Ch7-9 ACCT 211
Sheldon has a $15,000 liability for a machine that has an interest rate of 10%. The interest expense for one year is?
$1,500
Tops Co. purchases equipment for $12,000 and has been using straight-line depreciation, estimating a 5-year life and $500 salvage value. At the beginning of the third year, Tops decides to use the equipment for a total of 6-years with no salvage value. Compute the revised depreciation for the third year.
$1,850 Reason: (12,000-500)/5=2,300 per year. $2,300 x 2 years = $4,600 depreciation taken. Book value at beginning of year 3 = $12,000-4,600= $7,400/4 = $1,850.
Ion Co. purchased land for $190,000. Ion also paid $5,000 in real estate commissions, $1,000 in legal fees, and $500 in title insurance fees. Ion should record the cost of this land at:
$196,500
Daley Co. owns a mineral deposit with an estimated 600,000 tons of available ore. It was purchased for $300,000 and has no salvage value. During the current period, Daley mined and sold 40,000 tons of ore. Depletion expense for the period will be how much?
$20,000 Reason: $300,000/600,000 x 40,000=20,000
Winn Co. signs a 60 day note payable for a $15,000 copy machine with an interest rate of 8%. Winn will record total interest expense of
$200 Reason: $15,000 x .08 x (60/360) = $200.
Wen Co. purchased a building for $200,000. Wen paid $20,000 in lawyer and title fees. Wen also paid an additional $15,000 to modify the building in order to accommodate his business needs. Wen should record the cost of the building at:
$235,000
Alin Co. purchases a building for $300,000 and pays an additional $30,000 for title fees and lawyer fees. Alin also pays $20,000 in renovations, including painting, carpet, lighting, etc. Alin should record the cost of the building at:
$350,000
A company acquires a patent for $20,000 to manufacture and sell an item. The company intends to hold the patent for 5 years. Amortization for the first year will be recorded with a debit to Amortization Expense for
$4000
Geo Co. purchased a building for $400,000. In addition, Geo paid $35,000 for taxes and lawyer fees. Geo also paid $60,000 to modify the building, changing the layout specifically for Geo's needs. Geo should record the building at
$495000
Straight-line depreciation can be calculated by taking:
(cost minus salvage value)/useful life
Which of the following items are plant assets?
-Equipment being used in operations -Building being used for operations
Which of the following items are considered employee benefits?
-Medical insurance -Pension plans
The cost at which a company records purchases of machinery and equipment should include which of the following?
-Purchase price -Taxes -Installation -Shipping fees
Employee income tax depends on:
-number of employee withholding allowances -employee's income
Jorge Lopez worked 40 hours this week and earned $1,000 in total compensation. Federal and state taxes and other withholdings totaled $350. Jorge's gross pay totals $
1000
Which of the following situations will result in recognizing a gain on sale of a plant asset?
A fully depreciated asset is sold for $1,000.
_________ are expenditures that make a plant asset more efficient or productive, but do not always increase an asset's useful life.
Betterments
______ is the process of allocating the cost of a plant asset to expense while it is in use.
Depreciation
________ is the process of allocating the cost of a plant asset to expense while it is in use.
Depreciation
Unemployment taxes are examples of (employee/employer) taxes.
Employer
Simar Sales Co. sells and installs kitchen appliances. Simar guarantees parts and labor for one year after installation. Simar would record potential claims in a(n) _______ account.
Estimated Warranty Liability
Keys Co. is located in Florida. An evacuation has been ordered due to Hurricane Edward, which is headed in the direction of Keys. Keys should record a contingent liability prior to the evacuation.
False Reason: Contingent liabilities cannot be recorded for future events.
_______ are expenditures that keep an asset in good operating condition. They are necessary if an asset is to perform to expectations over its useful life.
Ordinary repairs
(Plant/Current) assets purchased as a group in a single transaction for a lump-sum price are allocated the purchase price based on their relative market values.
Plant
_________ assets are assets used in a company's operations that have a useful life of more than one accounting period.
Plant
Which of the following expenses would not be considered an ordinary repair?
