Plant Assets and Depreciation
Which of the following costs are included in the cost of land:
-Legal Fees
-Surveying Fees
-Sidewalks
-Property Taxes
-Sidewalk Lights
What are legal fees, surveying fees, and property taxes?
The allocation of the cost of an intangible asset to expense over its estimated useful life.
What is amortization?
Employee vacation benefits are this type of liability.
What is estimated?
This is the method of estimating bad debts expense using outstanding accounts and the length of time over due.
What is the Aging of Accounts Receivable method?
Notes receivable are due and payment must be received in full on this date.
What is the maturity date?
On January 1, a food manufacturer installed equipment costing $180,000 with a useful life of 4 years and an estimated salvage value of $20,000. This is the amount of depreciation expense in year 3 using the Straight Line method.
What is $40,000?
(Cost – Salvage Value)/Useful Life
($180,000-$20,000)/4=$40,000
True or false:
Company vehicles and bank accounts are examples of intangible assets.
What is false?
These are other assets (plant assets and current assets)
Both employers and employees have to pay their share of these two taxes.
What are FICA Social Security taxes and FICA Medicare taxes?
Green Valley Landscaping provides residential landscaping services. Below are the details from their financial records for the year ending December 31:
This is the company's Accounts Receivable Turnover. (rounded to 1 decimal place)
What is 8.9?
Accounts Receivable Turnover = Net Sales/Average Accounts Receivable
Average Accounts Receivable = ($62,000+$68,000)/2 = $65,000
Accounts Receivable Turnover = $580,000/$65,000 = 8.9
These are assets that increase the usefulness of land, but unlike land, they have a limited useful life and are subject to depreciation.
What are land improvements?
Synergy Company owns equipment that cost $50,000 and has accumulated depreciation of $40,000. This is the journal entry to record the disposal of the equipment on January 1 if they sold the equipment for $12,000. There was no salvage value.
What is debit Cash $12,000, debit Accumulated Depreciation $40,000, credit Gain on Disposal of Equipment $2,000, and credit Equipment $50,000?
Cost – Accumulated Depreciation = Book Value
$50,000 - $40,000 = $10,000
Sale Price -Book Value = gain/(loss)
$12,000-$10,000 = $2,000 gain
On 6/30, Florez Company sells machinery that they originally purchased for $100,000. Depreciation was last recorded on 12/31 of the prior year. Accumulated depreciation to date is $80,000. Using the straight-line method, they depreciate the machinery at $20,000 per year. This is the journal entry to update depreciation as of the sales date.
What is
Debit Depreciation Expense - Machinery $10,000
Credit Accumulated Depreciation - Machinery $10,000
?
$20,000 x 6/12 = $10,000
On December 1, Sylvester Company requested a 90-day, $8,000, 6% note from their supplier Office Supply Inc. for a time extension on their past-due accounts payable. This is the year-end adjusting journal entry for interest accrued on the note.
What is
debit Interest Expense $40
credit Interest Payable $40
?
$8,000 x 6% x 30/360 = $40
Collins & Sons Company uses the percent of accounts receivable method. This is their December 31 year-end adjusting entry based on the following information: Outstanding accounts receivable is $125,000, the company estimates that 3% will be uncollectible, and the Allowance for Doubtful Accounts has a $3,000 credit balance before the adjustment.
What is debit bad debts expense $750 and credit allowance for doubtful accounts $750?
Estimated balance: $125,000 x 3% = $3,750
Estimated Balance – Unadjusted Balance = $3,750-$3,000=$750
Failure by a customer to pay a note receivable is called this.
What is dishonoring a note?
On January 1, a food manufacturer installed equipment costing $180,000 with a useful life of 4 years and an estimated salvage value of $20,000. This is the amount of depreciation in year 2 using the Double Declining Balance method.
What is $45,000?
Calculate Straight-Line Rate: 100%/Useful life = 100%/4 years = 25%
Double the Straight-Line Rate: 25% x 2 = 50%
Year 1: Beginning Book Value x DDB Rate = $180,000 x 50% = $90,000 depreciation expense
Accumulated depreciation $90,000
Ending Book Value: Cost – Accumulated Depreciation = $180,000-$90,000=$90,000
On 6/30, Florez Company sells machinery for $18,000. The machinery was originally purchased for $100,000 and accumulated depreciation as of the sale date is $90,000. This is the journal entry to record the disposal (sale) of the machinery.
