Accounting Final

AJE for reconciling interest received by bank

Cash Interest revenue

AJE for reconciling a collection of check/note

Cash Notes receivable

Record the entry for Techcom's $100 sale (through a credit card which takes a 4% fee) Omit the Cost side of the transaction

Cash 96 Credit Card Expense. 4 Sales 100

What is the cost of a plant asset?

Cost includes all expenditures necessary to get an asset in place and ready for use. An expenditure must be normal, reasonable, and necessary in preparing the plant asset for its intended use. Machinery and equipment cost may consist of purchase price plus taxes, transportation charges, insurance while in transit, and installing, assembling, and testing. Building cost may consist of purchase price, taxes, title fees, lawyer fees, repairs and renovations to ready it for use. If company is constructing it, then materials for construction, labor expenses, direct overhead cost such as heat & lighting & power, depreciation on machinery used during construction, and perhaps design fees, building permits, and insurance during construction. Any insurance once building is in use would NOT be included. Land's cost include price for land, real estate commissions, title insurance fees, legal fees, any accrued property taxes, and perhaps payments for surveying, clearing, grading, and draining, as well as government assessments (which don't get depreciated), and removal of any unwanted structures (less salvaged materials) on the land that were passed on from previous owner.

Unearned Revenue journal entry example: FastForward agreed on December 26, 2020 to provide consulting services for 60 days for a fixed fee of $3,000. On December 26, the client paid the 60-day fee in advance, covering the period December 27 to February 24. Record all entries

Dec. 26 Cash 3,000 Unearned consulting revenue 3,000 Dec. 31 Unearned consulting revenue 250 Consulting Revenue 250 Feb. 24 Unearned consulting revenue 2,750 Consulting revenue 2,750

When you depreciate a plant asset at period end, what does the journal entry look like?

Dec. 31 Depreciation expense Accumulated depreciation -- equipment or any plant asset (except for land)

FastForward had $2,000 worth of supplies on Dec. 1. During the month, they purchased $9,720 of supplies. When they compute their remaining unused supplies at December 31, they find that amount to be $8,670. Make the period-end adjusting entry for supplies.

Dec. 31 Supplies expense 3050 Supplies 3050

Seller choose to except credit card sales because it has many advantages, but the obvious downside for sellers is that...

they have to pay a fee to credit card companies (usually 1-5% of card sales)

How to calculate Adjusted Bank Balance

+ Deposits in transit - outstanding checks +- errors

To calculate the correct book balance, you add and subtract what to the Book's current Cash balance ?

+ collections (unrecorded cash receipts) & interest - uncollectibles - bank fees +- errors

List the Bank Balance Adjustments (Things the company has accounted for, but the bank hasn't)

- Deposits in transit (Company recorded the payment from customer, but the check has not cleared the bank yet) - Outstanding checks (Company sent out check and deducted it from cash balance, but the check hasn't been cleared yet at bank) - +- errors

List the Book Balance Adjustments (Info the bank has accounted for, but the company hasn't)

- UNRECORDED CASH RECEIPTS AND INTEREST: (sometimes customers will pay directly to the bank and company doesn't even know that the customer had paid. Additionally, the bank receives interest earned) - BANK FEES (Bank may charge various fees, sometimes for having to deal with NSF checks, or for writing new checks, or service fees) - NFS CHECKS (the company will not be aware of a check from a customer that bounces until they see the bank statement) - BOOK ERRORS

To summarize, gain or loss on a sale of plant asset is calculated by.... and loss on discarding plant asset occurs when....

1. Cash received < or > book value of asset 2. the asset hasn't been fully depreciated, or in other words, accumulated depreciation < cost of asset

steps in the closing process

1. Close out all revenue accounts by DEBITING them, CREDIT income summary account by same amount 2. Close out all expense accounts by CREDITING them, and then DEBITING income summary by same amount 3. Close out Income Summary account by debiting or crediting it depending on its balance, and then do the opposite to retained earnings, but with the same amount. 4. Subtract dividends from retained earnings/debit dividends to retained earnings.

What are the two ways of recording and writing off bad debts? Compare and contrast them.