Replacing an engine
________ are amounts owed to suppliers for products or services purchased on credit.
accounts payable
Employee ________ are perks that are provided in addition to salaries and wages, such as all or part of medical, dental, life and disability insurance.
benefits
Angela Bennett is an employee of Marks Co. This past year, Angela received 1% of Marks net income, in addition to her annual salary. This added benefit is called a:
bonus plan
The factors necessary to compute depreciation include all of the following, except:
book value
When a company revises an estimate used to record depreciation expense, the company should revise depreciation by using the formula (_______ - revised salvage value)/revised remaining useful life.
book value
The factors necessary to compute depreciation include (cost/selling price/market value), salvage value and useful life.
cost
Amounts withheld from employee's earnings for employee income tax is considered a _____ by the employer until the government is paid.
current liability
The process of allocating the cost of a natural resource to a period when it is consumed requires a debit entry to the ________ account.
depletion expense
A company owns an asset that is fully depreciated. The asset is no longer being used in operations and has no market value. The company has decided to ________ the asset by recording an entry to remove it from the balance sheet.
discard
A plant asset is (depreciated/discarded/obsolete) when it is no longer useful to the company, and it has no market value.
discarded
A known obligation of an uncertain amount that can be reasonably estimated is called a(n) _____ liability.
estimated
Book value is less than the selling price
gain on sale of asset
_______ is(are) the total compensation an employee earns including wages, salaries, commissions, bonuses, and any compensation earned before deductions such as taxes.
gross pay
A measurable obligation arising from agreements, contracts, or laws is called a _____ liability
known
Assets that increase the benefits of land, have a limited useful life, such as parking lots and lighting systems, are called:
land improvements
Bina Consulting Co. collected $500 from a customer in advance to provide consulting fees for the next two months. The $500 would be recorded with a debit to Cash and a credit to the Unearned Revenues, which is a(n) (asset/liability/equity) account.
liability
Bryne Co. sells merchandise and collects a 5% state sales tax. The tax is recorded on Bryne's general ledger as a(n) ______ account.
liability
Book value is greater than the selling price
loss on sale of asset
Unearned subscription revenues that extends over multiple periods is an example of a _______ known liability.
multi-period
Brice Co. purchases land in order to drill oil. This oil field would be classified as a(n) _______ on the balance sheet.
natural resource
Gross pay minus all deductions—including federal and state taxes, FICA and any voluntary deductions—equals _____ pay.
net
Which of the following items is not a payroll deduction?
net pay
Bushra Co. replaced a $1,000 account payable balance to Elin Co. with a 120-day, $1,000 note bearing 8% annual interest. Bushra's entry to record this transaction would include a credit to which account?
notes payable
A potential legal claim is recorded
only if payment for damages is probable and the amount can be reasonably estimated.
In order for a contingent liability to be recorded as a journal entry in the financial statements, it must be (probable/reasonably possible/remote) and reasonably estimable.
probable
A contingent liability can be ignored (not recorded in the financial statements or notes to the financial statements) if it is considered as (probable/reasonably possible/remote) possibility.
remote
A written promise to pay a specified amount on a stated future date within one year or the company's operating cycle, whichever is longer, is considered a __________.
short-term note payable
The ratio of income before interest expense (and any income taxes) divided by interest expense reflects the risk of a company not being able to pay fixed expenses if sales decline is called the ____________ ratio.
times interest earned
A known liability is a measurable obligation arising from agreements, contracts, or laws. Known liabilities would include all of the following items, except:
warranties
A _____ is a seller's obligation to replace or fix a product (or service) that fails to perform as expected within a specified period.
warranty
Book value is equal to the selling price
No gain or loss recognized
Paid absences offered to employees are called ______ benefits.
Vacation
Abby Co. allows each employee two weeks of paid time off during each calendar year. Since employees are working for 50 weeks, rather than 52 weeks, Abby must accrue the paid time off during the 50 weeks that the employees work. The year-end adjusting entry is recorded as a credit to the ________ account.
Vacation Benefits Payable
_______ are nonphysical assets used in operations that give companies long-term rights, or competitive advantages.
Intangible assets
On January 8, Lee Co. borrows $100,000 cash from National Bank by signing a 90-day, 6% interest note. On April 8, Lee Co. will pay National Bank a total of $101,500. The difference between the amount paid back to National Bank of $101,500 and the amount borrowed of $100,000 (or $1,500) represents ____ expense.
