowance for uncollectible accounts 3,650.00

    $
    Accounts receivables (235000-10150) 224,850.00

    ve at the percentages to use for estimating


    Date Particualrs Debit Credit
    a) ### Note receivables 6,000.00
    Cash 6,000.00

    b) 12/31/2019 Interest receivable (6000 x 8% x 7/12) 280.00


    Interest revenue 280.00

    c) ### Cash 6,480.00


    Note receivable 6,000.00
    Interest receivable 280.00
    Interest revenue (6000 x 8% x 5/12) 200.00
    Note the date the transaction was entered into
    that’s where you start calculating interest from
    With a balance sheet and income statement

    A question asking you that a company is interested in measuring its ability to pay its current liabilities
    and to calculate two ratios

    Answer Prepare a current ratio


    Quick ratio

    A question asking you that a client wants to know how long in days that it is to sell inventory and
    to calculate a ratio

    Answer Inventory turnover


    days inventory outstanding

    A question asking you to calculate a rato on what percentage of each sales dollar is earned on net income
    Answer Return on net sales

    Given ratios already calculated

    A question asking which company is in a better postion to pay its current liabilities
    Answer Look at the current ratio to make your decision

    A question asking you which company is earning more based on every $ invested by its common shareholders
    Answer Look at the return on common shareholders equity to make your decisoon

    A questions on which company is generatig more profit


    Answer Look at the gross profit percentage to make your decision

    Which company is generating more operating cash flows quickly


    Answer look at the shorter cash conversion cyle

    company is outperforming the other as indicated by the percentage of the stock’s market value being paid o
    Answer look at the higher dividend yield ration

    Which company has more debt


    Answer look at the leverage ratio
    urrent liabilities
    The last two ratio assignments are helpful

    ventory and

    arned on net income

    ts common shareholders

    ’s market value being paid out as dividends to shareholders

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