1. The Direct Write-off Method NO ATTEMPT TO ESTIMATE BAD DEBTS EXPENSE IS MADE. The company writes off an account receivable when it is determined to be uncollectible. Let's say TechCom determines that on January 23, it cannot collect the $520 owed by its customer J. Kent. It record the loss as follows: Bad Debts Expense 520 Accounts Receivable-- J. Kent 520 What has it done here? It recorded the loss in revenue as an expense resulting from selling on credit, and it has erased the previously expected $520 receivable. 2. The allowance method ESTIMATES BAD DEBATE EXPENSE at the end of each accounting period and records it with an adjusting entry. It matches these estimated losses from uncollectible accounts receivable against the sales they helped produce (we estimate because we don't know which specific accounts/customers will be the ones to not pay). The benefits here are the following: 1) it records estimated bad debts expense in the period when the related sales are recorded (expense/matching principle), and 2) it reports acc receivable on the balance sheet at the estimated amount to be collected. The AJE at period-end to estimate the amount of credit sales to be lost (aka bad debt expense) is the following: Bad debt expense Allowance for doubtful accounts Allowance for doubtful accounts is a contra-asset account. It decreases Accounts receivable on the balance sheet. The way I like to understand this account: it is basically a control that prevents accounts receivable from being overstated. It factors the likelihood of bad debts into the asset's value. When a customer's account actually does become uncollectible later on, then their specific account is written off: Allowance for doubtful accounts Acc. Receivable--J.Kent Allowance for doubtful accounts decreases, because if we are now decreasing the specific account, then we would be kind of counting that bad debt twice if we kept AFDA the same. Here lies a MAJOR difference between the two methods: For a direct write-off, Equity decreases (bad debt expense), and assets decrease (decrease in acc receivable). When an account is written off through allowance method, nothing happens to the accounting equation. When the AJE for bad debt estimation was made in the prior period, this was when assets and equity decreased. This allowance write-off doesn't do anything: it is decreasing the contra-asset which increases assets, but the individual account being written off decreases assets by the same amount. This means realizable value of accounts receivable (calculated by accounts receivable - allowance for doubtful accounts) is the same before and after the write-off, under the allowance method. Not sure if net realizable value exists outside of when allowance method is being used.

Three Key, differentiating characteristics of PLANT ASSETS

1. They have useful lives extending over more than one accounting period 2. They are USED in operations. They are not inventory to be sold or anything else, they are investments that help facilitate operations. For example, equipment used to make products, or land that holds a factory, or a truck which is part of a fleet which transports the company's goods. 3. They are TANGIBLE

Nike's new sneaker machine has a cost of $10,000, an expected salvage value of $1,000, and a useful life of 5 years (annual accounting period). What is the depreciation expense to be recorded at the end of each accounting period? Also include journal entry

10,000 - 1,000 / 5 = 1,800 Dec. 31 Depreciation expense 1,800 Accumulated depreciation- machinery 1,800

Nike's new sneaker machine has a cost of $10,000, an expected salvage value of $1,000, and a useful life of 5 years (annual accounting period). What is its book value at the end of year 2? (STRAIGHT-LINE DEPRECIATION)

10,000 - 1,000 / 5 =1,800 annual depreciation expense 1,800 x 2 = 3,600 accumulated depreciation by end of year 2 10,000 - 3,600 = 6,400 book value

Nike's new sneaker machine has a cost of $10,000, an expected salvage value of $1,000, and a useful life of 5 years (annual accounting period). It is expected to pump out 36,000 shoes in its lifetime. First year it produced 7,000 shoes. Second year it produced 8,000 shoes. What is its book value at the end of year 2? (Units of Production Method)

10,000 - 1,000 = 9,000 9,000 / 36,000 = 0.25 0.25 x 7,000 = 1,750 Year 1 depreciation expense 0.25 x 8,000 = 2,000 year 2 depreciation expense, and accumulated depreciation of 3,750 book value is cost - accumulated depreciation, so 10,000 - 3,750 = $6,250 book value after year 2

Nike's new sneaker machine has a cost of $10,000, an expected salvage value of $1,000, and a useful life of 5 years (annual accounting period). What is its book value after year 2?