What is
Debit Cash $18,000
Debit Accumulated Depreciation $90,000
Credit Gain on Sale of Machinery $8,000
Credit Machinery $100,000
?
Cost $100,000 - $90,000 accum. depr. = $10,000 book value
$18,000 selling price - $10,000 book value = $8,000 gain
A company with 20 employees who have earned $10,000 of sales salaries ends their first pay period on January 7th. Withholdings from the employees’ salaries include FICA Social Security taxes at the rate of 6.2%, FICA Medicare taxes at the rate of 1.45%, $1,200 of federal income taxes, $250 of medical insurance deductions, and $70 of union dues. No employee earned more than $7,000 in this first period. This is the journal entry when they record the salaries expense and liabilities.
What is
debit Salaries Expense $10,000
credit FICA - Social Security Taxes Payable $620
credit FICA- Medicare Taxes Payable $145
credit Employee Federal Income Taxes Payable $1,200
credit Employee Medical Insurance Payable $250
credit Employee Union Dues Payable $70
credit Salaries Payable $7,715
?
Collins & Sons Company uses the percent of accounts receivable method. This is their December 31 year-end adjusting entry based on the following information: Outstanding accounts receivable is $125,000, the company estimates that 3% will be uncollectible, and the Allowance for Doubtful Accounts has a $2,000 debit balance before the adjustment.
What is debit bad debts expense $5,750 and credit allowance for doubtful accounts $5,750?
Estimated balance: $125,000 x 3% = $3,750
Estimated Balance – Unadjusted Balance = $3,750 - -$2,000=$5,750 *remember, if it’s a debit balance, subtract a negative (add)
Rose Florists has a 30 year mortgage on their store building with monthly payments of $1,200. This is the amount of mortgage payable listed as current liabilities on the balance sheet as of December 31st.
What is $14,400?
Current year amount only = $1,200 per month x 12 months
On January 1, a food manufacturer installed equipment costing $180,000 with a useful life of 4 years and an estimated salvage value of $20,000. The manufacturer estimates the equipment will be able to produce 400,000 product units during its useful life. It actually produces the following units: 102,000 in year 1, 94,000 in year 2, 98,000 in year 3, and 110,000 in year 4. This is the depreciation in year 1 using the Units of Production Method.
What is 40,800?
Cost - Salvage Value = Depreciable Cost:
$180,000-$20,000 = $160,000
Depreciable Cost/Estimated # of total units = Depreciation Expense per Unit:
$160,000/400,000 units = $0.40 per unit
Depreciation Expense for Year 1:
102,000 units produced x $0.40 per unit = $40,800
A company purchased a mineral deposit with an estimated 100,000 tons of available ore for $150,000 and expects zero salvage value. At the end of year 1, 50,000 tons are mined and 40,000 tons are sold. A total of 10,000 tons remain unsold. This is the journal entry recording depletion in year 1.
What is:
Debit Depletion Expense - Mineral Deposit $60,000
Debit Ore Inventory $15,000
Credit Accumulated Depletion - Mineral Deposit $75,000
?
$150,000/100,000 tons = $1.50 per ton
Mined: 50,000 x $1.50 = $75,000
Sold: 40,000 x $1.50 = $60,000
Unsold: 10,000 x $1.50 = $15,000
A company has 5 employees, each of whom earns $2,000 per month and have been employed since January 1st. On February 28th, must record the February payroll taxes expense. FICA Social Security taxes are 6.2% of the first $137,700 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. FUTA taxes are 0.6% and SUTA taxes are 5.4% of the first $7,000 paid to each employee. This is the journal entry.
What is
?
This is the adjusting entry if the company uses the aging of receivables method: 10% of balances 31-60 days overdue, 8% of balances 1-30 days, and 4% of current balances. Customer A has a balance of $700 that's 50 days overdue, Customer B has a balance of $300 that's 15 days overdue, and Customer C has a balance of $500 that's not yet due. The current balance in the allowance for doubtful accounts is a $100 credit.
What is:
Debit Bad Debts Expense $14
Credit Allowance for Doubtful Accounts $14
?
$700 x 10% = $70
$300 x 8% = $24
$500 x 4% = $20
$70+$24+$20 = $114
$114 - $100 credit balance = $14
Smart Computer Supply store sold a laptop for $2,400 to a customer. The state has a 5% sales tax. This is the journal entry to record the sale.
What is
Debit Cash $2,520
Credit Sales Taxes Payable $120
Credit Sales $2,400
?
Sales Tax: $2,400 x 5% = $120