‘Name: Date: ‘The net amount expected to be received in cash from receivables is termed the A) cash realizable valuc. B) cash-good value. C) gross cash value, D) cash-equivalent valve. . Under the allowance method, writing off an uncollectible account A) affects only balance sheet accounts. B) affects both balance sheet and income statement accounts. ©) affects only income statement accounts. D) isnot acceptable practice. Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $45,000, If the balance of the Allowance for Doubtful Accounts is $11,000 debit before adjustment what is the balance after adjustment? A) $45,000 B) $11,000 C) $56,000 D) $34,000 Under the allowance method of accounting for uncollectible accounts, A) the cash realizable value of accounts receivable is greater before an account is written off than after it is written off. B) Bad Debt Expense is debited when a specific account is written off as uncollectible. ©) the cash realizable value of accounts receivable in the balance sheet is the same before and after an account is written off, D) Allowance for Doubtful Accounts is closed each year to Income Summary. The interest on a $7,000, 6%, 60-day note receivable is A) $35. B) $420 © 8210. D) $70. Page 110. i. Which depreciation method is most frequently used in businesses today? A) Straight-line. B) Declining-balance. C) Units-of-activity. D) Double-declining-balance. . Which of the following would not be included in the Equipment account? A) Installation costs. B) Freight costs. C) Cost of trial runs. D) Electricity used by the machine. When estimating the useful life of an asset, accountants do not consider A) the cost to replace the asset at the end of its useful life. B) vulnerability to obsolescence, C) expected repairs and maintenance. D) the intended use of the asset, Equipment with a cost of $300,000 has an estimated salvage value of $20,000 and an estimated life of 4 years or 10,000 hours. It is to be depreciated by the units-of-activity method, What is the amount of depreciation for the first full year, during which the ‘equipment was used 2,700 hours? A) $75,000. B) $70,000. C) $75,600, D) $72,500. All the following are needed for the computation of depreciation except A) training costs of manufacturing personnel, B) cost. C) salvage value. D) estimated useful life. The interest charged on a $70,000 note payable, at the rate of 6%, on a 60-day note would be A) $4,200. B) $2,100. C) $1,050. 1D) $700. Page 212, 13, 14, ‘The present value of a $10,000, 5-year bond, will be less than $10,000 if the A) contractual rate of interest is less than the market rate of interest B) contractual rate of interest is greater than the market rate of interest. ©) bond is convertible. D) contractual rate of interest is equal to the market rate of interest, ‘The current portion of long-term debt should A) be paid immediately. B) bereclassified as a current liability. C) be classified as a long-term liability. D) not be separated from the long-term portion of debt. ‘Thayer Company purchased a building on January 2 by signing a long-term $2,520,000 mortgage with monthly payments of $23,100. The mortgege carries an interest rate of 10 percent. The entry to record the first monthly payment will include a A) debit to the Cash account for $23,100, B) credit to the Cash account for $21,000. C) debit to the Interest Expense account for $21,000. D) credit to the Mortgage Payable account for $23,100. . The relationship between current assets and current liabilities is A) useful in determining ineome. B) useful in evaluating a company’s liquidity. C) called the matching principle. D) useful in determining the amount of a company's long-term debt. Page 316. Erickson Company had a $300 credit balance in Allowance for Doubtful Accounts at December 31, 2014, before the current year's provision for uncollectible accounts. An aging of the accounts receivable revealed the following: Estimated Percentage ‘Uncollectible Current Accounts $170,000 1% 1-30 days past due 15,000 3% : 31-60 days past due 12,000 % 61-90 days past due 5,000 15% Over 90 days past due 9,000 30% Total Accounts Receivable $2000 Instructions (@) Prepare the adjusting entry on December 31, 2014, to recognize bad debts expense. (b) Assume the same facts as above except that the Allowance for Doubtful Accounts account had a $300 debit balance before the current year’s provision for uncollectible accounts. Prepare the adjusting entry for the current year's provision for uncollectible accounts. 17, At the beginning of the current period, Emer Corp. had balances in Accounts Receivable of $200,000 and in Allowance for Doubtful Accounts of $9,000 (credit). During the period, it had net credit sales of $650,000 and collections of $590,000. It ‘wrote off as uncollectible accounts receivable of $5,000, However, a $3,000 account previously written off as uncollectible was recovered before the end of the current period. Uncollectible accounts are estimated to total $20,000 at the end of the period. Instructions (a) Prepare the entries to record sales and collections during the period. (b) Prepare the entry to record the write-off of uncollectible accounts during the period. (©) Prepare the entries to record the recovery of the uncollectible account during the period. (d) Prepare the entry to record bad debts expense for the period, (e) Determine the ending balances in Accounts Receivable and Allowance for Doubtful Accounts (8 Calculate the net realizable value of the receivables at the end of the period. Page 418. Prepare journal entries to record the following transactions entered into by the Merando 19, Company: 201 June 1 Noy. 1 Nov. 5 Nov. 9 Dec. 31 2014. June 1 Received