100/5 = 20%, x2 = 40% 10,000 x .4 = 4,000 depreciation expense for year 1 10,000 - 4,000 =6,000 book value after year 1 6,000 x .4 = 2,400 depreciation expense for year 2 6000 - 2400 = $3,600 book value after year 2

Bank Reconciliation

A report that accounts for the differences between the bank statement and a checkbook balance. Company must make AJEs to update their books.

Closing process

A step in the accounting cycle that occurs at the end of the period. The closing process consists of journalizing and posting the closing entries to set the balances of the revenues, expenses, Income Summary, and Dividends accounts to zero for the next period.

Which of the following are temporary accounts? A. Income summary B. Retained Earnings C. Dividends D. Revenues E. Rent Expense F. Accounts receivable G. Debt H. Cost of Goods Sold I. Equity J. Taxes K. Intertest L. Depreciation

A, C, D, E, H, J, K, L

What are accrued expenses?

AKA accrued liabilities. Costs that are incurred in a period that are both UNPAID and UNRECORDED. They are reported on the income statement for the period when incurred via AJEs. Common examples are salaries, interest, and taxes. You debit expense, and credit some kind of payable.

If income statement, statement of retained earnings, and statement of cash flows report financial performance OVER A PERIOD OF TIME, then the balance sheet reports an organization's financial position...

AT A POINT IN TIME

AJE for reconciling NSF check

Accounts receivable-- T. Woods Cash

Entry for recovering a bad debt after using DIRECT WRITE-OFF METHOD

Accounts receivable--J. Kent Bad debt expense Cash Accounts receivable--J. Kent

Accrual basis accounting vs cash basis accounting

Accrual basis: records revenue when's services and products are delivered and records expenses when incurred (revenue recognition and matching/expense recognition principles) Cash basis: records revenues when cash is received and records expenses when cash is paid. Cash basis income is cash receipts minus cash payments.

On December 1, 2020, a company received a loan from a bank for $6,000, with 5% annual interest. The company pays the bank back on Dec. 1, 2021. What entry is made at the end of 2020? Bonus: What is the entry for Dec. 1, 2021?

Accrued interest expense AJE. 6000 x 0.05 x 1/12 = 25 Dec. 31 Interest Expense 25 Interest payable 25 Dec. 31, 2021 Interest payable 25 Interest Expense 275 Cash 300

In the second week of December, FastForward agreed to provide 30 days of consulting services to a fitness club for a fixed fee of $2,700. FastForward will, provide services from December 12 through January 10. The club agrees to pay FastForward $2,700 on January 10 when the service is complete. What journal entry must be made at period-end? Bonus: What will entry for receipt of payment from fitness club be?

Accrued revenue AJE (2,700/30, x 20) Dec. 31 Accounts receivable 1,800 Consulting revenue 1,800 Bonus: Jan. 10 Cash 2,700 Consulting revenue 900 Accounts receivable 1,800

FastForward's employee earns $70 per day, or $350 for a five-day workweek beginning on Monday and ending on Friday. Its employee is paid every two weeks on Friday. On December 12 and 26, the wages are paid, recorded in the journal, and posted to the ledger. There's an adjusting entry that needs to be made at year-end.............. Bonus: what is the account balance for salaries expense at year-end

Accrued wage expenses (3 x 70) Dec. 31 Salaries Expense 210 Salaries Payable 210 (350x2)+(350x2)+210= 1610

Is a trial balance a financial statement?

No, it is just a tool for making sure all debits equal all credits

What is unearned revenue

Also called deferred revenues. These are LIABILITIES, because you received cash but haven't supplied the corresponding service yet. You are LIABLE to provide that service. The accounting for this is similar to prepaid expenses. The Unearned revenue account is established upon receipt of cash, and over time this account decreases, snd similar to how prepaid expenses turn into expenses, unearned revenue turns into revenue.

The Accounting Equation

Assets = Liabilities + Equity Assets= Liabilities + Paid-in capital + retained earnings Assets= Liabilities + common stock + paid-in capital in excess of par - treasury stock +retained earnings Assets= liabilities + common stock + paid in capital in excess - treasury stock + revenues - expenses - dividends

Do you make AJEs for Bank Balance Adjustments or Book Balance Adjustments?

