Accounting

Question 1

The following information pertains to Crane Video Company.

1.		Cash balance per bank, July 31, $7,893.
2.		July bank service charge not recorded by the depositor $35.
3.		Cash balance per books, July 31, $7,914.
4.		Deposits in transit, July 31, $1,815.
5.		Bank collected $1,215 note for Crane in July, plus interest $43, less fee $27. The collection has not been recorded by Crane, and no interest has been accrued.
6.		Outstanding checks, July 31, $598.

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Journalize the adjusting entries at July 31 on the books of Crane Video Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.	Account Titles and Explanation	Debit	Credit
July 31	[removed]	[removed]	[removed]
	[removed]	[removed]	[removed]
	[removed]	[removed]	[removed]
	[removed]	[removed]	[removed]
	(To record the collection of the note.)
July 31	[removed]	[removed]	[removed]
	[removed]	[removed]	[removed]
	(To record the bank service charge.)

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Question 2

Information related to Mingenback Company for 2014 is summarized below.

Total credit sales		$2,478,000
Accounts receivable at December 31		844,000
Bad debts written off		32,200

(a)		What amount of bad debt expense will Mingenback Company report if it uses the direct write-off method of accounting for bad debts? $[removed]

(b)		Assume that Mingenback Company estimates its bad debt expense to be 3% of credit sales. What amount of bad debt expense will Mingenback record if it has an Allowance for Doubtful Accounts credit balance of $4,400? $[removed]

(c)		Assume that Mingenback Company estimates its bad debt expense based on 5% of accounts receivable. What amount of bad debt expense will Mingenback record if it has an Allowance for Doubtful Accounts credit balance of $3,200? $[removed]

(d)		Assume that Mingenback Company estimates its bad debt expense based on 5% of accounts receivable. What amount of bad debt expense will Mingenback record if it has an Allowance for Doubtful Accounts debit balance of $3,200? $[removed]

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Question 3

On January 1, 2014, Evers Company purchased the following two machines for use in its production process.

Machine A:		The cash price of this machine was $47,600. Related expenditures included: sales tax $2,500, shipping costs $130, insurance during shipping $80, installation and testing costs $60, and $130 of oil and lubricants to be used with the machinery during its first year of operations. Evers estimates that the useful life of the machine is 5 years with a $5,700 salvage value remaining at the end of that time period. Assume that the straight-line method of depreciation is used.
Machine B:		The recorded cost of this machine was $160,000. Evers estimates that the useful life of the machine is 4 years with a $8,900 salvage value remaining at the end of that time period.

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Prepare the following for Machine A. (Round answers to 0 decimal places, e.g. $2,125. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

1.		The journal entry to record its purchase on January 1, 2014.
2.		The journal entry to record annual depreciation at December 31, 2014.

No.	Account Titles and Explanation	Debit	Credit
1.	[removed]	[removed]	[removed]
	[removed]	[removed]	[removed]
2.	[removed]	[removed]	[removed]
	[removed]	[removed]	[removed]

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Calculate the amount of depreciation expense that Evers should record for machine B each year of its useful life under the following assumptions. (Round depreciation cost per unit to 2 decimal places, e.g. 12.25. Round final answers to 0 decimal places, e.g. $2,125.)

(1)		Evers uses the straight-line method of depreciation.
(2)		Evers uses the declining-balance method. The rate used is twice the straight-line rate.
(3)		Evers uses the units-of-activity method and estimates that the useful life of the machine is 126,900 units. Actual usage is as follows: 2014, 48,700 units; 2015, 37,100 units; 2016, 23,500 units; 2017, 17,600 units.

	2014	2015	2016	2017
Straight-line method	$[removed]	$[removed]	$[removed]	$[removed]
Declining-balance method	$[removed]	$[removed]	$[removed]	$[removed]
Units-of-activity method	$[removed]	$[removed]	$[removed]	$[removed]

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Question 4

If a check correctly written and paid by the bank for $427 is incorrectly recorded on the company's books for $472, the appropriate treatment on the bank reconciliation would be to

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add $45 to the bank's balance.

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add $45 to the book's balance.

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deduct $427 from the book's balance.

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deduct $45 from the bank's balance.

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Question 5

Jukebox Company had checks outstanding totaling $10,800 on its June bank reconciliation. In July, Jukebox Company issued checks totaling $77,800. The July bank statement shows that $76,600 in checks cleared the bank in July. A check from one of Jukebox Company's customers in the amount of $1,000 was also returned marked "NSF." The amount of outstanding checks on Jukebox Company's July bank reconciliation should be

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$11,000.

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$1,200.

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$12,000.

[removed]$13,000.

Question 6

Each of the following items affect the cash balance per books except

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NSF checks.

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outstanding checks.

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bank service charges.

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notes collected by the bank.

Question 7

A customer charges a treadmill at Annie's Sport Shop. The price is $4,000 and the financing charge is 6% per annum if the bill is not paid in 30 days. The customer fails to pay the bill within 30 days and a finance charge is added to the customer's account.

What is the amount of the finance charge?

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$240

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$80

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$20

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Question 8

A customer charges a treadmill at Annie's Sport Shop. The price is $4,000 and the financing charge is 9% per annum if the bill is not paid in 30 days. The customer fails to pay the bill within 30 days and a finance charge is added to the customer's account.

The accounts affected by the journal entry made by Annie's Sport Shop to record the finance charge are

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Accounts Receivable
	Interest Revenue

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Accounts Receivable
	Cash

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Cash
	Finance Receivable

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Accounts Receivable
	Interest Payable

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Question 9

Syfy Company on July 15 sells merchandise on account to Eureka Co. for $5,000, terms 2/10, n/30. On July 20 Eureka Co. returns merchandise worth $2,000 to Syfy Company. On July 24 payment is received from Eureka Co. for the balance due. What is the amount of cash received?

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$3,000

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$5,000

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$2,940

[removed]$2,900

Question 10

An aging of a company's accounts receivable indicates that $5,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $900 credit balance, the adjustment to record bad debts for the period will require a

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debit to Allowance for Doubtful Accounts for $4,100.

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debit to Bad Debt Expense for $4,100.

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credit to Allowance for Doubtful Accounts for $5,000.

[removed]debit to Bad Debt Expense for $5,000.

Question 11

The cost of a purchased building includes all of the following except

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closing costs.

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real estate broker's commission.

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remodeling costs.

[removed]all of these are included.

Question 12

A company purchased land for $90,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the historical cost principle, the cost of land would be recorded at

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$102,000.

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$107,000.

[removed]	$90,000.

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Question 13

Hull Company acquires land for $86,000 cash. Additional costs are as follows:

Removal of shed	$	300
Filling and grading		1,500
Salvage value of lumber of shed		120
Broker commission		1,130
Paving of parking lot		10,000
Closing costs		560

Hull will record the acquisition cost of the land as

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$89,610.

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$89,370.

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$96,000.

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$87,690.

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Question 14

All of the following factors in computing depreciation are estimates except

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residual value.

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salvage value.

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useful life.

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cost.

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Question 15

Angie’s Blooms purchased a delivery van for $40,000. The company was given a $4,000 cash discount by the dealer, and paid $2,000 sales tax. Annual insurance on the van is $1,000. As a result of the purchase, by how much will Angie’s Blooms increase its van account?

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$38,000

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$36,000

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$40,000

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$39,000

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