Question 1 - Ingles Company has accounts receivable of $93,100 at March 31. An analysis of the accounts shows the following.
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Month Of Sale
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Balance, March 31
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March
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$60,000
|
|
February
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$17,600
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|
January
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$8,500
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|
Prior to January
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$7,000
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|
$93,100
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Credit terms are 2/10, n/30. At March 31, Allowance for Doubtful Accounts has a credit balance of $1,200 prior to adjustment. The company uses the percentage-of-receivables basis for estimating uncollectible accounts. The company's estimate of bad debts is as follows.
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Age of Accounts Uncollectible
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Estimated Percentage
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1-30 days
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2.00%
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|
31-60 days
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5.00%
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61-90 days
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30.00%
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|
Over 90 days
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50.00%
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Instructions -
(a) Determine the total estimated uncollectibles.
(b) Prepare the adjusting entry at March 31 to record bad debts expense?
Question 2 - The following expenditures relating to plant assets were made by Spaulding Company during the first 2 months of 2008.
1. Paid $5,000 of accrued taxes at time plant site was acquired.
2. Paid $200 insurance to cover possible accident loss on new factory machinery while the machinery was in transit.
3. Paid $850 sales taxes on new delivery truck.
4. Paid $17,500 for parking lots and driveways on new plant site.
5. Paid $250 to have company name and advertising slogan painted on new delivery truck.
6. Paid $8,000 for installation of new factory machinery.
7. Paid $900 for one-year accident insurance policy on new delivery truck.
8. Paid $75 motor vehicle license fee on the new truck.
Instructions - List the numbers of the foregoing transactions, and opposite each indicate the account title to which each expenditure should be debited.
Question 3 - Kelm Company purchased a new machine on October 1, 2008, at a cost of $120,000. The company estimated that the machine will have a salvage value of $12,000. The machine is expected to be used for 10,000 working hours during its 5-year life.
Instructions - Compute the depreciation expense under the following methods for the year indicated.
(a) Straight-line for 2008.
(b) Units-of-activity for 2008, assuming machine usage was 1,700 hours.
(c) Declining-balance using double the straight-line rate for 2008 and 2009.
Question 4 - Beka Company owns equipment that cost $50,000 when purchased on January 1, 2005. It has been depreciated using the straight-line method based on estimated salvage value of $5,000 and an estimated useful life of 5 years.
Instructions
Prepare Beka Company's journal entries to record the sale of the equipment in these four independent situations. Update depreciation on assets disposed of at time of sale.
(a) Sold for $28,000 on January 1, 2008.
(b) Sold for $28,000 on May 1, 2008.
(c) Sold for $11,000 on January 1, 2008.
(d) Sold for $11,000 on October 1, 2008.
Question 5 - The following are selected 2008 transactions of Franco Corporation.
Jan. 1 Purchased a small company and recorded goodwill of $150,000. Its useful life is indefinite.
May 1 Purchased for $90,000 a patent with an estimated useful life of 5 years and a legal life of 20 years.
Instructions - Prepare necessary adjusting entries at December 31 to record amortization required by the events above.