Book Balance Adjustments. The company makes journal entries to update their own missing info, not what the bank missed. That's the bank's problem to fix.

calendar year vs natural business year, and what kind of companies use each

Calendar year, self explanatory; used by companies that have little seasonal variations in sales (ex. Netflix). Natural business year: ends during the time of year when sales are usually at their lowest. Used by companies that have seasonal variations in sales. Very popular with retailers. Retailers like Target and Nordstrom end their natural business year around end of January, after the holidays.

How to calculate depreciation expense for a plant asset using double-declining balance method

Divide 100% by # of accounting periods in useful life, multiply this by 2. Then multiply this rate by the plant asset's book value at the beginning of each period

My guide on "Expenses"

Expenses are the costs of a service a company hires, costs associated with selling a product, costs associated with running a business, and losses on sales of certain things. Under the accrual basis of accounting, you must record an expense in the same period that you record any associated revenue. Expenses decrease equity, and appear on the income statement. Some expenses are non-cash, like depreciation and amortization. Expenses can be broken down into 3 groups: COGS, Operating expenses and non-operating expenses. COGS is the cost of buying the goods, shipping them to the store (if FOB), and making them ready for sale. Operating expenses are the costs incurred to sustain the daily operations of the organization, and can be can be broken into 2 groups: Selling expenses, & General and Administrative expenses. Selling expenses are the costs of actually selling the goods. Examples include salesperson salaries and wages, payroll taxes, store rent, advertising, store equipment depreciation, store supplies expense, warranty expense, bad debt expense General and Administrative expenses are the costs of supporting a company's essential behind the scenes outside of actually preparing and selling the products, like corporate expenses. These include things like office expenses (office equipment depreciation, office rent, etc.), insurance expense, etc. Non-operating costs are those non associated with actually running the business. These often include interest expense, loss on disposal of an asset, loss from a lawsuit. These appear under "Other revenues and gains" on the multi-step income statement.

Consider equipment costing $8,000 with accumulated depreciation of $6,000 on December 31 of 2019. This equipment is being depreciated by $1,000 per year using the straight-line method over eight years with zero salvage. On July 1 of 2020, it is discarded. Journalize this disposal.

First, account for accrued depreciation July 1 Depreciation expense 500 Accumulated depreciation--equipment 500 July 1 Accumulated depreciation--equipment 6,500 Loss on disposal of equipment 1,500 Equipment 8,000

Do we depreciate all plant assets?

No, we don't depreciate land

Journal entries for the three possible scenarios when a plant asset is sold (below book value, at book value, and above book value). Assume the plant asset is equipment

Guide to doing this: BEFORE THIS, you must do an AJE for any accrued depreciation up until point of sale. Then you can create the journal of the sale. First debit however much cash received. The next step is to completely rid the asset from record. You gotta credit the cost out of existence, and also debit any accumulated depreciation on the records out of existence. If the sale was done at book-value, you're done. If the cash received > the book value, then you should record this difference as a debit to gain on disposal of equipment. If cash was < than book value, record the difference as a credit to loss on disposal of equipment. 1. Below... Cash 2,500 Accumulated depreciation-- equipment 13,000 Loss on disposal of equipment 500 Equipment 16,000 2. At book-value Cash 13,000 Accumulated depreciation--equipment 3,000 Equipment 16,000 3. Above... Cash 7,000 Accumulated depreciation--equipment 13,000 Gain on disposal of equipment 4,000 Equipment 16,000

A company's prepaid insurance account has a $5,000 debit balance to start the year, and no insurance payments were made during the year. A review of insurance policies shows that $1,000 of unexpired insurance remains at its December 31 year-end. Make appropriate adjusting entry to realize the insurance expense for the year.

Insurance expense 4,000 Prepaid insurance 4,000

Impairment of intangible assets

Intangible assets that do not have definite, limited lives, are tested annually for impairment. Most notably, remember that GOODWILL is tested for impairment. Measures the extent to which the book value of an intangible asset is greater than the fair value. Examples are trademarks, goodwill,

What happens to a plant assets book value over time?

It decreases. This should make a lot of sense --> it becomes less valuable thru various means, such as wear-and-tear, becoming obsolete, or becoming inadequate.

What does "depreciation" of a plant asset actually mean?

