I. Recording Actual Bad Debts
On April 1, 2017, Alice Company determined that N. O. Money's $3,500 account receivable was uncollectible. On August 6, 2017, the $3,500 cash was unexpectedly received on account from N. O. Money.
REQUIRED:
A. Give the general journal entries required to record the April 1 and August 6 transactions for Alice Company, assuming the direct write-off method is used.
B. Give the general jouranl entries required to record the April 1 and August 6 transactions for Alice Company, assuming the allowance method is used.
C. Short Answer
1. What two disadvantages are associated with the direct write off method?
2. Under what conditions can a corporation use the direct write off method for accounting purposes?
3. Under the allowance method, if the cash realizable value of the accounts receivable is $88,000 before the April 1 write-off transaction, what is the cash realizable value of the accounts receivable after the April 1write-off entry is posted?
II. Recording ESTIMATED bad debts
Dinah Company uses the allowance method to account for bad debts. On December 31, 2017, the following information was available:
Net Sales $1,950,000
Accounts Receivable $610,000
REQUIRED:
A. Give the December 31, 2017 adjusting entry required under the allowance method, assuming
Case 1: Bad debts are estimated at 3% of net sales; the unadjusted balance of the Allowance for Bad Debts account is $16,000 credit.
Case 2: Bad debts are estimated at 3% of net sales; the unadjusted balance of the Allowance for Bad Debts account is $13,000 debit.
Case 3: Bad debts are estimated at 9% of accounts receivable; the unadjusted balance of the Allowance for Bad Debts account is $16,000 credit.
Case 4: Bad debts are estimated at 9% of accounts receivable; the unadjusted balance of the Allowance for Bad Debts account is $13,000 debit.
B. Based on your journal entries from Part A, indicate the balances of the accounts that would be reported on the financial statements on December 31, 2017:
III. Recording Plant Asset Disposals
On January 1, 2017, Hatter Company purchased a truck costing $56,000. The truck had an estimated salvage value of zero and an estimated useful life of 8 years. The straight-line depreciation method is used.
REQUIRED:
Give the general journal entry required to record the disposal of the truck in each of the following independent cases.
Case 1 The truck is discarded at the end of year 8.
Case 2 The truck is discarded at the end of year 6.
Case 3 The truck is sold for $26,500 cash at the end of year 5.
Case 4 The truck is sold for $30,000 cash on July 1 of year 4.
Case 5 The truck is exchanged for a new truck at the end of year 7. The old truck has a fair market value of $5,500 and Hatter Company pays $64,500 cash in the exchange, which is presumed to have commercial substance.
Case 6 The truck is exchanged for a new truck at the end of year 7. The old truck has a fair market value of $10,000 and Hatter Company pays $60,000 cash in the exchange, which is presumed to have commercial substance.
IV. Accounting for Notes Payable
On February 1, 2017, Tart Company borrowed $11,000 cash from Queen Corporation giving Queen an $11,000, 6%, 7-month note. Tart repaid the note on September 1, 2017. Tart Company prepares financial statements every three months on the following dates: March 31, June 30, September 30, and December 31.
REQUIRED:
Give the general journal entries necessary to record the notes payable transactions for Tart for 2017.
V. Accounting for Payroll
Doormouse Company has the following payroll information available for the week ending on August 31, 2017:
Gross Pay $27,000
Federal Income Tax Withholdings $4,050
State Income Tax Withholdings $1,620
FICA Tax Withholdings $2,070
Federal Unemployment Taxes $162
State Unemployment Taxes $810
In addition, the employees have $650 withheld for the company health insurance program.
REQUIRED:
For the weekly pay period ending on August 31:
A. Give the general journal entry to record the employee payroll.
B. Give the general journal entries to record the employer payroll taxes.
V. Plant Assets
Part A - Duchess Company had the following expenditures related to the purchase of a machine:
Purchase Cost $28,000
Shipping Costs $900
Testing Costs $300
Installation Costs $500
Sales Taxes $1,800
Oils needed to lubricate machine during operation $650
Annual inspection of machinery $1,200
When the machine is purchased, what total cost should be debited to the machine account?
Part B - Wonderland Company purchased equipment costing $41,000. The equipment had a 5-year useful life and a salvage value of $3,000. Complete the following depreciation schedule using straight-line depreciation.
Give the general journal entry required to record depreciation for Year 1:
VII. Short Answer
A. What is meant by an accelerated depreciation method? What is the tax advantage associated with an accelerated depreciation method?
B. Indicate whether the following expenditures related to an office building are revenue expenditures (RE) or capital expenditure (CE).
1. The hallways and ceiling in the building are repainted.
2. The glass in two broken windows of the building are replaced.
3. A new wing is added to the building.
4. The interior of the building is renovated, extending the useful life of the building by 10 years.
5. A cleaning firm is paid $150 per week to clean the carpets in the building.
C. On which financial statement is Loss on Disposal of Plant Assets reported?
D. When an exchange of similar plant assets is said to have "commercial substance", what does that mean?
E. What are intangible assets? Give an example of an intangible asset. What is meant by the amortization of intangible assets?
F. What are natural resources? Give an example of a natural resource. What is meant by the depletion of natural resources?
G. What is a contingent liability? Give an example of a contingent liability. Under what condition should contingent liabilities be recorded?
Attachment:- Assignment.rar