Ch. 4
RECORD PURCHASE OF COMPUTER EQUIPMENT USING A CREDIT CARD for $1000
Equipment 1,000
Accounts Payable 1,000
Fire Nation Inc. has credit sales of $1,000,000 in its first year of operations. Of this amount, $250,000 of receivables remains uncollected at December 31. The credit manager estimates that $30,000 of these sales will be uncollectible. The adjusting entry to record the estimated uncollectible amount:
Bad Debt Expense 30,000
Allowance for Uncollectible Accounts 30,000
Sell CDs on account, $5800, that had a cost of $3,000. Record cost of inventory sold.
Accounts Receivable 5800
Sales revenue 5800
Cost of goods sold 3000
Inventory 3000
Fire Nation Inc. bought a patent from Water Tribe LLC. for $300,000. The legal and filing fees for administering this patent costs $20,000 and $15,000 respectively. How much should Fire Nation Inc. record the cost of the patent to be.
NOTE: purchased patent costs incl. the purchase price and everything necessary to get the asset ready for use
300,000 + 20,000 + 15,000 = 335,000 (Patent, Intangible Asset)
RECORD PAYMENT OF SALARIES OF 600 ISSUING CHECKS
Salaries expense 600
Cash 600
Fire Nation Inc. performs $1000 of services but later writes it off:
Make the journal entry of the service provided.
Record the adj. entry to write off the bad debts
1. Db. Accounts Receivable 1000, Cr. Service Rev. 1000
2. Db. AUA 1000, Cr. AR 1000
July 18 Record purchase of CDs on account for $3100, terms 1/10, n/30
Inventory 3100
Accounts Payable 3100
Fire Nation Inc. decided to develop their own technology and patent it. The research and developmental costs amounted to $400,000. The legal and filing fees for administering this patent costs $25,000 and $15,000 respectively. How should Fire Nation Inc. record these patent costs?
Note: Internally developed patent costs include the fees. The expense is separately recorded but still included in the overall costs.
400,000 (Research and Development Expense)
25,000 + 15,000 = 40,000 (Patent, Intangible Asset)
RECORD PAYMENT OF MAINTENANCE OF 400 FOR COMPANY VEHICLE USING DEBIT CARD
Repairs and maintenance expense 400
Cash 400
Fire Nation Inc. performs $1000 of services but later writes it off:
The reversing entry of the write off to indicate the customer paying it off.
Record the customer paying off the bad debt
1. Db. AR 1000, Cr. AUA 1000
2. Db. Cash 1000, Cr. AR 1000
Sell CDs to customers for cash, $4200, that had a cost of $2500
Cash 4200
Sales Revenue 4200
Cost of goods sold 2500
Inventory 2500
. Fire Nation Inc. buys up Air Nomad Co. for 23 million. At the time of acquisition, Air Nomad Co. had:
15 million in Accounts Receivable, 29 million in Equipment, 8 million in Patents, 25 million in accounts payables, 14 million in notes payables.
Record the journal entry for the acquisition. NOTE: Acq. = purchase price - net assets
Accounts Receivable 15
Equipment 29
Patents 8
Goodwill 10
Accounts payable 25
Notes Payable 14
Cash 23
Corporation establishes a petty cash fund for $225, issues a credit card to its office manager. By end of month, employees made one expenditure form petty cash fund (entertainment expense 25), and three expenditures with the credit card (postage expense, 50, delivery expense, 85, supplies expense $50)
Record employee credit card expenditures
Postage expense 60
Delivery expense 85
Supplies expense 50
Accounts Payable 195
Credit Sales = $400,000
Accounts Receivable = $80,000
Allowance for Doubtful Accounts = $400 credit
Estimates future uncollectible accounts to be 4% of accounts receivable.
Bad Debt Expense 2,800
Allowance for Doubtful Accounts 2,800
Earlier in the month, your company purchased $3100 worth of CDs on account from Music Supply. You notice $300 worth of CDs were cracked.
Record return of CDs to Music Supply and receive credit of $300
Accounts Payable 300
Inventory 300
. Fire Nation Inc. acquires land at a cash cost of $95,000. The land contains an old barn that is razed at a net cost of $8,000 ($10,000 in demolition costs less $2,000 proceeds from salvaged materials). Additional expenditures are the attorney’s fee, $1,500, and the real estate broker’s commission, $9,000. How much will Fire Nation Inc. record the cost of this land? Journalize the cost of the land.
Cash Price of Property 95,000
Net Removal costs of Warehouse (10,000-2,000) 8,000
Attorney’s Fees 1,500
Real estate broker’s commision 9,000
Cost of Land (add up all cost above) 113,500
Land 113,500
Cash 113,500
Corporation establishes a petty cash fund for $225, issues a credit card to its office manager. By end of month, employees made one expenditure form petty cash fund (entertainment expense 25), and three expenditures with the credit card (postage expense, 50, delivery expense, 85, supplies expense $50)
Record petty cash expenditures
Bonus: record the establishment of a $225 petty cash fund
Record petty cash expenditures
Entertainment expense 25
Cash 25
2. Petty cash 225
Cash 225
Credit Sales = $650,000
Accounts Receivable = $75,000
Allowance for Doubtful Accounts = $250 debit
Estimates future uncollectible accounts to be 7% of accounts receivable
Bad Debt Expense 5500
Allowance for Doubtful Accounts 5500
July 30 Record payment to Music Supply in full. Note: you bought CDs on account for $3100. You later returned $300 of CDs. What is your AP now?
AP: 2800 (3100 - 300)
Accounts Payable 2800
Cash 2800
Fire Nation Inc. purchased a fire truck on January 1 for a cash price of $30,000. Additional Expenditures include: Sales tax of $2,000, Painting and Lettering of $800, motor vehicle license of $200, and a five year insurance policy of $4,000.
Record the cost of the delivery truck.
BONUS: Record the total cash expenditures.
Delivery Truck
Cash Price 30,000
Sales Tax 2,000
Painting and Lettering 800
Cost of Delivery Truck 32,800
Cash Transaction
Equipment 32,800
License Expense 200
Prepaid Insurance 4,000
Cash 37,000