Interest
______ is the difference between the amount borrowed and the amount repaid.
Interest
Zion Co. sells $100 of merchandise and collects $10 sales tax. The sales tax is recorded to which account?
Sales Tax Payable
Jorge Lopez worked 40 hours this week and earned $1,000. Federal and state taxes, and other withholdings totaled $350. Jorge's net pay totals $ .
650
Copyrights, trademarks, and other intangible assets are expensed over their useful lives through the process of:
amortization
Niren Co. made modifications to a manufacturing machine that increased its productivity by 40%. Niren would classify this expense as a(n):
betterment
A(n) ______ liability is a known obligation that is of an uncertain amount but that can be reasonably estimated.
estimated
Land _______ are assets that are additions to land and have limited useful lives, such as walkways and fences.
improvements
A _____ is a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events.
liability
When a company has a current obligation to make a future payment to their supplier due to a shipment of supplies that were received last week, the company would record this transaction with an increase to an asset account and a(n) ________ account.
liability
Amounts withheld from an employee's gross pay are called:
payroll deductions
On October 30, Cleo Co. purchased a machine for $26,000 and estimates it will use the machine for four-years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year partial depreciation expense for October 30 through December 31.
$1000 Reason: This is a partial year depreciation. $26,000 - 2,000 = $24,000/4 = $6000 per year. $6000 x 2/12 = $1,000.
Determine which of the following expenses are considered revenue expenditures related to a company vehicle.
-Car wash -Oil change -Dent repair
Niwa Co. replaced a $3,000 account payable balance to Fiona Co. with a 60-day, $3,000 note bearing 5% annual interest. Niwa's entry to record this transaction would include which of the following entries?
-Credit to Notes Payable -Debit to Accounts Payable
Patel Paving collected $1,000 cash in advance from a customer to provide paving services next month. The entry to record this cash receipt would include the following entries?
-Debit to Cash -Credit to Unearned Paving Fees
Kenesha Co. reported income before interest expense and income taxes of $30,000; interest expense of $3,000; and income taxes of $4,000. Calculate the times interest earned ratio.
10; (30,000/3000)=10
On March 1, Young Co. borrowed $1,000 by extending their past-due account payable with a 120-day, 6% interest-bearing note. On June 29, the due date, Young pays the amount due in full. This entry would be recorded by Young with a credit to _____ in the amount of ______.
Cash; $1,020 Reason: Interest is computed for 120 days. $1,000 x .06 x (120/360) = $20. Cash will be credited for $1,000 + 20. Notes payable will be debited for $1,000.
Which of the following situations is not a contingent liability?
Future natural disaster
On January 1, Avers Co. borrowed $10,000 by extending their past-due account payable with a a 60-day, 8% interest-bearing note. On March 1, the due date, Avers pays the amount due in full. This entry would be recorded by Avers with a debit to (Accounts Payable/Notes Payable/Cash)_____ in the amount of _______.
Notes Payable; $10,000
(Revenue/Capital) expenditures are additional costs of plant assets that do not materially increase the asset's life or capabilities.
Revenue
When a company guarantees the payment of debt owed by a supplier, customer or another company, the guarantor usually discloses the guarantee as a _______ liability.
contingent
Plant assets are recorded at cost, which includes all expenditures necessary to get the asset in place and ready for use. All of the following would be included as part of the cost of a plant asset except:
damage done when unpacking the plant asset
The purchase of a group of plant assets for one price is called a ______ purchase.
lump-sum
______ are assets that are physically consumed when used, such as mineral deposits and oil and gas fields.
natural resources
Total asset turnover is computed as net _____/average total assets.
sales
Straight-line depreciation is calculated by taking cost minus (salvage/market) value divided by useful life.
salvage
PT Co. purchased land and an existing building for $200,000. In addition, PT paid real estate commissions of $15,000. PT removed the unwanted building and graded the land for a total cost of $35,000. PT should record the cost of the land at:
$250,000
On June 1, Harding Co. purchased a machine for $14,000 and estimates it will use the machine for five-years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year (partial) depreciation expense for June 1st through December 31st.
$1400 Reason: (14,000-2000)/5 x 7/12=1,400 for a partial year depreciation.
