When is a receivable recorded by a service organization?
C)
On June 15, Pronghorn Co sold merchandise on account to Monty Co. for $1,470 terms 2/10, n/30. On June 20, Monty Co. returns merchandise worth $820 to Pronghorn Co. On June 24, payment is received from Monty Co. for the balance due. What is the amount of cash received on June 24?
C)
1470 - 820= 650
650 x 0.02= 13
650 - 13= 637
At what value are accounts receivable on the balance sheet?
C)
Bridgeport Co uses the percentage-of-receivables method for recording bad debt expense. The accounts receivable balance is $73,000 at year-end and the total credit sales were $2,311,000 for the year. Management estimates that 3% of receivables will be uncollectible. What adjusting entry should be made if the Allowance for Doubtful Accounts has a credit balance of $370 before adjustment?
A)
Bad Debt Exp 1820
Allow. for Doubt. Acct. 1820
B)
Bad Debt Exp 2190
Allow. for Doubt. Acct. 2190
C)
Bad Debt Exp 1820
A/R 1820
D)
Allow. for Doubt. Acct. 2190
Bad Debt Exp 2190
A)
7,300 x 0.03= 2,190
2,190 - 370= 1,820
At what amount is a short-term notes receivable recorded on the issue date?
A)
When an uncollectible account is recovered after it has been written off, which of the following accounts will be credited in the process?
B)
Blue Co factors $312,000 of receivables to Indigo Factors. Indigo assesses a 5% fee on the amount of receivables sold. Blue Co factors its receivables to Indigo regularly. What JE does Blue make when the factoring occurs?
Cash 296,400
Service Charge Exp 15,600
A/R 312,000
Ayayai Co sold $8,300 of merchandise to customers who charged their purchases with a bank credit card. The bank charges a 4% fee. Which one of the following is part of the JE to record the credit sales?
A)
8,300 - (8,300 x 0.04)= $7,968
A 90-day promissory note is issued on September 15. What is the note's maturity date?
B)
Riverbed Co has a March 31 fiscal year end. What is the maturity value of a $29,600, 12%, 3-month note receivable dated March 1?
D)
29,600 x 0.12 x (3/12)= 888
29,600 + 888= 30,488
On May 2, Pronghorn Co receives a $4,200 3-month, 10% note from Monty Co as a settlement of its accounts receivable. What entry will Pronghorn Co. makes when it receives the note on May 2?
Grouper Co holds Sheffield Inc.'s $14,900 120-day, 9% note. What is the entry to be made by Grouper Co when the note is collected, assuming no interest has previously been accrued?
A)
Cash 15347
Note Rec. 15347
B)
Cash 14900
Notes Rec. 14900
C)
A/R 15347
Notes Rec 14900
Interest Rev 447
D)
Cash 15347
Notes Rec 14900
Interest Rev 447
D)
Note= 14,900
Interest= 14,900 x 0.09 x (120/360)
= 447
Which of the following is the debit effect of the journal entry to record the dishonor of a note receivable when eventual collection is anticipated?
A)
A/R is debited
Notes Rec. is credited
What is the following correct presentation of A/R and its contra account on the balance sheet?
A/R $6,820,000
Less: Allow. for Doubtful Acct. $4,100
= Net Rec. $6,663,400
Marigold Co had net credit sales during the year of $838,000 and cost of goods sold of $572,000. The net accounts rec. at the beginning of the year was $142,000 and at the end of the year was $178,000. How much is the accounts rec. turnover?
AR Turnover= (Net Sales / Avg. A/R Turnover)
838,000 / ((142,000+178,000) / 2)
= 5.2
Flounder Co sells its goods on terms of 2/10, n/30. It has a receivables turnover ratio of 13.00. What is its average collection period (days)?
365 / Turnover ratio
= 365 / 13
= 28 days
What of the following is not a depreciable asset?
A)
Blue Co purchased land for $80,500. The Co. also paid $13,300 in accrued taxes on the property, incurred $7,200 to remove an old building, and received $4,100 from the salvage of the old building. At what amount will the land be recorded in the accounting records?
(80,500 + 13,300 + 7,200) - (4,100)= $96,900
Indigo Corp. recently purchased a number of trucks from Blue Corp for $502,000. Delivery costs incurred were $10,900, painting logos on the trucks cost Indigo $4,400 and the insurance premium for the first year of use was $14,200. What is the acquisition cost of the trucks Indigo Corp. should record?
(502,000+10,900+4,400)= $517,300
Which of the following will minimize depreciation expense in the first year of owning an asset?
D)
What is depreciation?