It represents the expense of using the asset, since using the asset causes wear and tear. Why is this expense allocated to various accounting periods over time? We can't just expense it all at once. This would overstate that period's expenses and understate the other periods while the plant asset is in use. Since multiple periods get use out of the plant asset and contribute to wear and tear, we allocate the responsibility across these periods. It better reflects the standing of the business and its operations. What exactly is getting expensed? The cost of the planet asset (which includes buying it, and getting it in place and ready to use).

Types of plant assets listed in the book

Land, equipment & machinery, buildings, and land improvements.

AJE for reconciling bank printing charge

Miscellaneous expense Cash

What is the entry for paying off accrued expenses?

Payable account Expense account (since more expenses accrued since the AJE) Cash

List of accounts that require period-end adjusting entries

Prepaid Accounts Unearned accounts Inventory updates Depreciation of plant assets accrued expenses/accrued liabilities accrued revenues (also called accrued assets) Inventory shrinkage Bank reconciliation Bad debt expense through Allowance method Estimated liabilities (employee benefits, warranties,

Prepaid expenses example: You pay for your insurance 12 months in advance ($1,200). Record the payment and adjusted expense entries for end of every month.

Prepaid Insurance Cash Insurance expense 100 Prepaid insurance 100 (x12)

Journal entries for the two possible scenarios when a plant asset is discarded: asset was discarded after being fully used/depreciated, and when asset was discarded without being fully used/depreciated

Remember to always get depreciation up top date. If asset was fully used, then that isn't applicable. 1. Fully used depreciated... Accumulated depreciation Equipment Basically you erase the asset and all its depreciation off the records 2. Not fully used/depreciated Accumulated depreciation Loss on disposal of equipment Equipment

Let's say a company pays $500 for its rent a month in advance. It pays on the first day of the month. What is the entry for this?

Rent expense Cash You may have thought this would be... Prepaid rent cash but it's not. Since the prepaid expense was fully used up in that period, we don't make the adjusting entry, and record the expense right away.

______________ reflect prior periods' revenues, expenses, and dividends.

Retained Earnings

Revenue expenditures vs Capital expenditures

Revenue expenditures=income statement expenditures. These are costs incurred to maintain a plant asset, but do not materially increase the plant asset's life or capabilities. An example is ORDINARY REPAIRS. These appear as expenses on the income statement. The entry is a debit to expense and a credit to cash (or acc payable I guess). Capital expenditures=balance sheet expenditures. These actually provide benefits for longer than the current period, and increase productivity or longevity. These are not recorded as expenses, instead they increase the whichever plant asset account, on the balance sheet, via being added to the total cost. Therefore, it ends up getting expensed through the depreciation of the plant asset each period-end.

Income Summary has a debit balance this means... If Income summary has a credit balance, this means...

Revenues exceeded expenses, and there was net income Revenues were less than expenses, and there was a net loss

List of every contra-revenue account

Sales Discount Sales Returns and allowances

How does recovering a bad debt under the write-off method AFFECT THE ACCOUNTING EQUATION

Since a direct write-off decreases equity and assets, recovering the bad debt would increase equity and assets. We also record receipt of cash, but this part has no effect because it is basically just rearranging assets: increases in cash, decrease in accounts receivable

What are the two ways that an asset can be disposed of?

Sold or discarded

Prepaid expenses

Something paid for in advance of actually receiving/using the product or service. This is an ASSET. As they are used up, they transfer from ASSETS to EXPENSES. The prepaid account decreases over time as the expense gets recognized.

What does "recovering a bad debt" mean?

Sometimes an account that was written off ends up eventually paying. We have to basically make an entry that reverses the write-off, and then record another entry in which we record the receipt of cash.

What do we call the difference between beginning supplies amount and supply amount at period end?

Supplies expense

What is the adjusting journal entry for supplies at period-end

Supplies expense Supplies "Record supplies used"

TRUE OR FALSE? Revenue, expense, and dividend accounts must begin each period with ZERO balances.

TRUE

Unadjusted trial balance vs adjusted trial balance

The adjusted trial balance is created after all adjusting entries have been made, such as accrued interest expense.

If a credit to unearned revenue was incorrectly posted to the revenue ledger account, would the ledger still balance? What is the effect on the accounting equation?

Yes, it would still balance. Equity would be overstated, and liabilities would be understated.

