mgm221 – review

8/6/2019 MGM221 Review

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MGT120 ReviewThe tutorial is a review only and not an indication of what will be on the

test.

Net sales represents the __________________ of merchandise sold to customers during the period,less _______________. COGS is a(n) ___________________ and is shown on the_____________________________________________________________________________.

The difference between net sales and COGS is ____________. It is a useful means of measuring theprofitability of _____________________, but it does not represent the overall profitability of thebusiness.

2 approaches used in accounting for merchandising transactions:1.___________________________________________________________________________2.___________________________________________________________________________

Assuming a company uses the perpetual inventory system, record the JE (a) when the goods arebought and (b) when the goods are sold:____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Assume instead the company uses the periodic inventory system, repeat the requirements fromabove:______________________________________________________________________________________________________________________________________________________

In a periodic inventory system, COGS is a computation. Show the calculations:____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Four cost flow assumptions that could be used are:

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


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Example: At the end of June, ABC Company reports the following for the month:

Date Explanation Units Unit Cost Total CostJune 1 Inventory 200 $5 $1,000

12 Purchase 300 6 1,800

23 Purchase 500 7 3,50030 Inventory 180

Calculate the cost of ending inventory and the COGS using the periodic inventory system under (i)FIFO; (ii) LIFO (iii) Average cost

Inventory should be reported on the balance sheet at the lower of its____________________________________________________________________________.

An error in the valuation of inventory will affect several balance sheet measurements such as___________________________

___________________________________________. It also affects some income statement itemssuch as___________________________________________. Since ending inventory of one yearbecomes the __________ balance of the next year, an error in inventory valuation will____________into the ___________________ of the following year.

If ending inventory is overstated, then net income is ___________________________________.If ending inventory is understated, then net income is ______________________________.If beginning inventory is overstated, then net income is_______________. If beginning inventory is understated, then net income is __________________.

Gross profit = _____________________________________It evaluates the profitability of _________________________and does not consider the_____________________________________________________________________________

Two ratios directly related to inventory are the gross profit percentage and the inventory turnover.The gross profit percentage is an indicator of the companys ability to sell inventory and iscalculated as__________________________________________________________________________________________________________________________________________________.

The inventory turnover indicates how rapidly inventory is sold. The calculationis:____________________________________________________________________________

The CICA uses the general term capital assets to encompass three groups of long-term assets:1.__________________________________ 2._______________________________________3.__________________________________________________

________________________ describes long-lived capital assets acquired for use in businessoperations rather than for resale.


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Two examples of tangible capital assets are:1._____________________________________ 2.___________________________________

Two examples of intangible capital assets are:

1._____________________________________ 2.____________________________________

For all categories of plant assets, there are three basic events that must be captured in the companysrecords:1._____________________________________ 2.____________________________________3._____________________________________

The cost of plant assets includes all costs necessary to place the asset in use. Some examplesinclude:______________________________________________________________________________

__________________ is a term used to allocate the cost of a plant asset to expense over the periodsit was used to generate revenue. This satisfies the ________________ principle.

Three methods used (including formulas) to estimate the allocation of this cost are:1.____________________________________________________________________________2.____________________________________________________________________________3.____________________________________________________________________________

The adjusting journal entry to record this allocation is:______________________________________________________________________________________________________________________________________________________

When a plant asset is disposed of, the journal entry(ies) to record this is:____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Example:The Centennial Company acquired a $40,000 machine on January 2, 2005. The machine isestimated to have a useful life of 5 years, and a residual (salvage) value of $4,000. For units ofproduction purposes, the machine is expected to produce 500,000 units. In 2005, the companyproduced 80,000 units.

Use the above information to calculate amortization expense for all 3 amortization methods.


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If all or any part of the regular dividend on a cumulative preferred stock is omitted in a year, theamount is said to be in _______________.Eg.

Retained earnings includes:_________________________________________________________________________________________________________________________________________________________________________________________________________________

When a cash dividend is declared, the JE is:___________________________________________________________________________________________________________________________________________________________

A distribution of additional shares of capital stock is called a__________________________________. The JE to record thisis:__________________________________________________________________________________________________________________________________________________________

The value used as the amount in the JE is_____________________________________________and is determined at the date of _____________________________________________________

A ______________________ is used by companies to reduce the market price of the common stock,with the intent of making the stock more affordable to investors. The transaction may be recordedby _________________________. It does not change___________________________________________________.

Book value per share of common stock is computed by____________________________________________________________________________________________________________________________________________________________

When a company repurchases their own shares, the JE is:____________________________________________________________________________________________________________________________________________________________

The ratio that measures a companys ability to generate profits from the use of its assets is:__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

The ratio that measures income earned on shareholders investment is called____________________________________________________________________________


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mgm221 – review

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