Exam 15: Overhead Application: Variable and Absorbtion Costing

The adjusting entry increases owners' equity and decreases liabilities.

is also called the statement of financial position.

By federal law, the agency with the ultimate responsibility for specifying the generally accepted accounting principles for U.S. companies whose stock is held by the general investing public

If one party to a contract has a prepaid expense, the other must have unearned revenue.

Historical costs are used on the balance sheet because these costs are verifiable and objective.

Recognition occurs before realization.

Given below are the daily balances in the accounts of the Liberace Company. Assuming only one transaction occurred each day, explain the nature of each transaction on May 1 to May 10. Accts. Accts. Owners' Cash Rec. Inv. Equip. Pavable Equity Beg. \1 ,250 \5 00 \1 ,125 \3 ,000 \1 ,750 \5 ,250 Bal. M ay 1 1,250 500 1,325 3,000 1,950 5,250 M ay 2 1,400 350 1,325 3,000 1,950 5,250 M ay 3 1,225 350 1,325 3,000 1,775 5,250 M ay 4 1,600 350 1,325 3,000 1,775 5,625 M ay 5 1,375 350 1,325 3,575 2,125 5,625 M ay 6 1,375 350 1,200 3,575 2,000 5,625 M ay 7 1,450 700 1,200 3,150 2,000 5,625 M ay 8 1,200 700 1,200 3,150 2,000 5,375 M ay 9 1,175 700 1,225 3,150 2,000 5,375 M ay 10 1,175 700 1,225 3,425 2,000 5,650

Cash payment on accounts payable will:

A method of record keeping in which each transaction affects at least two accounts

Magic Company owns a fixed asset with an original cost of $100,000. Magic Company estimates it will use the asset for 4 years, at which time the asset can be sold for $10,000. The book value of the asset after two years of use is:

An entry on the left side of an account

The ownership claim arising from the reinvestment of previous profits

Measures the performance of an organization by matching its accomplishments and its efforts

To be recorded in a period's accounting record, revenue must be:

is an example of an implicit transaction.

A cash payment of accounts payable does not affect stockholders' equity.

An audit guarantees that there are absolutely no mistakes in the financial statements.

Given below is the activity of Super Company: 1. Owners invested $20,000 in cash in the business 2) Credit sales were $80,000 3) Cash sales were $10,000 4) Cash collections from credit customers were $36,000 5) Cash borrowed on a note payable was $27,000 The total revenue for Super Company, using the accrual basis of accounting, is:

The excess of assets over the liabilities

is an example of an explicit transaction.