Compute the recorded cost of a new machine given the following payments related to its purchase: gross purchase price, $700,000; sales tax, $49,000; purchase discount taken, $21,000; freight cost- terms FOB shipping point, $3,500; normal assembly costs, $3,000; cost of necessary machine platform, $2,500; and cost of parts used in maintaining machine, $4,200.

The cost of the machine is $737,000

How much do the amounts depreciated differ between the three depreciation methods for plant assets (straight-line, ddb, units of production)

They all end up with the same total amount depreciated, it's just that individual periods will vary.

What are accrued revenues?

They revenues earned in a period that are both UNRECORDED and NOT YET RECEIVED IN CASH. They must be reported in period when incurred, via AJE. An example is an electrician who bills customers after the job is done. If one-third of a job is complete by the end of a period, then the technician must record one-third of the expected billing as revenue in that period -- even though there is no billing or collection. Also called "accrued assets." Debit receivable, and credit revenue, like so: Acc receivable Type of revenue

What is goodwill?

This is only added to a company's balance sheet when they acquire another company. It is the amount a company paid, over what the acquired company was really worth on paper (parent company accounting for the intangibles of a business's worth, such as intellectual property, brand recognition, skilled labor, and customer loyalty.

What exactly is "book value" of a plant asset, and where is it recorded?

This value reflects how much use the asset has been through and what its remaining productivity is. Amortization and any impairment are also subtracted and accounted for in this, if applicable. This value does not reflect market value or physical deterioration. This value = the value for the asset stated on the balance sheet. It is usually stated with either "Less: accumulated depreciation" below, or something like this: "Machinery (net of $3,600 accumulated depreciation) $6,400"

Two reasons for why a bank statement and a company's book will most likely differ at period end

Timing differences, and errors.

A sneaker machine cost $10,000, and has a salvage value of $1,000. and a useful life of 5 years (STRAIGHT-LINE METHOD). In its 3rd year, the estimate # of years remaining in its useful life changes from 3 to 4 years AND its salvage value changes from $1,000 to $400. Record all of its depreciation expense entries.

Year 1 and 2: Depreciation expense 1,800 Accum Dep 1,800 x2 Accum dep: 3,600. Book Value: 6,400 Suddenly it has 4 yrs left, and salvage value of $400, so, 6,400-400 / 4 = 1,500 Year 3, 4, 5, and 6: Depreciation expense 1,500 Accum Depr. 1,500 x4 Accum dep: 6,400 Book value: 0

Can we prepare financial statements directly from the adjusted trial balance? What about the unadjusted trial balance?

Yes for adjusted no for unadjusted

The company charges $100 per month to spray a house for insects. A customer paid $600 on November 1 in advance for six treatments, which was recorded with a debit to Cash and a credit to Unearned Services Revenue. At year-end, the company has applied two treatments to the customer. Record journal entry for year end, and state what the balance in prepaid service revenue account is at year-end.

Unearned Service Revenue 200 Service Revenue 200 The unearned service revenue balance is 400

What must we do with supply account at period-end?

We have to physically count supplies to make sure that the account balance matches the physical balance. If it doesn't, then we must make an adjusting entry to update the account balance for supplies.

What happens when the estimates of a plant asset's useful life and/or salvage value change

We must use the new estimate(s) to compute depreciation for current and future periods. Revising an estimate of the useful life or salvage value ONLY AFFECTS CURRENT AND FUTURE FINANCIAL STATEMENTS. We do not go back and revise prior years' statements. To calculate depreciable cost, take latest book value, not cost, and then subtract revised salvage value, and then divide by revised remaining years.

What are "bad debts" ?

When a company directly grants credit to customers (vs through credit card companies), it expects some customers will not pay what they promised. The accounts of tases customers are uncollectible accounts, or bad debts.

