ACC 202 Final Exam Study Notes: Accounting Principles

Posted on May 14, 2026 in Financial and Accounting Management

Core Accounting Principles

  • Match the method to the data given:
    • Units given → Units-of-production
    • Time given → Straight-line
  • Always update depreciation BEFORE disposal.
  • Watch time carefully: (months vs. years vs. 360 days).
  • Accrual vs. Cash: Expenses are recorded when incurred, not paid.
  • Normal balances: Essential for every journal entry.

Chapter 10: Assets

Asset Classification

  • Tangible: Depreciation
  • Natural Resources: Depletion
  • Intangible: Amortization

Cost of Asset (Highly Tested)

Include: Purchase price, sales tax, shipping (FOB shipping point = buyer pays), installation, testing, and legal fees.

Exclude: Repairs and maintenance (expensed).

Depreciation Methods

Straight-Line

Depreciation = (Cost − Salvage) / Life

Double-Declining Balance (Accelerated)

Rate = 2 ÷ Life
Depreciation = Beginning Book Value × Rate

Rules: Ignore salvage until the final year; never depreciate below salvage.

Units-of-Production

Rate = (Cost − Salvage) ÷ Total Units
Depreciation = Rate × Units Used

Book Value

Book Value = Cost − Accumulated Depreciation

Disposal (Highly Tested)

Gain/Loss = Cash − Book Value

Steps:

  1. Update depreciation.
  2. Remove asset and accumulated depreciation.
  3. Record cash.
  4. Plug gain or loss.

Journal Entries

Gain: Dr Cash, Dr Accum. Dep., Cr Asset, Cr Gain
Loss: Dr Cash, Dr Accum. Dep., Dr Loss, Cr Asset
Discard (No Cash): Dr Accum. Dep., Dr Loss, Cr Asset

Depletion and Intangibles

  • Depletion: (Cost − Salvage) ÷ Total Units × Units Extracted
  • Intangibles: Finite life (amortize); Indefinite life (no amortization).
  • Goodwill: Purchase Price − FMV Net Assets (Only recorded when buying a business; not amortized).

Chapter 11: Payroll and Liabilities

Payroll Calculations

  • Gross Pay: Hourly (Hours × Rate) or Salary (Fixed).
  • Overtime: 40+ hours = 1.5 × rate.
  • Net Pay: Gross − Deductions (FICA, Federal tax, etc.).
  • Employer Taxes: Employer also pays FICA, FUTA, and SUTA.

Notes Payable

Interest = Principal × Rate × Time (Watch for 360/365 days and months/12).

Chapter 12: Partnerships

  • Formation: Use Market Value (FMV).
  • Admission: Use Bonus or Goodwill method.
  • Income Allocation: Salary, then Interest, then Remainder split.
  • Closing Entry: Dr Income Summary, Cr Partner Capital.

Chapter 13: Corporations

  • Stock Issuance: At Par (Cr Common Stock); Above Par (Cr Common Stock, Cr APIC).
  • Dividends: Declaration (Dr Retained Earnings, Cr Dividends Payable); Payment (Dr Dividends Payable, Cr Cash).
  • Preferred Stock: Cumulative (Pay past dividends first).
  • Stock Dividends: Small (<25% use market value); Large (>25% use par value).
  • Treasury Stock: Purchase (Dr Treasury Stock); Reissue (Above cost: Cr PIC-TS; Below cost: Dr PIC-TS then RE).

Chapter 14: Bonds

  • Bond Price: PV of Interest + PV of Principal.
  • Discount: Market rate > Stated rate (Increases interest expense).
  • Premium: Market rate < Stated rate (Decreases interest expense).
  • Carrying Value: Discount increases to face; Premium decreases to face.

Chapter 18: Managerial Accounting

  • Product Costs: DM, DL, FOH.
  • Period Costs: Selling, Admin.
  • Prime Cost: DM + DL.
  • Conversion Cost: DL + FOH.
  • DM Used: Beg RM + Purchases − End RM.
  • COGM: DM + DL + FOH + Beg WIP − End WIP.
  • COGS: Beg FG + COGM − End FG.

Chapter 19: Job Order Costing

  • Total Job Cost: DM + DL + Applied FOH.
  • POHR: Estimated FOH ÷ Estimated Activity.
  • Applied FOH: POHR × Actual Activity.
  • Over/Under Applied: Actual > Applied (Underapplied, Dr COGS); Applied > Actual (Overapplied, Cr COGS).

Final Exam Traps

  • If salvage is given, don’t ignore it unless using DDB in early years.
  • Prorate depreciation for partial years.
  • Always use FMV for partnership formations.
  • Check for cumulative preferred stock.
  • Always check WIP for manufacturing problems.
  • Identify discount vs. premium on bonds immediately.