Question 1. On January 1, 2009, the balance in Great Lakes Co.'s Allowance for Bad Debts account was $5,200. During the year, a total of $3,500 of delinquent accounts receivable were written off as bad debts. The balance in the Allowance for Bad Debts account at December 31, 2009, was $7,300.
(a.) What was the total amount of bad debts expense recognized during the year?
(b.) Explain the term "net realizable value" as it relates to the presentation of Accounts Receivable on the Balance Sheet.
Question 2. Using the column headings provided below, show the effect, if any, of the transaction entry or adjusting entry on the appropriate balance sheet category or on the income statement by entering the account name, amount, and indicating whether it is an addition (+) or subtraction ( ). Column headings reflect the expanded balance sheet equation; items that affect net income should not be shown as affecting owners' equity.
(1.) The firm borrowed $2,000 from the bank; a short-term note was signed.
(2.) Merchandise inventory costing $750 was purchased; cash of $200 was paid and the balance is due in 30 days.
(3.) Employee wages of $1,000 were accrued at the end of the month.
(4.) Merchandise that cost $350 was sold for $450 in cash.
(5.) Revenues from services during month totaled $6,500. Of this amount, $2,000 was received in cash and the balance is expected to be received within 30 days.
(6.) Interest of $240 has been earned on a note receivable, but has not yet been received.
Txn: Assets = Liabilities + Owners' Equity <-- Net Income
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Question 3. The following are data available for Richards Co. for the month of May:
Sales 1,120 units
Beginning Inventory 200 units @ $1.25
Purchases, in chronological order 500 units @ $1.30
400 units @ $1.40
700 units @ $1.50
Calculate cost of goods sold under the following cost flow assumptions:
(1.) Weighted average
(2.) FIFO
(3.) LIFO
Question 4. Lone Star Sales & Service acquired a new machine that cost $42,000 in early 2008. The machine is expected to have a five-year useful life and is estimated to have a salvage value of $7,000 at the end of its life. (Round your final answers to the nearest dollar).
(a.) Using the straight-line depreciation method, calculate the depreciation expense to be recognized in the second year of the machine's life and calculate the accumulated depreciation after the third year of the machine's life.
(b.) Using the double declining balance depreciation method, calculate the depreciation expense for the first year of the machine's life and the net book value of the machine at this point in time.