Suppose you do not purchase a plant asset at the start or end of an accounting period. For example, Popeyes buys a new industrial stove for $10,000 on Nov. 1 2021, and they use a calendar year for their accounting periods. What journal entry must you make at year end, assuming $2,000 salvage value and 4 year expected useful life? (STRAIGHT-LINE)

You must make an AJE to account for the accrued depreciation over the ending 2 months of the period. 10,000 - 2,000 = 8,000 depreciable cost, then over 4 years.... 8,000 / 4 = 2,000 yearly depreciable expense 2 months is 2/12 or 1/6 of a year, so 2,000 x 1/6 = 333.33 depreciation expense for 2021. Dec. 31 Depreciation expense 333.333 Accumulated depreciation 333.333 As you see, this depreciation journal entry is no different, the tricky part is not forgetting to account for accrued depreciation at year-end.

Amortization of intangible assets

You only amortize tangible assets with DEFINITE LIVES.This means their life is limited and must be amortized over time. Use straight-line (cost - salvage value / # periods in life). This ends up requiring the use of contra-asset account "Accumulated amortization." Entry is: Amortization expense Accumulated amortization -- xxxx Examples of limited life intangibles are patents, copyright, possibly franchises and licenses,

A company owns a machine that costs $500 and has accumulated depreciation of $400. Prepare the entry to record the disposal of the machine on January 2 in each separate situation: a. The company disposed of the machine, receiving nothing in return b. The company sold the machine for $80 cash c. The company sold the machine for $100 cash d. The company sold the machine for $110 cash

a. Accumulated depreciation--Machinery 400 Loss on disposal of machinery 100 Machinery 500 b. Cash 80 Accumulated depreciation--machinery 400 Loss on disposal of machinery 20 Machinery 500 c. Cash 100 Accumulated depreciation--machinery 400 Machinery 500 d. Cash 110 Accumulated depreciation--machinery 400 Gain on disposal of machinery 10 Machinery 500

List of every contra-asset account we learned

accumulated depreciation -- name of plant asset

The adjusted bank balance and the adjusted book balance must ______

agree

The following information is available to reconcile Gucci's book balance of cash with its bank statement cash balance as of December 31. a. The December 31 cash balance according to the accounting records is $1,610, and the bank statement cash balance for that date is $1,900 b. Gucci's December 31 daily cash receipts of $800 were placed in the bank's night depository on December 31 but do not appear on the December 31 bank statement c. Gucci's comparison of canceled checks with its books shows three checks outstanding: No. 6242 for $200, No. 6273 for $400, and No. 6282 for $100. d. When the December checks are compared with entries in the accounting records, it is found that Check No. 6267 had been correctly drawn (taken from the bank) for $340 to pay for office supplies but was erroneously entered in the accounting records as $430. e. The bank statement shows the bank collected a note receivable and increased Gucci's account for $470. Gucci had not recorded this transaction before receiving the statement. f. The bank statement included an NSF check for $150 received from Prada Inc. in payment of its account. It also included a $20 charge for check printing. Gucci had not recorded these transactions before receiving the statement. Reconcile, and make sure to provide the necessary AJEs

b. add 800 to bank balance c. subtract 700 from bank balance d. add $90 back to book cash balance: Cash Office supplies "Correct an entry error" e. Add 470 to book cash balance Cash Notes receivable f. Subtract 150 from book cash balance Notes receivable Cash Subtract 20 from book cash balance Miscellaneous expense Cash Both balances should be $2,000 after this

An adjusting entry was made in which Unearned Services Revenue was debited for $4,000. However, this journal entry was posted to the Unearned Services Revenue account as a debit and to the Office Supplies expense account as a debit. As a consequence of this error, the: a. trial balance will have a credit balance $8,000 greater than the debit balance b. trial balance will have equal totals of debit and credit balances c. trial balance will have a debit balance of $8,000 greater than the credit balance d. net income will be overstated $4,000

c. trial balance will have a debit balance of $8,000 greater than the credit balance

How do you calculate a plant asset's book value?

cost - accumulated depreciation (or amortization, or impairment if applicable

How to depreciate a plant asset using STRAIGHT-LINE METHOD

cost - salvage value / # of accounting periods in assets useful life.

How to depreciate a plant asset using the units of production method

cost - salvage value / total units produced then multiply that by the # of produced items in the specific period to find the depreciation expense of the period

When using double-declining balance method, depreciation expense is _____________ in earlier periods of assets life, and then becomes __________ towards the end of the plant asset's useful life.

greater Less and less

What are the three methods you can use to depreciate a plant asset?

straight-line method, double-declining method, and units of production method