QUESTION
1.Journalize the following transactions using the allowance method of accounting for uncollectible receivables.
Apr. 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the merchandise is $5,400.
June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder.
Oct. 11 Reinstated the account of Jim Dobbs and received cash in full payment.
| Date | Debit | Credit | |
2 (10 points) At the end of the current year, Accounts Receivable has a balance of $700,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and sales for the year total $3,500,000. Bad debt expense is estimated at ½ of 1% of net sales.
(a) Journalize the adjusting entry for bad debt expense;
| Date | Debit | Credit | |
(b) Determine the adjusted balances of:
Accounts Receivable
Allowance for Doubtful Accounts
Bad Debt Expenses
Net Realizable value of accounts receivable.
- (5 points) Eagle Country Club has acquired a lot to construct a clubhouse. Eagle had the following costs related to the construction:
| Architects’ fees | $ 45,000 | |
| Construction labor | 80,000 | |
| Engineers’ fees | 15,000 | |
| Fences around building | 9,000 | |
| Grading and leveling | 10,000 | |
| Insurance costs incurred during construction | 7,000 | |
| Interest on money borrowed for construction | 5,000 | |
| Land | 73,000 | |
| Building materials | 237,000 | |
| Sales taxes | 6,000 | |
| Trees and shrubs | 6,000 |
Determine the cost of the club house to be reported on the balance sheet.
4 For each of the following fixed assets, determine the depreciation expense for 2013:
Disposal date is N/A if asset is still in use.
Method: SL = straight-line; DDB = double-declining-balance
Assume the estimated life is five years for each asset.
|
Item |
Cost |
Residual Value |
Purchase Date |
Disposal Date |
Depr. Method |
Depr.
Expense 2013 |
| A | $40,000 | $ 4,000 | July 1, 2013 | N/A | SL | |
| B | 50,000 | 5,000 | Jan. 1, 2010 | Aug. 31,2013 | SL | |
| C | 60,000 | 2,000 | Oct. 1, 2013 | N/A | DDB | |
| D | 80,000 | 10,000 | Jan. 1, 2012 | Apr. 1, 2013 | DDB |
- Computer equipment (office equipment) purchased 6½ years ago for $170,000, with an estimated life of eight years and a residual value of $10,000, is now sold for $60,000 cash. (Appropriate entries for depreciation had been made for the first six years of use.) Journalize the following entries:
| (a) | Record the depreciation for the one-half year prior to the sale, using the straight-line method. |
| (b) | Record the sale of the equipment. |
| (c) | Assuming that the equipment had been sold for $25,000 cash, prepare the entry to record the sale. |
| Date | Debit | Credit | |
6 Solare Company acquired mineral rights for $60,000,000. The diamond deposit is estimated at 6,000,000 tons. During the current year, 2,300,000 tons were mined and sold.
| (a) | Determine the depletion rate. |
| (b) | Determine the amount of depletion expense for the current year. |
| (c) | Journalize the adjusting entry to recognize the depletion expense. |
| Date | Debit | Credit | |
- On July 1, Sterns Co. acquired patent rights for $36,000. The patent has a useful life of six years and a legal life of 15 years. Journalize the adjusting entry on December 31 to recognize the amortization.
| Date | Debit | Credit | |
- On May 15, a business issued a 120-day, 6% note for $10,000 to a creditor on account. Journalize the entries to record (a) the issuance of the note and (b) the payment of the note at maturity (be sure to indicate the due date), including interest.
| Date | Debit | Credit | |
- An employee receives an hourly rate of $45, with time and a half for all hours worked in excess of 40 during the week. Payroll data for the current week are as follows: hours worked, 48; federal income tax withheld, $950; social security tax rate, 6.2%; Medicare tax rate, 1.45%; state unemployment compensation tax, 3.4% on the first $7,000; federal unemployment compensation tax, 0.6% on the first $7,000.
Journalize the necessary entries related to payroll:
(a) This is the first payroll of the year and the employee has no cumulative earnings for the year to date.
| Date | Debit | Credit | |
- Nelson Industries warrants its products for one year. The estimated product warranty is 4.3% of sales. Sales were $475,000 for September. In October, a customer received warranty repairs requiring $215 of parts and $65 of labor.
| (a) | Journalize the adjusting entry required at September 30, the end of the first month of the current year, to record the estimated product warranty expense. |
| (b) | Journalize the entry to record the warranty work provided in October. |
| Date | Debit | Credit | |
- Jesse and Tim form a partnership by combining the assets of their separate businesses. Jesse contributes accounts receivable with a face amount of $50,000 and equipment with a cost of $180,000 and accumulated depreciation of $100,000. The partners agree that the equipment is to be valued at $58,000, that $3,500 of the accounts receivable are completely worthless and are not to be accepted by the partnership, and that $2,000 is a reasonable allowance for the uncollectibility of the remaining accounts receivable. Tim contributes cash of $21,000 and merchandise inventory of $44,500. The partners agree that the merchandise inventory is to be valued at $48,000. Journalize the entries to record in the partnership accounts (a) Jesse’s investment and (b) Tim’s investment.
| Date | Debit | Credit | |
- Emmett and Sierra formed a partnership dividing income as follows:
- Annual salary allowance to Emmett of $48,000
- Interest of 8% on each partner’s capital balance on January 1
- Any remaining net income divided equally
Emmett and Sierra had $25,000 and $140,000, respectively, in their January 1 capital balances. Net income for the year was $200,000.
