Question 1:
Trudy Company incurred the following costs.
1. Sales tax on factory machinery purchased $5,000
2. Painting of and lettering on truck immediately upon purchase 700
3. Installation and testing of factory machinery 2,000
4. Real estate broker's commission on land purchased 3,500
5. Insurance premium paid for first year's insurance on new truck 880
6. Cost of landscaping on property purchased 7,200
7. Cost of paving parking lot for new building constructed 17,900
8. Cost of clearing, draining, and filling land 13,300
9. Architect's fees on self-constructed building 10,000
Instructions:
Indicate to which account Trudy would debit each of the costs.
Question 2:
Brainiac Company purchased a delivery truck for $30,000 on January 1, 2008.The truck has an expected salvage value of $2,000, and is expected to be driven 100,000 miles over its estimated useful life of 8 years. Actual miles driven were 15,000 in 2008 and 12,000 in 2009.
Instructions:
(a) Compute depreciation expense for 2008 and 2009 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining balance method.
(b) Assume that Brainiac uses the straight-line method.
(1) Prepare the journal entry to record 2008 depreciation.
(2) Show how the truck would be reported in the December 31, 2008, balance sheet.
Question 3:
Presented below are selected transactions at Ingles Company for 2008.
Jan. 1 Retired a piece of machinery that was purchased on January 1, 1998.The machine cost
$62,000 on that date. It had a useful life of 10 years with no salvage value.
June 30 Sold a computer that was purchased on January 1, 2005.The computer cost $40,000. It
had a useful life of 5 years with no salvage value.The computer was sold for $14,000.
Dec. 31 Discarded a delivery truck that was purchased on January 1, 2004. The truck cost
$39,000. It was depreciated based on a 6-year useful life with a $3,000 salvage value.
Instructions:
Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on assets disposed of. Ingles Company uses straight-line depreciation. (Assume depreciation is up to date as of December 31, 2007.)
Question 4:
Herzogg Company, organized in 2008, has the following transactions related to intangible assets.
1/2/08 Purchased patent (7-year life) $560,000
4/1/08 Goodwill purchased (indefinite life) 360,000
7/1/08 10-year franchise; expiration date 7/1/2018 440,000
9/1/08 Research and development costs 185,000
Instructions:
Prepare the necessary entries to record these intangibles. All costs incurred were for cash. Make the adjusting entries as of December 31, 2008, recording any necessary amortization and reporting all intangible asset balances accurately as of that date.
Question 5:
The ledger of Hixson Company at the end of the current year shows Accounts Receivable $120,000, Sales $840,000, and Sales Returns and Allowances $30,000.
Journalize entries related to accounts receivable.
Journalize entries for recognizing accounts receivable.
Journalize entries to record allowance for doubtful accounts using two different bases.
Instructions:
(a) If Hixson uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Hixson determines that Fell's $1,400 balance is uncollectible.
(b) If Allowance for Doubtful Accounts has a credit balance of $2,100 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 1% of net sales, and (2) 10% of accounts receivable.
(c) If Allowance for Doubtful Accounts has a debit balance of $200 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 0.75% of net sales and (2) 6% of accounts receivable.