Chapter 9 - Receivables
Is Allowance for Doubtful Accounts a liability account?
No
What is another name for Residual Value?
Scrap Value
Trade In Value
Salvage Value
On February 15th, State Bank issued a 90 day, 10%, $30,000 note to Toys Inc. What amount of cash did Toys Inc receive on February 15th?
$30,000
A 90 day, 10% note for $30,000 is received by a customer on account. What is the face value of the note?
$30,000
What type of account is Cash?
Asset
What is the type of account and what is the normal balance for "Allowance for Doubtful Accounts?"
Contra Asset; Credit
Cost - Residual Value = Depreciable Cost
A pension plan that promises employees a fixed annual pension benefit, based on years of service compensation is called a ...?
Defined Benefit Plan
A 90 day, 10% note for $30,000 is received by a customer on account. What is the maturity value of the note?
30,750
30,000 * 10% * 90/360 = 750 + 30,000 = 30,750
What type of account is Cost of Goods Sold?
Expense
What are the 2 methods of estimating uncollectible receivables using the allowance method?
Percent of Sales and
AR Aging method
Which of the following should not be included in the cost of an asset?
Sales Tax
Mistakes in Installation
Installation
Testing prior to production
Mistakes in Installation
On February 15th, State Bank issued a discounted 90 day, 10%, $30,000 note to Toys Inc. What amount of cash did Toys Inc receive on February 15th?
29,250
30,000 * 10% * 90/360 = 750 interest
30,000 - 750 = 29,250
What is the journal entry to record depreciation?
Debit Depreciation Expense
Credit Accumulated Depreciation
What is the normal balance of "Drawing?"
Debit
If Accounts Receivable is $400,000 and Allowance for Doubtful Accounts is $25,000, what is the Net Realizable Value for Accounts Receivable?
$375,000
Equipment with a cost of $100,000 and an estimated salvage value of $20,000, has an estimated useful life of 4 years. What is the amount of annual depreciation using the straight line method?
20,000
100%/4 years = 25%
100,000 - 20,000 = 80,000
80,000 * 25% = 20,000
What is required of a company that has a likely and estimable contingent liability?
Record the liability and disclose in the financial statements
What is the maturity value of a $100,000, 90 day, 15% note?
103,750
100,000 * .15 * 90/360 = 3,750
100,000 + 3,750 = 103,750
What type of account and what is the normal balance of Accumulated Depreciation?
Contra Asset, Credit Balance
What is the journal entry for the issuance of a $50,000 90 day, 10% note from a bank?
Debit Cash $50,000
Credit Notes Payable $50,000
What is the journal entry to estimate uncollectible receivables using the allowance method? (ie..what account do you debit and what account do you credit?)
Debit Bad Debt Expense
Credit Allowance for Doubtful Accounts
Equipment with a cost of $100,000 and an estimated salvage value of $20,000, has an estimated useful life of 4000 hours. The equipment is used 1,100 hours during the year. What is the amount of depreciation using the units of activity method?
$22,000
100,000 - 20,000 = 80,000
80,000/4,000 = $20/hr
1,100 * 20 = 22,000
What is the journal entry for the payment of a discounted note?
Debit Note Payable
Credit Cash
If a company sells machinery at a price equal to book value, what accounts would you debit and credit?
Debit Cash
Debit Accumulated Depreciation
Credit to Machinery
What is the normal balance of Fees Earned and what type of account is it?
Revenue, Credit Balance
Sales are $2,000,000 for the current year, AR balance at the end of the year is $45,000, AFDA has a credit balance of $1,000 and bad debt is estimated to be .1% of sales. What is the journal entry to estimate bad debt expense?
Debit bad debt expense 2,000
Credit Allowance for Doubtful Accounts 2,000
Equipment with a cost of $100,000 and an estimated salvage value of $20,000, has an estimated useful life of 4 years. What is the amount of depreciation in the first year using the double declining method?
100%/4 years = 25%/year
20% * x = 50%
50% * 100,000 (Book Value) = 50,000
Calculate the net pay:
John worked 41 hours during the week at $20/hour. Federal Income tax withheld was $40, Social Security rate is 6.0% and the Medicare rate is 1.5%
40 * 20 = $800
20 * 1.5 = $30 * 1 = $30
Gross wages = $830
830 * 6% = 49.80, 830 * 1.5% = $12.45
830 - 40 - 49.80 - 12.45 = $727.75
What amount of cash is received on a discounted $100,000, 180 day, 10% note?
100,000 - (180/360 * 10%) =
100,000 - 5,000 = 95,000
Balance Sheet
At the end of the current year, Accounts Receivable has a balance of $100,000, Allowance for Doubtful Accounts has a $500 credit balance and Sales for the year were $300,000. An Analysis of Receivables estimates the uncollectible amount to be $2000. What is the journal entry to account for the estimated uncollectible?
Debit Bad Debt Expense $1,500
Credit Allowance for Doubtful Accounts $1,500
(2,000 estimated - 500 AFDA balance = 1500)
Equipment with a cost of $100,000 and an estimated salvage value of $20,000, has an estimated useful life of 4 years. What is the amount of depreciation in the second year using the double declining method?
100%/4 years = 25%/year
20% * x = 50%
50% * 100,000 (Book Value) = 50,000 first year
50% * (100,000 - 50,000) = 25,000 second year
Calculate the credit to Salaries Payable for
Gross Payroll $50,000
Fed. Inc. Tax Withheld $5,000
Social Sec rate 6% Medicare rate 1.5%
Federal unemployment rate .8%
State unemployment rate 7%
50,000
-5,000
- 50,000 * 6% = -3,000
- 50,000 * 1.5% = -750
=$41,250
Calculate the gain or loss on the sale of a fixed asset with an initial cost of $300,000, accumulated depreciation of $250,000 that sold for $70,000
70,000 - (300,000 - 250,000) = 20,000 gain
On what financial statement does Accumulated Depreciation appear?
Balance Sheet