journal
entries
entries
At the beginning of the year, Michum Enterprises allows estimated uncollectable accounts of $22,600. By the end of the year, actual bad debts total $26,500
Record the write-off for uncollectable accounts (What is the debit and credit account)
Allowance for uncollectable accounts $26,500
Accounts Receivable $26,500
Which of the following describes accounts receivable?
A. The amounts owed by a company to its vendors for purchases of goods or services on account
B. The amount of cash not expected to be collected by a company from its customers from the sale of goods or services on account (bad debts)
C. The amounts owed to a company by its customers from the sale of goods or services on accountCorrect
D. The amount of cash collected by a company from its customers from the sale of goods or services on account
C
On October 1, 2024, Green Corporation loans one of its employees $26,000 and accepts a 12-month, 8% note receivable.
Calculate the amount of interest revenue Green will recognize in 2024 and 2025
formula hint: (loan amount) x (%) x (months passed/total months)
2024: $26,000 x 8% x 3/12 = $520
2025: $26,000 x 8% x 9/12 = $1,560
Assume inventory sold for the year includes the items that were purchased first
Which inventory method is this?
FIFO (First in, First Out)
At the end of the year, Mercy Cosmetics’ balance of Allowance for Uncollectible Accounts is $500 (credit) before adjustment. The balance of Accounts Receivable is $20,000. The company estimates that 15% of accounts will not be collected over the next year.
What adjusting entry would Mercy Cosmetics record for Allowance for Uncollectible Accounts?
Bad Debt Expense $2,500
Allowance for Uncollectable accounts $2,500
$20,000 x 15% - $500 = $2,500
The inventory cost flow assumption that results in a random mixture of goods being included in the balance of inventory and cost of goods sold is:
A. LIFO.
B. Weighted-average.
C. Lower of cost and net realizable value.
D. FIFO.
B - Weighted Average
Weighted average is the average of all inventory costs.
On January 1, Californian Specialty Foods purchased equipment for $29,000. Residual value at the end of an estimated four-year service life is expected to be $2,900. The machine operated for 3,000 hours in the first year, and the company expects the machine to operate for a total of 18,000 hours.
Calculate depreciation expense for the first year using straight-line
Depreciation Expense:
$29,000 - $2,900 / 4 years = $6,525
(asset cost - residual value ) / service life
Intangible assets have no physical substance and generally represent exclusive rights that provide benefits to owners.
True or False?
True
Examples: patents and trademarks
On February 3, a company provides services on account for $31,000, terms 2/10, n/30. On February 9, the company receives payment from the customer for those services on February 3.
Record the service on account on February 3 and the collection of cash on February 9.
Feb 3 Accounts Rec 31,000
Service Rev 31,000
Feb 9 Cash 30,380
Sales Disc. 620
Accounts Rec 31,000
A company purchased a piece of equipment by paying $5,000 cash. Shipping cost of $400 to get the equipment to its factory was also incurred. The fair value of this equipment is $7,000. For what amount should the company report the equipment?
a. $7,400
b. $5,400
c. $7,000
d. $5,000
C - $5,400
$5,000+$400
On January 1, Californian Specialty Foods purchased equipment for $29,000. Residual value at the end of an estimated four-year service life is expected to be $2,900. The machine operated for 3,000 hours in the first year, and the company expects the machine to operate for a total of 18,000 hours.
Calculate depreciation expense for the first year using Double Declining
Depreciation Expense:
$29,000 x 2/4 = $14,500
(asset cost x 2/service life)
Freight-in is included in the cost of inventory
True or False
True
Freight-in refers to the shipment costs. Inventory costs include the actual inventory and all costs necessary to get the inventory, so freight-in would be included
Generally, a lower gross profit ratio reflects positively on a company's ability to manage its inventory.
True or False
False.
A higher ratio is generally a stronger signal about the company's successful management of inventory.
Inventory records for Capetown, Inc revealed the following
Date Transaction # of Units Unit $
4.1 Beg. Inv 460 $2.31
4.20 Purchase 400 2.63
Capetown sold 610 units of inventory during the month. Ending inventory assuming FIFO would be
$658
Ending Inventory:total units-units sold = 860-610 = 250
250x2.63= $658
On January 1, Californian Specialty Foods purchased equipment for $29,000. Residual value at the end of an estimated four-year service life is expected to be $2,900. The machine operated for 3,000 hours in the first year, and the company expects the machine to operate for a total of 18,000 hours.
Calculate depreciation expense for the first year using Activity Based
Depreciation Expense
$29,000 - $2,900 / 18,000 hours = $1.45 per hour x 3,000 hours = $4,350
(asset cost - residual value) x total hours
= depreciation rate x yearly hours
We report a gain if we sell an asset for less than book value.
True or False?
False.
We report a gain if we sell an asset for more than book value.