Leo Co. uses the allowance method to account for bad debts. At the end of the year, Leo Co.'s accounts receivable balance is $25,000; allowance for doubtful accounts balance of $100 (credit); and sales of $500,000. Based on history, Leo estimates that bad debts will be 2% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of:
$400
Seven Co. owns a coal mine with an estimated 1,000,000 tons of available coal. It was purchased for $300,000 and has $50,000 salvage value. During the current period, Seven mined and sold 200,000 tons of coal. Depletion expense for the period will be how much?
$50,000
Yates Co. uses the allowance method to account for bad debts. At the end of the period, Yate's unadjusted trial balance shows an accounts receivable balance of $10,000; allowance for doubtful accounts balance of $400 (credit); and sales of $500,000. Based on history, Yates estimates that bad debts will be 1% of sales. The entry to record estimated bad debts will include a debit to bad debts expense in the amount of:
$5000
Finish Co. uses the allowance method to account for bad debts. At the end of the year, Finish Co.'s unadjusted trial balance shows an accounts receivable balance of $30,000; allowance for doubtful accounts balance of $200 (credit); and sales of $600,000. Based on history, Finish estimates that bad debts will be 1% of sales. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of:
$600
Thomas Co. sold $1,000 worth of merchandise on a bank credit card with a 3% fee. The entry to record the sales transaction would include a debit to Cash in the amount of
$970
Recording employee Deductions
- First you record the salaries expense Dr - Then all the AP which are credited along with salaries payable
Disadvantages of cooperation characteristics
- Government regulations (must meet laws) - Cooperate taxation
Advantages of cooperation characteristics
- Separate legal entity - Limited liability of stockholders (They are not affected if company goes bad - Continues lives
Plant assets
- These are used in operations. - Extended life more than 1 accounting period - Computer example
Liability
-A past transaction -A present obligation -A future payment of asset or services
Which of the following assets are amortized?
-Copyright -Patent
A company estimates that $1,000 of its accounts receivable is uncollectible at the end of the period and will make the following adjusting entry: (Check all that apply).
-Debit to Bad Debts Expense for $1,000 -Credit to Allowance for Doubtful Accounts
On July 10, Yao Co. collects $740 from Ean, Inc. from a prior credit sale. This entry would be recorded by Yao with a: (Check all that apply.)
-Debit to cash -Credit to accounts receivable
Which of the following asset(s) are not considered intangible assets?
-Mineral deposit -Copy machine
On December 1, Christy Co. accepted a 60-day, 6%, $1,000 note due January 30. On December 31, the appropriate year-end adjusting entry was made. On January 30, the note was honored and paid in full. The entry to record receipt of payment on January 30 (assuming no reversing entry was made) would include a credit to: (Check all that apply.)
-Notes Receivable for $1,000. -Interest Receivable for $5. -Interest Revenue for $5.
A. Stine Co. previously wrote off a $200 bad debt from Thorn Co. using the direct write-off method. On October 1, Stine unexpectedly receives a check in the amount of $200 from Thorn Co. The entry to record this receipt of $200 will include a: (Check all that apply.)
-credit to Bad Debts Expense. -debit to Cash.
On January 1, Franz Co. accepted a 30-day, 6% note in the amount of $5,000 from Bria Co., a customer. On January 31, the due date of the note, Bria honors the note and pays in full. The journal entry that Franz would make to record payment of this note would include a: (Check all that apply.)
-credit to Note Receivable for $5,000. -credit to Interest Revenue for $25. -debit to Cash for $5,025.
Zion Company sells merchandise on credit to BRC, Inc. in the amount of $1,200. The entry to record this sale would include a: (Check all that apply.)
-credit to Sales. -debit to Accounts Receivable.
Lina Co. uses the allowance method to account for bad debts. On January 28, Lina determines that a $200 balance from ZRT, Inc. is uncollectible and writes the balance off. The journal entry to write this balance off will include a: (Check all that apply.)
-debit to Allowance for Doubtful Accounts. -credit to Accounts Receivable - ZRT.
On November 1, Eli Co. received a $6,000, 60-day, 6% note from a customer as payment on his $6,000 account. Eli's journal entry to record this transaction on November 1, would include a: (Check all that apply.)
-debit to Notes Receivable for $6,000. -credit to Accounts Receivable for $6,000.