How much net income should be distributed to Emmett?
- S. Stephens and J. Perez are partners in Space Designs. Stephens and Perez share income equally. D. Fredericks will be admitted to the partnership. Prior to the admission, equipment was revalued downward by $8,000. The capital balances of each partner are $100,000 and $139,000, respectively, prior to the revaluation.Required
| (1) | Provide the journal entry for the asset revaluation. | |
| (2) | Provide the journal entry for Fredericks’ admission under the following independent situations: | |
| (a) | Fredericks purchased a 20% interest for $50,000. | |
| (b) | Fredericks purchased a 30% interest for $125,000. | |
| Date | Debit | Credit | |
- Immediately prior to the process of liquidation, partners Micco, Niccum, and Orwell have capital balances of $70,000, $20,000, and $30,000, respectively. There is a cash balance of $10,000, noncash assets total $160,000, and liabilities total $50,000. The partners share net income and losses in the ratio of 2:2:1.Journalize the entries to record the liquidation outlined below, using Assets as the account title for the noncash assets and Liabilities as the account title for all creditors’ claims.
| (a) | Sold the noncash assets for $80,000 in cash. |
| (b) | Divided the loss on realization. |
| (c) | Paid the liabilities. |
| (d) | Received cash from the partner with the deficiency. |
| (e) | Distributed the cash to the partners. |
| Date | Debit | Credit | |
ANSWER
1.
| Date | Debit | Credit | |
| Apr-01 | Accounts Recievable-Jim Dobbs | 7200 | |
| Revenue | 7200 | ||
| Cost of Goods sold | 5400 | ||
| Inventory | 5400 | ||
| Jun-10 | Cash | 2400 | |
| Bad Debts | 4800 | ||
| Accounts Recievable-Jim Dobbs | 7200 | ||
| Oct-11 | Accounts Recievable-Jim Dobbs | 4800 | |
| Bad Debts | 4800 | ||
| Cash | 4800 | ||
| Accounts Recievable-Jim Dobbs | 4800 | ||
2.
(a) Journalize the adjusting entry for bad debt expense;
| Date | Debit | Credit | |
| 31 dec | Bad debt Expense | 17500 | |
| Allowance for doubtful debts | 17500 |
(b) Determine the adjusted balances of:
Accounts Receivable 700000
Allowance for Doubtful Accounts 23000
Bad Debt Expense 17500
Net Realizable value of accounts receivable. 677000
| Architects’ fees | $ 45,000 | |
| Construction labor | 80,000 | |
| Engineers’ fees | 15,000 | |
| Fences around building | 9,000 | |
| Grading and leveling | 10,000 | |
| Insurance costs incurred during construction | 7,000 | |
| Interest on money borrowed for construction | 5,000 | |
| Land | 73,000 | |
| Building materials | 237,000 | |
| Sales taxes | 6,000 | |
| Trees and shrubs | 6,000 |
Determine the cost of the club house to be reported on the balance sheet.
