ACC 211- Exam 2

Allowance for Uncollectible accounts- If it has a balance of a Credit before adjustment you..... (Subtract or Add?) If it is a debit?

-Subtract the credit amount -Add the debit amount

A purchased store equipment for $22,000. A estimates that at the end of its 10-year service life, the equipment will be worth $4,000. During the 10-year period, the company expects to use the equipment for a total of 15,000 hours. A used the equipment for 1,600 hours the first year. Calculate Straight line depreciation expense

1,800 Cost- Value/ service life 22,000-4,000 / 10 years

Abbott Landscaping purchased a tractor at a cost of $39,000 and sold it three years later for $19,800. Abbott recorded depreciation using the straight-line method, a five-year service life, and a $2,500 residual value. Tractors are included in the Equipment account. Record the sale of equiptment

39,000-2,500/5 years= 7,300 3 years later x 7,300= 21,900 (Acc. Dep.) 39,000-21,900= 17,100 19,800- 17,100= GAIN of 2,700 DEBIT Cash 19,800 Accum. Dep. 21,900 CREDIT Equiptment 39,000 Gain 2,700

Tasty Subs acquired a delivery truck on October 1, 2021, for $21,000. The company estimates a residual value of $1,800 and a six-year service life.

YEAR 2022= 21,000-1,800=19,200 / 6 years = 3200 YEAR 2021 = 21,000-1,800 = 19,200 / 6 years 3,200 X 3/12 (Oct-Dec) = 800

Using the aging method, Carlton Company calculates the estimated ending balance in the Allowance for Uncollectible Accounts to be $12,000. Prior to adjusting entries, the Allowance for Uncollectible Accounts has a credit balance of $3,000. The year-end adjustment would include a:

Debit to Bad Debt Expense of $9000 12,000-3,000

Sells a coat on account to a customer for $200. On November 15, the customer decides to return the coat to the retailer. The journal entry on November 15 will include a

Debit: Sales Return Credit: Accounts Receivable

Sales returns, sales allowances, and sales discounts are what kind of accounts? What is the purpose of the account?

contra revenue accounts -Keeps record of total revenue recognized separate form reduction due to sales returns -track on how much a company sells and returns

Preparing a multiple step statement

(DEBIT)Sales Revenue-COGS = (CREDIT) Gross Profit (DEBIT)ALL Expenses Except income expense Total Operating expenses= (CREDIT) (CREDIT) Operating income (Always a Loss)= GP - Expenses Non-operating revenue Income before taxes= Non Operating Rev- Operating income

In a periodic inventory system, the purchase of inventory is debited to:

Purchases

The allowance method requires managers to estimate future uncollectible accounts and to record that estimate in the current year. T or F

TRUE

The direct write-off method is used for tax purposes but is generally not permitted for financial reporting.

TRUE

At the beginning of the year, A allows for estimated uncollectible accounts of $23,000. By the end of the year, actual bad debts total $27,000. -Record the write-off to uncollectible accounts. (entry) -What is the balance of Allowance for Uncollectible Accounts?

Allowance for uncollectible accounts DEBIT 27,000 Credit - Accounts Receivable 27,000 Balance for Uncollectible acc. = -4000 or 4,000 (DEBIT) 23,000 BEG - 27,000 ACTUAL = -------

Inventory (Define, where is it reported, What does it include)

An Asset Reported on the balance sheet Includes items not yet finished

B is in the process of closing its operations. It sold its two-year-old bakery ovens to CC for $510,000. The ovens originally cost $701,000, had an estimated service life of 10 years, had an estimated residual value of $41,000, and were depreciated using straight-line depreciation. Complete the requirements below for B. Calculate the book value of the ovens at the end of the second year.

Cost of Oven - Acc. Dep. 701,000- 132,000 = 569000

How to calculate operating expenses

Gross Profit- Net Income

Specific Identification

Identifies each unit of inventory (Unique barcode/#) Used by companies with unique, expensive products (low sales volume)

A bills customers $18,000 for the services provided. At the end of the year, $6,000 remains due from customers. The company's credit manager estimates that 10% of the total year-end accounts receivable will not be collected. The company's estimate of uncollectible accounts is: Journal Entry:

$600 Debit: Bad Debt Expense 600 Credit: Allow. for U.A 600

A purchased store equipment for $22,000. A estimates that at the end of its 10-year service life, the equipment will be worth $4,000. During the 10-year period, the company expects to use the equipment for a total of 15,000 hours. A used the equipment for 1,600 hours the first year. Calculate activity based depreciation expense

22,000-4000 / 15,000 hours = 1.2 RATE 1.2 X 1,600 hours= 1920

A purchased store equipment for $22,000. A estimates that at the end of its 10-year service life, the equipment will be worth $4,000. During the 10-year period, the company expects to use the equipment for a total of 15,000 hours. A used the equipment for 1,600 hours the first year. Calculate Double declining depreciation expense

2/Useful life 2/10 x 22,000 = 4,400

El Tapitio purchased restaurant furniture on September 1, 2021, for $50,000. Residual value at the end of an estimated 10-year service life is expected to be $6,500. Calculate depreciation expense for 2021 and 2022, using the straight-line method, and assuming a December 31 year-end.