An accounts receivable ledger:
-records journal entries that affect accounts receivable -is a supplementary record to maintain an account for each customer
Companies sometimes convert receivables to cash before they are due by selling them or using them as security for a loan. The reasons that a company may convert receivables before their due date include: (Check all that apply.)
-the company needs cash. -the company does not want to deal with collecting receivables.
Incorporation
...
Recording and writing off bad debts
1. Direct wright off method (both of these are writing off bad debts) 2. Allowance method
Lani Co. uses the allowance method to account for bad debts. At the end of the year, their unadjusted trial balance shows an accounts receivable balance of $400,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,200,000. Based on history, Lani estimates that bad debts will be 1% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of:
400,000 * 1% = 4,000 + 400 = 4,400
A 90-day note is signed on October 21. The due date of the note is:
90 days = 31-21=10 days in October + 30 days in November + 31 days in December + 19 days in January. Always start with the number of days in the first month and subtract the date of the note. (October: 31-21 = 10). January 19
Review the statements below and choose the one that correctly describes a control account.
A control account appears in the general ledger and is supported by a subsidiary ledger.
Cash recieved sometime after deposit
AR Dr Credit card Expense Dr Sales Cr And later when they pay its Cash Dr AR Cr
Dishonored notes
AR dr Interest revenue Cr Notes receivable Cr
First step to recording Acceptions
Accepted a $12,600, 60-day, 9% note dated this day in granting Danny Todd a time extension on his past-due account receivable. When ever you accept something like this Notes receivable dr AR Cr
Chapter 11
Accounting for equity
Ace Company sells merchandise to a customer in the amount of $200 on credit, terms n/30. The entry to record this sale would include a debit to the ____________ account:
Accounts Receivable
On March 14, Zest Co. accepted a 120-day, 6% note in the amount of $5,000 from AZC Co., a customer. On the due date of the note, AZC dishonors the note and fails to pay. The journal entry that Zest would make to record the failure to pay this note on the due date would include a debit to:
Accounts Receivable - AZC for $5,100
On September 1, Horn Co. accepted a 60-day, 5% note in the amount of $3,000 from a customer. On the due date of the note, the customer dishonors the note and fails to pay. The journal entry that Horn would make on the due date would include debit to:
Accounts Receivable for $3,025
A company has $150,000 of credit sales during the year and estimates that $1,000 of its accounts receivable will be uncollectible. The adjusting entry will include a credit to:
Allowance for Doubtful Accounts
Receivable
Amount due from another party
Principal
Amount that the signer agrees to pay back, not including interest
Accounts Receivable
Amounts due from customers for credit sales
Notes Receivable
An asset consisting of a written promise to receive a definite sum of money on demand or on specific future dates
A 60-day note is signed on February 15 (and it's not leap year). The due date of the note is:
April 16
Unearned revenues
Are amounts received in advance Cash Dr Unearned revenues Cr And when the service has been done Unearned revenue Dr Earned revenue Cr
Bonus expense formula
B = .005(210000-B) B = 10500-0.05B 1.05B = 10500 B = 10500/1.05=10000
On August 1, Harris Co. determines that it cannot collect $200 from its customer, L. Dash. Harris Co. uses the direct write-off method, so they will record the write-off of this account by debiting:
Bad Debt Expense
On August 1, Hanes Co. determines that it cannot collect $150 from a customer. Hanes uses the direct write-off method. Hanes will record the write-off of this account by debiting:
Bad Debts Expense for $150.
In August, Johns Co.'s account receivable balance was written off using the direct method. In November, Johns pays the balance in full. The journal entry to record the reinstatement of the account receivable must include a credit to the _____________________ account before recording a debit to the Cash account.
Bad debts expense
To record a customer's check in full payment for a sale that was made the prior month, the company should debit the ____________ account.
Cash
Cash recieved immediatly on deposit
Cash Dr Credit card Expense Dr Sales Cr
Note given to borrow from the bank
Cash Dr Notes payable Cr Notes payable Dr Interest expense Dr Cash Cr This is when principle and interest is paid
An honored note
Cash Dr Notes receivable Cr Interest Receivable Cr
T. Hillcrest Co. sold $500 of merchandise on a bank credit card with a 5% fee. The entry to record this sales transaction would include debit(s) to:
Cash for $475 and to Credit Card Expense for $25
Interest
Charge from using money loaned from one entity to another
Straight line method
Cost - Salvage value / Useful life in periods - This is good if plant assets are used up in equal amounts each period -
Maturity date
Day that the principal and interest must be paid
Units of production depreciation
Equipment use varies from period to period eg Builder using tools - There are two steps in order to find this out 1st Cost - Salvage value / Total units of production 2nd x this by Units in the period
True or false: The allowance method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is made to predict bad debts.