| Architects’ fees | 45,000 |
| Construction labor | 80,000 |
| Engineers’ fees | 15,000 |
| Fences around building | 9,000 |
| Grading and leveling | 10,000 |
| Insurance costs incurred during construction | 7,000 |
| Interest on money borrowed for construction | 5,000 |
| Land | 73,000 |
| Building materials | 237,000 |
| Trees and shrubs | 6,000 |
| Cost of Club House | 2,50,000 |
4
| | | Residual Value | | | | Depr. |
| Item | Cost | Purchase Date | Disposal Date | Depr. Method | Expense 2013 | |
| A | 40,000 | 4,000 | July 1, 2013 | N/A | SL | 3600 |
| B | 50,000 | 5,000 | Jan. 1, 2010 | Aug. 31,2013 | SL | 6000 |
| C | 60,000 | 2,000 | Oct. 1, 2013 | N/A | DDB | 6000 |
| D | 80,000 | 10,000 | Jan. 1, 2012 | Apr. 1, 2013 | DDB | 4800 |
| (a) | Record the depreciation for the one-half year prior to the sale, using the straight-line method. |
| (b) | Record the sale of the equipment. |
| (c) | Assuming that the equipment had been sold for $25,000 cash, prepare the entry to record the sale. |
| Si.No | Date | Debit | Credit | |
| A | 1 year back | Depreciation | 20000 | |
| Accumulated depreciation | 20000 | |||
| Current | Depreciation | 10000 | ||
| Accumulated depreciation | 10000 | |||
| B | Cash | 60000 | ||
| Accumulated depreciation | 130000 | |||
| Computer Equipment | 170000 | |||
| Gain on Sale of computer | 20000 | |||
| c | Cash | 25000 | ||
| Accumulated depreciation | 130000 | |||
| Loss on Sale of computer | 15000 | |||
| Computer Equipment | 170000 | |||
6
| (a) | Determine the depletion rate. |
| (b) | Determine the amount of depletion expense for the current year. |
| (c) | Journalize the adjusting entry to recognize the depletion expense |
| Estimated deposites | 60,00,000.00 |
| Cost of Mineral rights | 6,00,00,000.00 |
| Depletion Rate per Tonne | 10.00 |
| Diamonds mined in current year | 23,00,000.00 |
| Depletion for current Year | 2,30,00,000.00 |
| Date | Debit | Credit | |
| 31-Dec | Depletion | 2,30,00,000.00 | |
| Accumulated Depletion-Mineral Rights | 2,30,00,000.00 |
| Date | Debit | Credit | |
| 31-dec | Amortization (36000*6/(12*15)) | 1200 | |
| Patents | 1200 |
| Date | Debit | Credit | |
| 15-May | Accounts payble | 10000 | |
| Note payable | 10000 | ||
| 12-Sep | Note payable | 10000 | |
| Interest on note | 200 | ||
| Cash | 10200 | ||
- Journalize the necessary entries related to payroll:
(a) This is the first payroll of the year and the employee has no cumulative earnings for the year to date.
| Date | Debit | Credit | |
| Salaries | 1980 | ||
| Cash | 878.53 | ||
| Federal Income tax Payble | 950 | ||
| social security tax | 122.76 | ||
| Medicare | 28.71 | ||
| (a) | Journalize the adjusting entry required at September 30, the end of the first month of the current year, to record the estimated product warranty expense. |
| (b) | Journalize the entry to record the warranty work provided in October. |
| Date | Debit | Credit | |
| 30-Sep | Warranty Expense | 20425 | |
| Allowance for warranty claims | 20425 | ||
| 31-Oct | Allowance for warranty claims | 280 | |
| Labor | 65 | ||
| Spares | 215 |
| Date | Debit | Credit | |
| A | Accounts Recievable | 46500 | |
| Equipment | 58000 | ||
| Allowance for doubtful debt | 2000 | ||
| Jesse’s Investment | 102500 | ||
| B | Cash | 21000 | |
| Inventory | 48000 | ||
| Tim’s Investment | 69000 | ||
- Annual salary allowance to Emmett of $48,000
- Interest of 8% on each partner’s capital balance on January 1
- Any remaining net income divided equally
Emmett and Sierra had $25,000 and $140,000, respectively, in their January 1 capital balances. Net income for the year was $200,000.
How much net income should be distributed to Emmett?
| Salary of emmett | 48000 |
| interest on capital of emmett | 2000 |
| Share of net income | 69400 |
| Total Income of Emmett | 119400 |
- evaluation.Required
| (1) | Provide the journal entry for the asset revaluation. | |
| (2) | Provide the journal entry for Fredericks’ admission under the following independent situations: | |
| (a) | Fredericks purchased a 20% interest for $50,000. | |
| (b) | Fredericks purchased a 30% interest for $125,000. | |
| Date | Debit | Credit | |
| 1 | Stephen’s Capital | 4000 | |
| Perez’capital | 4000 | ||
| Equipment | 8000 | ||
| 2 (A) | Perez’capital | 44500 | |
| Stephen’s Capital | 5500 | ||
| Fredricks Capital | 50000 | ||
| 2 (B) | Perez’capital | 82000 | |
| Stephen’s Capital | 43000 | ||
| Fredricks Capital | 125000 | ||
- Journalize the entries to record the liquidation outlined below, using Assets as the account title for the noncash assets and Liabilities as the account title for all creditors’ claims.
| (a) | Sold the noncash assets for $80,000 in cash. |
| (b) | Divided the loss on realization. |
| (c) | Paid the liabilities. |
| (d) | Received cash from the partner with the deficiency. |
| (e) | Distributed the cash to the partners. |
| Date | Debit | Credit | |
| A) | Cash | 80000 | |
| Loss on realization | 80000 | ||
| Non Cash Asset | 160000 | ||
| B | Micco | 32000 | |
| Niccum | 32000 | ||
| Orwell | 16000 | ||
| Loss on Realization | 80000 | ||
| C | Liabilities | 50000 | |
| Cash | 50000 | ||
| D | Cash | 12000 | |
| Niccum | 12000 | ||
| E | Micco | 16800 | |
| Niccum | 16800 | ||
| Orwell | 8400 | ||
| Cash | 42000 | ||
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