Principles of Management
chuckprofessor
Assignment2ACCT101wrk.docx
College of Administration and Finance Sciences
Assignment (2)
Deadline: Saturday 11/11/2023 @ 23:59
|
Course Name: Principles of Accounting |
Student’s Name: |
|
Course Code: ACCT 101 |
Student’s ID Number: |
|
Semester: 1st |
CRN: |
|
Academic Year: 1445 H |
For Instructor’s Use only
|
Instructor’s Name: |
|
|
Students’ Grade: /15 |
Level of Marks: High/Middle/Low |
Instructions – PLEASE READ THEM CAREFULLY
· The Assignment must be submitted on Blackboard ( WORD format only) via allocated folder.
· Assignments submitted through email will not be accepted.
· Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.
· Students must mention question number clearly in their answer.
· Late submission will NOT be accepted.
· Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.
· All answers must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism.
· Submissions without this cover page will NOT be accepted.
Assignment Question(s): (Marks 15)
Q1. Abdulaziz Co. purchased a machine in 2013 for SAR 50,000 that has a useful life of 5 years with a salvage value of SAR 5,000.
Calculate the depreciation expense, accumulated depreciation, book value throughout its useful life using:
1- Straight-line Method.
Depreciation Expense = (Cost - Salvage value) / Useful life (Theovanus et al., 2023).
= (SAR 50,000 - SAR 5,000) / 5 = SAR 9,000
|
Year |
Depreciation Expense |
Accumulated Depreciation |
Book Value |
|
2013 |
SAR 9,000 |
SAR 9,000 |
SAR 41,000 |
|
2014 |
SAR 9,000 |
SAR 18,000 |
SAR 32,000 |
|
2015 |
SAR 9,000 |
SAR 27,000 |
SAR 23,000 |
|
2016 |
SAR 9,000 |
SAR 36,000 |
SAR 14,000 |
|
2017 |
SAR 9,000 |
SAR 45,000 |
SAR 5,000 |
2- Units of Production Method if the machine produces 100,000 units.
Here is a table of units produced each year:
|
First |
Second |
Third |
Fourth |
Fifth |
|
23,000 |
25,000 |
- |
30,000 |
22,000 |
Unit Production Rate = (Original Value – Salvage Value) / Estimated Unit Production
|
Year |
Units Produced |
Depreciation Expense |
Accumulated Depreciation |
Book Value |
|
2013 |
23,000 |
SAR 10,350 |
SAR 10,350 |
SAR 39,650 |
|
2014 |
25,000 |
SAR 11,250 |
SAR 21,600 |
SAR 28,400 |
|
2015 |
0 |
SAR 0 |
SAR 21,600 |
SAR 28,400 |
|
2016 |
30,000 |
SAR 13,500 |
SAR 35,100 |
SAR 14,900 |
|
2017 |
22,000 |
SAR 9,900 |
SAR 45,000 |
SAR 5,000 |
3- Double Declining Balance Method (5 Marks).
Depreciation rate = 1 / 5 = 20%
Double declining rate = 2 * 20% = 40%
|
Year |
Depreciation Expense |
Accumulated Depreciation |
Book Value |
|
2013 |
SAR 50,000 * 40% = SAR 20,000 |
SAR 20,000 |
SAR 30,000 |
|
2014 |
SAR 30,000 * 40% = SAR 12,000 |
SAR 32,000 |
SAR 18,000 |
|
2015 |
SAR 18,000* 40% = SAR 7,200 |
SAR 39,200 |
SAR 10,800 |
|
2016 |
SAR 10,800 * 40% = SAR 4,320 |
SAR 43,520 |
SAR 6,480 |
|
2017 |
SAR 6,480 * 40% = SAR 1,480 |
SAR 45,000 |
SAR 5,000 |
Solution
Note payable=SAR 25,000,
Time=120-day
Rate= 6%
Assuming 365 days in 1 year,
a. The interest to be paid;
=$25,000 * 6% * 120 days / 365 days = $493.15
b. The issuance of the note payable
|
General Journal |
|||
|
Date |
Transaction |
Debit |
Credit |
|
1ST JUNE,2019 |
Issuance of the note payable |
$25,000 |
$25,000 |
c. Payment of the note on September 29, 2019
|
General Journal |
|||
|
Date |
Transaction |
Debit |
Credit |
|
29th September,2019 |
Issuance of the note payable |
$25,000 |
$25,000 |
|
|
Interest Expense |
$493.15 |
|
|
|
|
|
$25,493.15 |
Q3- Assume that you have a company. The management estimates that 2.5% of sales will be uncollectible. Give any amount of sales and prepare the journal entry using the percent of sales method (5 marks).
Let’s assume the company made sales worth; $150,000,
Sales: $150,000
Uncollectible Percentage: 2.5%
Uncollectible Amount = Sales * Uncollectible Percentage
Uncollectible Amount = $150,000 * 2.5% = $3,750
Journal entry:
|
Account |
Debit ($) |
Credit ($) |
|
Bad Debts Expense |
$3,750 |
|
|
Allowance for Doubtful Accounts |
|
$3,750 |
Explanation:
Bad Debts Expense (Debit): The Bad Debts Expense account is debited with $3,750. This represents the estimated amount of accounts receivable that the company expects to be uncollectible based on sales of $150,000. Debiting this account recognizes the expense associated with these uncollectible accounts (Alsharari & Abousamra, 2019).
Allowance for Doubtful Accounts (Credit): The Allowance for Doubtful Accounts account was credited with $3,750. This is a contra-asset account that represents the estimated amount of uncollectible accounts receivable. By crediting this account, the allowance for potential bad debts is increased, reflecting a reduction in the carrying value of accounts receivable on the balance sheet(Alsharari & Abousamra, 2019).
References
Alsharari, N. M., & Abousamra, R. (2019). Financial Crisis, bad debt and uncollectible receivables: Evidence from UAE. Indonesian Management and Accounting Research, 17(2), 119-142.
Theovanus, G. P., Wijaya, J. J., & Tungribali, H. R. H. (2023). Depreciation, Impairments, and Depletion. Available at SSRN 4340131.