False
True or false: The direct write-off method of accounting for bad debts matches the estimated loss from uncollectible accounts receivable against the sales they helped produce.
False
a. Sold $1,353,800 of merchandise (that had cost $980,200) on credit, terms n/30. b. Wrote off $21,400 of uncollectible accounts receivable. c. Received $670,400 cash in payment of accounts receivable. d. In adjusting the accounts on December 31, the company estimated that 1.70% of accounts receivable will be uncollectible.
In adjusting the accounts on December 31, the company estimated that 1.70% of accounts receivable will be uncollectible. (1,353,800 - 21,400 - 670,400) x 1.7% = 11,254 11,254 + 21,400 debit balance in the Allowance account = 32,654 Dr Bad Debt Expense 32,654 Cr Allowance for Doubtful Accounts 32,654 *Note: There is now a credit balance in the Allowance account of 11,254 A/R has a balance of $662,000
Kaiven Company accepted a $12,000, 60-day, 6% note on December 21 from Diaz Co, granting a time extension on his past-due account receivable. The adjusting entry on December 31 would include a debit to:
Interest Receivable for $20.
On November 1, Alice Co. accepted a 90-day, 6%, $2,000 note due January 30. On December 31, the appropriate adjusting entry was made. On January 30 of the next year, the note was honored and paid in full. The entry to record receipt of payment on January 30 would include a credit to: (Check all that apply.)
Interest Receivable for $20. Notes Receivable for $2,000 Interest Revenue for $10.
On March 14, Teal Co. accepted a 120-day, 6% note in the amount of $10,000 from AZC Co., a customer. On the due date of the note, AZC honors the note and pays in full. The journal entry that Teal would make to record payment of this note would include a credit to:
Interest Revenue for $200.
Lion Company accepted a $15,000, 30-day, 6% note on December 16 from Diaz Co, granting a time extension on his past-due account receivable. The adjusting entry on December 31 for Lion Company would include a credit to:
Interest Revenue for $37.50. Reason: The adjusting entry for Lion Company is to credit interest revenue for $37.50 [$15,000 x .06 x (15/360)]. Interest receivable would be debited.
Accounts receivable turnover
Netsales / Average accounts receivable, net - It indicates how often an average receivables are received and collected during the period
Long term liabilities
Not expected to pay with in that year
Notes recievable
Note recievable CR Sales Cr This is written at the full amount when it occurs Usually with these questions there is interest included. You take the interest form that particular date work it out Interest Receivable Dr Interest earned Cr
DonCo, Inc. sold merchandise on January 14, and accepted a 90-day, 5% promissory note in the amount of $5,000. On January 14, the entry to record this transaction would include a debit to:
Notes Receivable in the amount of $5,000
Maker
One who signed the note and promised to pay at maturity
Interest
Principle of note x Annual interest rate x Time expressed in fraction So $1000 x 12% x 90/360
Short term notes payable
Promissory note with a definite date where it is paid. Most notes have interest until the amount is paid
A company sells merchandise to a customer on credit. The journal entry to record this transaction would include a debit entry to the Accounts ______ account.
Receivable
Revenue expenditure
Revenue expenditure benefits only the current period and is recorded as an expense
The cost of a good recorded
The cost of the particular good plus anything else that help make and get it to where it was. e.g freight, unpacking
Payee
The person to whom the note is payable
Recording bad debts expense
This account is what is the amount that is recorded at the end of the year. The allowance for doubtful debts is debited from this so it can be decreased Bad debts expense Dr Allowance for doubtful debts Cr
Allowance for doubtful debts
This is a contra account because It Cr an asset in the balance sheet
Gross pay
Total compensation an employee earns. Eg wages, bonuses, compensation
True or false: The two methods companies can use to convert receivables to cash before they are due includes selling them and pledging them.
