gains and losses
Recording a gain would result in a ________ of net income
increase
A company purchases equipment for $10,000 with a salvage value of $1,000 and a useful life of 5 years. Using the straight-line method, what is the annual depreciation expense?
$1,800 per year
(Formula: Cost−Salvage ValueUseful LifeUseful LifeCost−Salvage Value)
10,000−1,0005=1,800510,000−1,000=1,800
What kind of account is Allowance for Uncollectible accounts, and how does this account operate?
Allowance for Uncollectible Accounts is a contra-asset account.
It represents the amount of receivables the company doesn’t expect to collect.
Instead of waiting to find out who won’t pay, companies estimate bad debts ahead of time and record them here.
Under the perpetual inventory system, which account is debited when a company purchases inventory on account?
a) Cost of Goods Sold
b) Inventory
c) Accounts Receivable
d) Sales Revenue
b) Inventory
(In a perpetual system, purchases are directly added to the Inventory account).
Which inventory system continuously updates inventory records?
a) Periodic
b) Perpetual
c) FIFO
d) LIFO
b) Perpetual
(The perpetual inventory system keeps real-time updates for inventory and cost of goods sold).
WHAT ARE THE FOUR INVENTORY METHODS
specific identification, weighted average, LIFO and FIFO
ABC Company purchased equipment for $10,000 and fully depreciated it to $0 book value. The company then sold the equipment for $500. Did the company record a gain or loss, and for how much?
$500 gain (since the book value is $0, the entire sale price is a gain).
ABC Company purchases a machine for $50,000, has a useful life of 5 years, and uses double-declining balance (DDB)depreciation. What is the depreciation expense for year 1?
$20,000
(DDB Formula: Book Value×2Useful LifeBook Value×Useful Life)
Does Allowance for Uncollectible Accounts go up with a Debit or a Credit and why?
Credit. Its a contra asset account.
When money goes into AUA (adjusting entry/bad debt expense), AUA is credited
When money gets taken out (write off), AUA is debited
A company sells inventory for $5,000 on account. The inventory had a cost of $3,200. Under the perpetual inventory system, which accounts are affected?
a) Accounts Receivable, Sales Revenue, Cost of Goods Sold, Inventory
b) Cash, Sales Revenue, Cost of Goods Sold, Inventory
c) Accounts Payable, Sales Revenue, Cost of Goods Sold, Inventory
d) Inventory, Accounts Payable, Sales Revenue
a) Accounts Receivable, Sales Revenue, Cost of Goods Sold, Inventory
(A sale in a perpetual system requires two entries:
1️⃣ Record revenue (debit Accounts Receivable, credit Sales Revenue).
2️⃣ Record cost (debit Cost of Goods Sold, credit Inventory).
Which planet in our solar system has the most moons?
a) Earth
b) Jupiter
c) Saturn
d) Neptune
c) Saturn
(Saturn has over 80 moons, beating Jupiter for the most in the solar system).
Beg inventory: 100 @ $10 = $1,000
Purchases:
60 units @ $12 = $720
40 units @ $13 = $520
Sales: 150 units sold
calculate cogs under FIFO
sell oldest first → take 100 @ $10 = $1,000
still need 50 more units → next layer 50 @ $12 = $600
COGS = 1,000 + 600 = $1,600
XYZ Corporation sold office furniture for $2,500. The furniture originally cost $8,000, and accumulated depreciation at the time of sale was $6,000. Did XYZ record a gain or loss, and for how much?
$500 gain
(Book Value = $8,000 - $6,000 = $2,000. Selling price is $2,500, so $500 gain).
A truck costs $40,000, has a salvage value of $5,000, and is expected to be driven 100,000 miles over its lifetime. If the truck is driven 20,000 miles in the first year, what is the activity-based depreciation expense for year 1?
$7,000
Suppose the balance of the allowance for uncollectible accounts at the end of the current year is $800 (credit) before any adjusting entry.
The company estimates future uncollectible accounts to be $5,600.
At what amount would bad debt expense be reported in the current year’s income statement?