2021= 1,450 (4,350 X 4/12) (Sept-Dec = 4 months) 2022= 4,350

Tasty Subs acquired a delivery truck on October 1, 2021, for $18,500. The company estimates a residual value of $1,700 and a six-year service life. It expects to drive the truck 140,000 miles. Actual mileage was 4,400 miles in 2021 and 17,800 miles in 2022. Calculate depreciation expense using the activity-based method for 2021 and 2022

2021= 528 18,500-1,700 / Expected miles (140,000) =.12 per mile .12 X 4,400= 528 2022= 2,136 (.12 X 17,800)

Beta Corporation wrote off $100,000 due from a specific client in March. However, this client was able to make a partial payment of $15,000 in June. Recording this cash collection will involve all of the following accounts except:

Bad Debt Expense Uses Allowance for Uncollectible accounts, Cash & Accounts Receivable

During December, Far West Services makes a $3,800 credit sale. The state sales tax rate is 6% and the local sales tax rate is 2.5%. Record the sale including the sales tax.

DEBIT Acc. Rec. 4,123 CREDIT Sales tax payable 323 Sales Rev. 3,800

B's balance of Allowance for Uncollectible Accounts is $470 (credit) before adjustment. The balance of Accounts Receivable is $18,500. The company estimates that 12% of accounts will not be collected over the next year.

DEBIT Bad Debt Expense 1,750 CREDIT Allow. for U.A 1750 18,500 x 12% - 470 CREDIT= 1,750

2021, Pave Construction provides services on account of $154,000. By the end of 2021, cash collections on these accounts total $107,000. Pave estimates that 25% of the uncollected accounts will be uncollectible. In 2022, the company writes off uncollectible accounts of $10,575. -Adjusting entry for uncollectibles -record the write off accounts in 2022 - calculate beg bal, write offs, ending bal

DEBIT Bad Debt Expense 11750 CREDIT Allow. for U.A 11750 DEBIT Allowance for U.A 10,575 CREDIT Accounts Receivable 10,575 Beg. Balance= 11,750 + (-10,575) = Ending Balance of $1,175

Shankar Company uses a perpetual system to record inventory transactions. The company purchases inventory on account on February 2 for $28,000. In addition to the cost of inventory, the company also pays $480 for freight charges associated with the purchase on the same day. Record the purchase of inventory on February 2, including the freight charges.

DEBIT Inventory 28,000 CREDIT Accounts Payable 28,000 FREIGHT IN charges are within inventory prices DEBIT inventory 480 CREDIT Cash 480

A supplier offers a company terms 3/10, n/30 for a $10,000 purchase on account on January 1. The company uses a perpetual inventory system to record transactions. If the company makes the payment on January 10, the entry to record the payment will include a:

DEBIT accounts payable 10,000 CREDIT to inventory for $300 Cash 9700

On March 12, Medical Waste Services provides services on account to Grace Hospital for $9,800, terms 3/10, n/30. Grace pays for those services on March 20. 1. Record the service revenue on account. 2.Record the cash received on account.

DEBIT accounts receivable 9,800 CREDIT Service rev. 9,800 DEBIT Cash 9,506 Sales Discount 294 CREDIT Accounts Receivable 9,800

A company performs $1,000 worth of services on account on March 1, with the terms 2/10, n/30. The customer makes payment on March 6. Entry:

Debit Cash $980 Debit Sales Discount $20 Credit Accounts Receivable $100

A company makes a credit sale for $500. Future collection from the customer is probable. The company will not record revenue from the transaction until it collects cash from the customer. T or F

FALSE

When inventory costs are rising, the _____ results in a higher reported inventory.

FIFO method

Gross Profit= (2 Ways)

Net Sales - COGS Net Income+ Operating Expenses

Which of the following is true of a sale on account using a periodic inventory system?

No entry is required for inventory reduction

B is in the process of closing its operations. It sold its two-year-old bakery ovens to CC for $510,000. The ovens originally cost $701,000, had an estimated service life of 10 years, had an estimated residual value of $41,000, and were depreciated using straight-line depreciation. Complete the requirements below for B. Calculate the balance in the accumulated depreciation account at the end of the second year.

Original Cost- RV / Service life 701,000- 41,000 / 10 Years = 66000 X 2 YEARS OLD =132,000

Periodic System entries include: Perpetual entries include words like:

Purchases, Freight In, Purchase Discounts/Returns Inventory, Inventory, Inventory

Multiple step Income Statement (Purpose & Levels)

Reports income from diff types of activity Can determine source of company's profitibility 1. Net Rev/Net Sales - COGS = Gross Profit 2. Operating expenses Gross Profit - Operating expenses= Operating income 3. Income before income taxes 4. Net income = Rev - Exp

what is the gross profit? Sales revenue $310,000 Accounts receivable 54,000 Ending inventory 118,000 Cost of goods sold 241,000 Sales returns 27,000

Sales Rev- Sales Return - COGS 310,000 - 27,000 - 241,000 = $42,000

The lower of cost and net realizable value rule causes losses in the value of inventory to be recognized in the period when:

The value of inventory declines below cost.

According to the allowance method, writing off an account receivable will include a:

a credit to Accounts Receivable