True
Current liabilities
Wages payable, unearned revenues
Recovery of bad debts
When the above transaction is collected, which a lot of the time it is not then these are the tranasctions Ar Dr Bad debts expense Cr Cash Dr AR Cr
Promissory note
Writen note to pay a specific amount of money
Promissory note
Written promise to pay a specified amount of money
Capital expenditure
Yields benefits that extend beyond this period and are recored as an asset
A(n) ____________ is a supplementary record created to maintain a separate account for each customer.
accounts receivable ledger
The ________ is a measure of both the quality and liquidity of accounts receivable; it indicates how often, on average, receivables are received and collected during the period.
accounts receivable turnover
The two most common receivables are ______ receivables and _____ receivables.
accounts; notes
The ________ of accounts receivable method uses several percentages to estimate the allowance.
aging
The __________ method of estimating bad debts uses both past and current receivables information to estimate the allowance amount. Specifically, each receivable is classified by how long it is past its due date.
aging of receivables
The (allowance/direct write-off) method of accounting for bad debts records estimated bad debts expense in the period when the related sales are recorded.
allowance
The total asset turnover ratio is computed by taking net sales divided by:
average total assets
The allowance for doubtful accounts is a(n) (current/contra/opposite) asset account and has a normal credit balance.
contra
A company sells merchandise to a customer on credit. The journal entry that the company makes to record this sale would include a (debit/credit) to the sales account.
credit
Zino Company determines that a customer balance of $200,from Hollis Co. is uncollectible. Zino uses the allowance method to account for bad debts. The entry to write off the uncollectible balance will include a:
debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.
The ____________ method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is made to predict bad debts expense.
direct write-off
Explain what a control account is by completing the following sentence. A control account appears in the (general/subsidiary) ledger and is supported by information in a separate (general/subsidiary) ledger.
general; subsidiary
2011 e. Sold $1,558,000 of merchandise (that had cost $1,343,100) on credit, terms n/30. f. Wrote off $26,300 of uncollectible accounts receivable. g. Received $1,215,000 cash in payment of accounts receivable. h. In adjusting the accounts on December 31, the company estimated that 1.70% of accounts receivable will be uncollectible.
h. In adjusting the accounts on December 31, the company estimated that 1.70% of accounts receivable will be uncollectible. 662,000 + 1,558,000 - 26,300 - 1,215,000 = 978,700 A/R balance 978,700 x 1.7% = 16,638 11,254 - 26.300 = 15,046 debit balance in Allowance account 16,638 + 15,046 = 31,684 Dr Bad Debt Expense 31,684 Cr Allowance for Doubtful Accounts 31,684
The (maker/payee) of the note is the one that signed the note and promised to pay at maturity. The (maker/payee) of the note is the person to whom the note is payable.
maker; payee
Accounts receivable turnover is calculated using the following formula:
net sales/average accounts receivable, net
A _______ is an exclusive right granted to its owner to manufacture and sell an item or use a process for 20 years.
patent
A _________________ is an amount due from another party.
receivable
The allowance for doubtful accounts is a contra asset account that equals:
total uncollectible accounts
Cadie Construction Co. signed a note promising to pay a cement supplier $1,000 60-days from now. As a result of this transaction, Cadie would record a(n) ________ on her balance sheet.
short-term note payable
Which of the following liabilities could be a multi-period known liability?
- Unearned Subscription Revenue - Notes Payable
True or false: The cost of plant assets should include all of the normal and reasonable expenditures necessary to get the asset in place and ready for its intended use, including repairs to damages incurred after installation
False
Employers must pay employee taxes in addition to those paid by the employees. Which of the following is paid only by the employer?
unemployment
A ___________ is when an employer provides employees with a percentage of the net income earned during the year.
bonus plan
Ella Co. owns a mineral deposit and recognizes $15,000 of depletion expense during the period. This entry will be recorded with a credit to:
Accumulated Depletion - Mineral Deposit
On December 31, Briar Co. disposed of a piece of equipment that cost $6,000 with accumulated depreciation of $4,500. The entry to record this disposal would include a debit to which account and for how much?
Loss on Disposal of Equipment for $1,500
Forward Co. discarded a machine that cost $5,000 and was fully depreciated. The entry to record this transaction would include a credit to the _________ account.
Machinery
A liability created by buying goods or services on credit is typically recorded to
accounts payable