a $10,000, 6%, 1-year note from Dan Gore as full payment on his account, Sold merchandise on account to Barlow, Inc,, for $14,000, terms 2/10, n/30. Barlow, Inc., returned merchandise worth $1,000, Received payment in full from Barlow, Inc. Accrued interest on Gore's note. Dan Gore honored his promissory note by sending the face amount plus interest. Match the items below by entering the appropriate code letter in the space provided. A. Aging the accounts receivable F._ Percentage of receivables basis B, Direct write-off method G. Promissory note C. Obligation due H. Dishonored note D. Trade receivables 1. Cash net realizable value E, Accounts receivable turnover J. Credit card sales 1 2. A written promise to pay a specified amount on demand or at a definite time. Sales that involve the customer, the retailer, and the eredit card issuer. A measure of the liquidity of receivables. Notes and accounts receivable that result from sales transactions. A note which is not paid in full at maturity. Analysis of customer account balances by length of time they have been unpaid. Emphasizes expected cash realizable value of accounts receivable. Bad debt losses are not estimated and no allowance account is used, The net amount expected to be received in cash. Page 520. Prepare the journal entries to record the following transactions for Reese Company, which has a calendar year end and uses the straight-line method of depreciation. (a) On September 30, 2014, the company sold old equipment for $46,000. The equipment was purchased on January 1, 2012, for $96,000 and was estimated to have a $16,000 salvage value at the end of its 5-year life, Depreciation on the equipment has been recorded through December 31, 2013. (b) On June 30, 2014, the company sold old equipment for $24,000. The equipment originally cost $36,000 and had accumulated depreciation to the date of disposal of $15,000, 21, (a) Faster Company purchased equipment in 2007 for $104,000 and estimated an $8,000 salvage value at the end of the equipment's 10-year useful life, At December 31, 2013, there was $67,200 in the Accumulated Depreciation account for this equipment using the straight-line method of depreciation. On March 31, 2014, the equipment was sold for $21,000. Prepare the appropriate journal entries to remove the equipment from the books of Faster Company on March 31, 2014 (b) Lewis Company sold equipment for $1 1,000. The equipment originally cost $25,000 in 2011 and $6,000 was spent on a major overhaul in 2014 (charged to the Equipment account), Accumulated Depreciation on the equipment to the date of disposal was $20,000. Prepare the appropriate journal entry to record the disposition of the equipment. (©) Selby Company sold equipment that had a book value of $13,500 for $15,000. The ‘equipment originally cost $45,000 and it is estimated that it would cost $57,000 to replace the equipment. Prepare the appropriate journal entry to record the disposition of the equipment. 22. Phill Co. has equipment that cost $50,000 and has been depreciated $30,000. Instructions Record entries for the disposal under the following assumptions. (a) _Itwas scrapped as having no value, (b) It was sold for $23,000. (©) It was sold for $18,000. Page 623. During the current year Knight Company incurred several expenditures. Briefly explain, whether the expenditures listed below should be recorded as an operating expense or as an intangible asset. If you view the expenditure as an intangible asset, indicate the number of years over Which the asset should be amortized. Explain your answer. (a) Spent $30,000 in legal costs in a patent defense suit. The patent was unsuccessfully defended. (b) Purchased a trademark from another company. The trademark can be renewed indefinitely. Knight Company expected the trademark to contribute to revenue indefinitely (c) Knight Company acquires a patent for $2,000,000, The company selling the patent hs spent $1,000,000 on the research and development of it, The patent has a remaining life of 15 years. (@ Knight Company is spending considerable time and money in developing a different patent for another product, So far $3,000,000 has been spent this year on research and development. Knight Company is very confident they will obtain this patent in the next few years 24, The adjusted trial balance for Helton Corporation at the end of 2014 contained the following accounts: Bonds payable, 10% $500,000 Interest payable 20,000 Discount on bonds payable 30,000 Notes payable, 9%, due 2016 70,000 Accounts payable 120,000 Instructions (a) Prepare the long-term liabilities section of the balance sheet (b) Indicate the proper balance sheet classification for the accounts listed above that do not belong in the long-term liabilities section. 25. On April 1, Holton Company borrows $100,000 from West Bank by signing a 6-month, 6%, interest-bearing note. Instructions Prepare the necessary entries below associated with the note payable on the books of Holton Company. (a) Prepare the entry on April 1 when the note was issued. (b) Prepare any adjusting entries necessary on June 30 in order to prepare the semiannual financial statements. Assume no other interest accrual entries have been made. Page 7 | 126. Steiner Sales Company has the following selected accounts after posting adjusting entries: Accounts Payable S$ 65,000 Notes Payable, 3-month 50,000 Accumulated Depreciation—Equipment 14,000 Notes Payable, 5-year, 6% 80,000 Payroll Tax Expense 4,000 Interest Payable 3,000 Mortgage Payable 120,000 Sales Taxes Payable 38,000 Instructions Prepare the current liability section of Steiner Sales Company's balance sheet, assuming $15,000 of the mortgage is payable next year. Page 8