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COMMERCE 1AA3 Final: Exam Review

Course Code
Emad Mohammad
Study Guide

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COMMERCE 1AA3 December 3, 2018
Exam Review
Chapter 5
Periodic and perpetual
*slide 17 chart* understand the journal entries, understand how it affects financial
Period adjusts at the end of the accounting period, cost of goods sold is an adjusting
Perpetual is adjusted right away
freight out is an operating expense
freight in is capitalization, expenditure is recognized as an asset
equations- ending inventory, beginning inventory, purchases, cost of goods purchased,
cost of goods available for sale, ending accounts payable (is it an error in the beginning
or ending)
cost of goods sold = beginning inventory + purchases - ending inventory
shipping terms- FOB shipping point and FOB destination
MC- lower cost or net realizable value (cost of ending inventory is calculated under a
cost flow assumption -either FIFO or WA. That cost is compared with inventory’s net
realizable value (NRV). Inventory then is reported at the lower of cost ….
Gross profit method- you only estimate with the periodic system (slides 53-56)
Chapter 6
Cost principle (slide -measurement) - long term assets are recorded at there historical
cost or acquisition
What goes in the cost of land, buildings, equipment etc
Lump sum purchases
Depreciation is NOT an asset valuation!!! It is an allocation of the assets cost over its
useful life to match revenues and expenses
Know how to calculate depreciation under the 3 methods
Know how to calculate the Book value of an asset
Changes in estimates of useful life and salvage value
accounting for disposal of long-term assets, including the calculation of gains/loss on the
capital expenditure vs expenses
Chapter 8 - 30% of the exam
current liabilities
short term notes payable (slide 14 short term interest bearing, and also excel file that
was emailed to us). At issue date DR cash and CR N/P, at each interest payment date DR
interest expense, DR N/P and CR cash, CR payment
Contingent liabilities (slides 22-26)
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