Question 1:
At December 31, 2013, Dustin Company reported this information on its balance sheet.
Accounts receivable $960,000
Less: Allowance for doubtful accounts 78,000
During 2014, the company had the following transactions related to receivables.
1. Sales on account $3,600,000
2. Sales returns and allowances 150,000
3. Collections of accounts receivable 3,100,000
4. Write-offs of accounts receivable deemed uncollectible 92,000
5. Recovery of bad debts previously written off as uncollectible 28,000
Instructions
(a) Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on the collections of accounts receivable. (Omit cost of goods sold entries.)
(b) Enter the January 1, 2014, balances in Accounts Receivable and Allowance for Doubt¬ful Accounts, post the entries to the two accounts (use T-accounts), and determine the balances.
(c) Prepare the journal entry to record bad debt expense for 2014, assuming that aging the accounts receivable indicates that expected bad debts are $140,000.
(d) Compute the accounts receivable turnover and average collection period.
Question 2:
On January 1, 2014, Alter Company had Accounts Receivable $154,000; Notes Receivable of $12,000; and Allowance for Doubtful Accounts of $13,200. The note receivable is from Hartwig Company. It is a 4-month, 9% note dated December 31, 2013. Alter Company prepares financial statements annually. During the year, the following selected transactions occurred.
Jan. 5 Sold $10,000 of merchandise to Flynn Company, terms n/15. 20 Accepted Flynn Company's $10,000, 3-month, 6% note for balance due.
Feb. 18 Sold $4,000 of merchandise to Mink Company and accepted Mink's $4,000, 6-month, 8% note for the amount due.
Apr. 20 Collected Flynn Company note in full. 30 Received payment in full from Hartwig Company on the amount due.
May 25 Accepted Creech Inc.'s $9,000, 6-month, 4% note in settlement of a past-due balance on account.
Aug. 18 Received payment in full from Mink Company on note due. Sept. 1 Sold $5,000 of merchandise to Glazer Company and accepted a $5,000, 6-month, 6% note for the amount due.
Required:
Journalize the transactions.
(Omit cost of goods sold entries)
Question 3:
At December 31, 2013, Tong Corporation reported these plant assets.
Land $4,000,000
Buildings $28,800,000
Less: Accumulated depreciation-buildings 11,520,000 17,280,000
Equipment 48,000,000
Less: Accumulated depreciation-equipment 5,000,000 43,000,000
Total plant assets $64,280,000
During 2014, the following selected cash transactions oc curred.
Apr. 1 Purchased land for $2,600,000.
May 1 Sold equipment that cost $750,000 when purchased on January 1, 2009. The equipment was sold for $367,000.
June 1 Sold land purchased on June 1, 2002, for $2,000,000. The land cost $800,000.
Sept. 1 Purchased equipment for $840,000.
Dec. 31 Retired equipment that cost $470,000 when purchased on December 31, 2004. No salvage value was received.
Instructions.
(a) Journalize the transactions. (Hint: You may wish to set up T-accounts, post beginning balances, and then post 2014 transactions.) Tong uses straight-line depreciation for buildings and equipment. The buildings are estimated to have a 40-year life and no salvage value; the equipment is estimated to have a 10-year useful life and no salvage value. Update depreciation on assets disposed of at the time of sale or retirement.
b) Record adjusting entries for depreciation for 2014.
c) Prepare the plant assets section of Tong's balance sheet at December 31, 2014.
Question 4:
In recent years Howard Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below.
|
Machine
|
Acquired
|
Cost
|
Salvage
Value
|
Useful Life (in years)
|
Depreciation Method
|
|
1
|
July 1, 2012
|
$68,000
|
$5,000
|
7
|
Straight-line
|
|
2
|
Apr. 1, 2013
|
64,000
|
6,000
|
4
|
Declining-balance
|
|
3
|
Sept. 1, 2013
|
84,000
|
4,000
|
8
|
Units-of-activity
|
For the declining-balance method, Howard Company uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 40,000. Actual hours of use in the first 3 years were: 2013, 1,200; 2014, 6,400; and 2015, 7,000.
Instructions
(a) Compute the amount of accumulated depreciation on each machine at December 31, 2015.
(b) If machine 2 was purchased on November 1 instead of April 1, what would be the depreciation expense for this machine in 2013? In 2014? (Round to the nearest dollar.)