4800
5600-800=4,800
A company purchases $10,000 of inventory and pays $500 in freight costs (FOB shipping point). How should the freight cost be recorded under the perpetual inventory system?
a) Debit Freight Expense for $500
b) Debit Cost of Goods Sold for $500
c) Debit Inventory for $500
d) Debit Accounts Payable for $500
c) Debit Inventory for $500
(In a perpetual system, freight costs related to purchases are capitalized into the Inventory account).
Under the double-declining balance method, what happens to depreciation expense over time?
a) It stays the same every year
b) It increases every year
c) It decreases every year
d) It is only recorded in the first year
c) It decreases every year
(The double-declining balance method applies a higher depreciation rate in earlier years, reducing each year as the book value decreases).
Record the journal entry
$200 freight paid in cash for an inventory purchase.
Dr Inventory 200; Cr Cash 200.
A company sells machinery for $50,000. The machinery originally cost $120,000, and accumulated depreciation is $75,000. Did the company record a gain or loss, and what is the corresponding journal entry
5,000 gain
debit cash: $50,000
debit accumulated depreciation: $75,000
credit gain: 5,000
credit equipment: $120,000
A company purchases equipment for $100,000 with a 5-year useful life and uses double-declining balance depreciation. The first-year depreciation was $40,000. What is the depreciation expense for Year 2?
$24,000
(Year 1: $100,000 × 40% = $40,000)
(New Book Value for Year 2 = $100,000 - $40,000 = $60,000)
(Year 2: $60,000 × 40% = $24,000)
On December 31, the Accounts Receivable ending balance is $80,000.
Assume that the unadjusted balance of Allowance for Uncollectible Accounts is a debit of $500, and that the company estimates 7% of the accounts receivable will not be collected.
The amount of bad debt expense recorded on December 31 will be:
a. $5,100.
b. $5,000.
c. $5,600.
d. $6,100.
d. 6100
80,000 * 0.07=5,600
debit balance in account (-500)
5600A company returns $800 worth of defective inventory to a supplier that was bought on account. How should this be recorded under the perpetual inventory system?
a) Debit Accounts Payable, Credit Inventory
b) Debit Inventory, Credit Accounts Payable
c) Debit Cost of Goods Sold, Credit Inventory
d) Debit Sales Returns, Credit Inventory
a) Debit Accounts Payable, Credit Inventory
(When a return occurs, Inventory is reduced and Accounts Payable (or Cash) is adjusted).
Which U.S. state was the first to ratify the Constitution?
a) New York
b) Pennsylvania
c) Delaware
d) Virginia
c) Delaware
(Delaware ratified the U.S. Constitution first on December 7, 1787).
Why doesn’t freight-in (shipping) affect Accounts Payable to the vendor?
It’s a separate cost paid to the carrier, not part of the vendor’s invoice.
A manufacturing company sells a specialized piece of equipment for $35,000. The original cost was $150,000, and accumulated depreciation was $110,000. However, the company also paid $3,000 in removal costs to sell the equipment. Did the company record a gain or loss, and for how much?
8,000 loss
(Book Value = $150,000 - $110,000 = $40,000. Selling price = $35,000, but after deducting the $3,000 removal cost, net proceeds = $32,000. Loss = $40,000 - $32,000 = $8,000).
A company purchases a truck for $90,000, with a salvage value of $10,000 and a 5-year useful life. The company uses straight-line depreciation for the first two years and then switches to the double-declining balance method. What is the total accumulated depreciation at the end of Year 3?
$55,200
Schmidt Company’s Accounts Receivable balance is $100,000, its adjusted balance in Allowance for Uncollectible Accounts is $4,000, and its bad debt expense is $3,800. The net amount of accounts receivable is: (30 seconds)
96,000
=100,000-4,000
A bookstore purchases books on account for $3,000, terms 2/10, n/30. The bookstore returns $500 of damaged books before payment. If they pay within the discount period, how much do they pay?
$2,450
📌 Breakdown:
What is Mellayne's favorite color
pink
Name an account that would be reported as a non-operating expense on a multiple-step income statement. (15 seconds)
interest expense, nonoperating revenue, gain on a sale, loss on a sale, revenue from investing, etc.