Horngren’s Accounting Chapter 2 Vocabulary

cost of good sold – subtracting the ending finished good inventory from the cost of finished goods available for sale
International Accounting – The study of accounting principles used by different countries.
Assets – The economic resources of the entity and include such items as cash, accounts receivable (amounts owed to a firm by its customers), inventories, land, buildings, equipment, and even intangibles such as patents and other legal rights and claims.
Blank Endorsement – A signature of the payee written on the back of the check that transfers ownership of the check without specifying to whom or for what purpose.
debtor – the business or individual who owes a debt
Lifestyle – the way they choose to spend their time and money
Conservatism – The manner in which accountants deal with uncertainty regarding economic situations
Double-entry accounting – The recording of debit and credit parts of a transaction
sales returns and allowances – a temporary owner's equity contra account used to record credit given to a customer for shortages damaged goods
Merchandise – Goods purchased for resale at a profit
You are considering two machines, A and B that can be used for the same purpose. Machine A costs $250,000, will reduce costs by $70,000 per year, needs net working capital of $20,000 at time zero which be released at the end of the project, has a 5 year straight line depreciable life and can be sold at the end of the project’s life for $50,000. Machine B costs $320,000, will reduce costs by the same $70,000 per year, has net working capital of $40,000 at time zero (also released at the end of its life), has a ten year straight line depreciable life and can be sold at the end of its life for $60,000. Assume that the tax rate is 34% and the discount rate is 10%. Calculate an Equivalent Annual Cost for each machine. What are they and which machine should you choose?
paramedic – One who is trained to do emergency medical aid but not a fully qualified doctor.
Authorizing transactions and maintaining c – …
Retained Earnings – How much money a company retains…. Net income less dividends
Appropriate Auditor Request – Atty engaged to advise or represent client professionally, with substantive attention in form of legal representation or consultation for:
Overtly threatened or pending litigation
Contractually assumed obligations
Unasserted possible claims or assessments
*Remember materiality standard
Owners – Investors who originally establish the business contribute money to the company in exchange for shares of ownership
Merchandise Inventory – The stock of goods a merchandising business keeps on hand.
Which of the following statements is true?
a. All companies use a calendar year for their annual financial statements.
b. A company is likely to end its fiscal year during the slowest time of its year.
c. For comparison purposes, all companies begin their first quarter on January 1, regardless of when they begin their fiscal year.
d. A quarter represents one-fourth of a company's operating cycle. – b. A company is likely to end its fiscal year during the slowest time of its year.
Yоu аre cоnsidering twо mаchines, A аnd B that can be used for the same purpose. Machine A costs $250,000, will reduce costs by $70,000 per year, needs net working capital of $20,000 at time zero which be released at the end of the project, has a 5 year straight line depreciable life and can be sold at the end of the project’s life for $50,000. Machine B costs $320,000, will reduce costs by the same $70,000 per year, has net working capital of $40,000 at time zero (also released at the end of its life), has a ten year straight line depreciable life and can be sold at the end of its life for $60,000. Assume that the tax rate is 34% and the discount rate is 10%. Calculate an Equivalent Annual Cost for each machine. What are they and which machine should you choose?
Accounts receivable – amount owed to the business for items sold on credit.

This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply