Accounting test

FINAL EXAM:

NAME: ___________________

The following select transactions have not yet been recorded by the company’s accountants. Please review the following transactions and record all relevant transactions and adjusting transactions. Each transaction must be recorded on a journal entry sheet with a reference number, date, and explanation (in good form). Use 12/31/2016 as the end of the year to post any required adjusting entries on 12/31/2016 Assume that this company is on a 12 month calendar year. In most of the scenarios the transaction is described and you must determine all of the appropriate journal entries to record the transactions and any subsequent adjusting entries (for example, depreciation expense on 12/31/2016).

a. Purchased new equipment for $50,000 by paying cash on Oct 1. This equipment will have an 8 year useful life, an estimated residual value of 8,000.

b. Purchased $4,000 of equipment on July1, paying $500 in cash and owing the rest on accounts payable to the supplier. The equipment will be depreciated using the double declining balance method have a useful life of 4 years. It is estimated to have a 500 residual value.

c. On Sept 1 paid the supplier of equipment purchased on July 1 the remaining balance.

d. Due to expansion the Company bought a new building and land on Oct 1 for $300,000 with cash which were the proceeds of a loan. The land is valued at 100,000 and the building at 200,000. The building will be depreciated using the straight line depreciation method. The estimated residual value of the building is $50,000 and it has an expected useful life of 25 years. Mortgage payments are $5,000 per month and assume that $3,000 is interest for payments on Nov 1, Dec 1, and Jan 1 of the next year.

e. The Company sold equipment for $18,000 which was classified as an asset on June 30. For simplification, this equipment was put into service on the same day (June 30) eight years ago. The asset's life was originally estimated to be 10 years. The original cost was $50,000 with an estimated residual value of $5,000. The asset was being depreciated using the straight-line method.

f. During the year the company sold 5000 units of inventory at $1,200 each. (Sold 1000 units on Feb 1, Sold 2000 units on May 1, sold 500 units on Aug 1, and 1500 units Dec 1) The company uses FIFO.

Date Purchased		Units	Unit Costs
10/1/2015		1000	800
11/15/2015		1500	810
1/15/2016		1000	815
2/20/2016		2500	820
5/10/2016		3000	830
8/22/2016		1000	850
10/15/2016		2000	850
12/10/2016		3000	860

g. The company determined that some slow moving inventory existed that is recoded at a cost of $10,000 but has a current market value of $6,000. Management has decided that a LCM adjustment is required.

h. At the end of the year company estimates its bad debt expense using an aging of the accounts receivable. Record the transaction to record the bad debt expense.

Aging Category	Estimated Percent not collectable	Amount outstanding
Not yet due	2%	10,000,000
Up to 90 Days past due	12%	3,000,000
Over 90 Days past due	35%	1,000,000