Review Sheet

							                                                Review Sheet
                                                 ACC 2101
                                               Examination III
Fall 1999                                                                                  Professor K. Gaver
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Chapter 9

1. Review Problem 9-2A. Make sure you can do these depreciation calculations in your sleep.

2. Remember that depreciation is the systematic allocation of the asset's cost less estimated
   salvage value. Regardless of the method you use, the total amount depreciated (or allocated)
   over the life of the asset is typically the same for all methods.

3. Be able to distinguish capital and revenue expenditures. See Exhibit 5, p. 358. What is a
   betterment?

4. Remember that interest costs and insurance costs incurred when constructing a building are
   capitalized not expensed; i.e., the costs are included as part of the acquisition cost of the
   building. This is in contrast with research and development expenditures which are
   expensed, not capitalized as an intangible asset like Future Product Ideas.

5. What is the systematic allocation of the acquisition cost of a natural resource asset like ore
   deposits, timber stands and oil reserves called? See pp. 337-8. What is the systematic
   allocation of the acquisition cost of an intangible asset like patents, goodwill, and copyrights
   called? See pp. 364-366 and Problem 9-6A.

6. Some important exercises to study are 9-11, 9-12 and 9-13. Exercise 9-11 and Problems 9-
   3A are partial year depreciation problems and should be reviewed thoroughly.


Chapter 11

1. Learn the structure of the Stockholders' Equity section of the balance sheet. Recall there are
   two main subdivisions in this section: paid-in capital and retained earnings. The balance in
   the retained earnings account, while positive ordinarily, can be negative for firms (especially
   start-up companies) that experience multiple losses. List as many accounts as you can recall
   that belong in the paid-in capital section. Is treasury stock added or deducted from
   stockholders' equity?

2. Learn the journal entries associated with the issuance of stock which carries par or stated
   values, and stock which has no par value.

3. Study problem 11-4A very carefully. In problem 11-4A, pay close attention to how many
   shares are outstanding after each transaction involving share issuances, stock dividends, and
   share repurchases/sales for treasury stock. Keeping tabs on how many shares are outstanding
   may be an important element in these problems.

4. Study the treasury stock transactions illustrated on p. 441. Pay attention to the sale of
   treasury stock when the shares are sold: (1) above cost, and (2) below cost.

5. Study the stock dividend example on pp. 444-5. Note the effect of the stock dividend
   described in the first paragraph, p. 445.

6. An ordinary cash dividend reduces the retained earnings of a corporation (after the dividend
   account is closed into retained earnings at the fiscal year-end).

7. What are the three important dates associated with the declaration of dividends. When is the
   liability for the dividend recorded? How is the firm's stock price quoted during the period
   between the date of record and the payment date? What journal entry is made on the payment
   date?


Chapter 12

1. Know the terms and definitions of various business combinations. What is a merger?
   consolidation? parent? subsidiary? minority interest?

2. Distinguish the cost method versus the equity method for accounting for investments in the equity
   securities of other corporations. Review exercises 12-14. Also, look over problem 12-4A.

3. Carefully review the presentation of nonrecurring items in the income statement. Remember.
   All nonrecurring gains and losses are presented net of income taxes! Many students have
   trouble coming to grips with this requirement.

4. Be able to convert data presented in the income statement to an earnings per share (EPS)
   basis. Remember. Since EPS is usually computed for common stock, you must first deduct
   any dividend obligations that are due to the preferred shareholders before proceeding with the
   common share EPS computations. Carefully review the solution to part 1, Problem 12-3A.

5. Review the Statement of Stockholders' Equity on p. 473. This basic financial statement is
   used to report changes in the stockholders' equity that occur during the accounting period.
   Look over the solution to Exercise 12-12 for formatting details.

6. As usual, know all the key terms in the chapter. There is almost always one multiple choice
   question that tests your understanding of terms and concepts.