A)
Grouper Co purchased equipment on Jan 1, 2025, at a total invoice of $412,000. The equipment has an estimated salvage value of $12,200 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at Dec 31, 2026, if the straight-line method of depreciation is used?
(412,000 - 12,200) / 5= 79,960
79,960 x 2= $159,920
At the beginning of the year, Sheffield Co purchased a piece of machinery for $79,000. It has a salvage value of $6,910, an estimated useful life of 9 years, and estimated units of output of 124,380 units. Actual units produced during the first year were 14,600. How much is depreciation exp for the first year under the straight-line method?
(79,000 - 6,910) / 9= $8,010
Swift Towing Co purchased a tow truck for $92,000 on Jan 1, 2025. It was originally depreciated on a straight-line basis over 10 years with an estimated salvage value of $14,500. On Dec 31, 2027, before adjusting entries had been made, the company decided to change the remaining estimated life to 4 more years as a Jan 1, 2027, and the salvage value was adjusted to $3,400. How much is depreciation exp for 2027?
(92,000 - 14,500) / 10= 7,750
92,000 - (7,750 x 2)= 76,500
(76,500 - 3,400) / 4= $18,275
On Jan 1, 2025, Riverbed Co purchased some equipment for $50,000. The estimated salvage value and useful life are $6,800 and 4 years, respectively. On Jan 1, 2027, the company determines that the asset's remaining useful life is 3 years. What is the revised depreciation expense for 2027 if the company uses the straight-line method?
(50,000 - 6,800) / 4= 10,800
(10,800 x 2) / 3= $7,200
Cheyenne Trucking Inc. purchased a new semi-truck on Jan 1, 2025 for $219,000. Its expected useful life is 4 years and its salvage value is estimated at $28,000. What is the depreciation for 2025 using the declining-balance method at a double the straight-line rate?
(1/4 x 2)= 0.50
0.50 x 219,000= $109,500
Flint Enterprises purchased a truck for $11,100 on Jan 1, 2024. The truck will have an estimated salvage value of $3,600 at the end of 7 years. If you use the units-of-activity methos, which formula can be used to calculate the balance in accumulated depreciation at Dec 31, 2025.
B)
When a plant asset is retired, the difference between original cost and the accumulated depreciation of the asset is
A)
On April 1, 2025, Pronghorn Co sells some equipment for $18,150. The original cost was $50,050, the estimated salvage value was $8,050, and the expected useful life was 6 years. On December 31, 2024, the Accumulated Depreciation account had a balance of $29,040. How much is the gain or loss on the sale?
C)
Given the following account balances, how much amortization expense on Michelle Enterprises income statement for the current year if Michelle thinks all of its intangibles should be amortized over ten years?
Sales Revenue $45,035,000
Patents $1,536,000
A/R $4,013,000
Land $15,045,000
Equipment $25,025,000
Copyrights $10,270,000
Goodwill $4,524,000
Research & Development $2,002,000
Patents: $1,536,000
Copyrights: $1,027,000
Total= $2,563,000 / 10
= $256,300
On March 1, 2025, Pronghorn Co purchased a patent from another company for $100,200. The estimated useful life of the patent is 10 years, and its remaining legal life is 15 years. How much is amortization expense for 2025?
A) $10,020
B) $8,350
C) $6,680
D) $5,680
Amortization is calculated using the straight-line method;
100,200 / 10= 10,020
10,020 x (10/12)= $8,350
Which of the following gives the recipient the right to manufacture, sell, or otherwise control an invention for a period of 20 years?
B)
Which of these statements is true?
D)
Bramble Industries average total assets for the year are $4,001,000 its net income is $800,200, and its net sales are $1,001,000. What is the return on assets?
ROA= Net Income / (Avg Total Assets)
= 800,200 / 4,001,000
= 0.20
Concord Cos average total assets are $209,000, net sales are $147,000, and net income is $41,800. How much net income did Concord Co generate for each dollar of assets invested?
Net sales / Avg total assets
41,800 / 209,000
= $0.20
Which of the following is not typically classified as a current liability?
D)
A corporation issued a $51,300, 8%, 4-month notes on July 1. The corporation's year-end is September 30. Which one of the following is the adjusting entry for interest on September 30?
Interest Exp. 1026
Interest Pay. 1026
Pronghorn Co collected $5145 from cash sales to customers, which includes both sales rev and 5% sales taxes. How much should be recognized as sales rev.
5145 / 1.05= $4,900
Sales taxes recorded at the time the sale takes place are
A)
Martinez Insurance Co collected a premium of $18,900 for a 1-year insurance policy on April 1. What amount should Martinez report as a current liability for Unearned Revenue at December 31?
A) $0
B) $4725
C) $14175
D) $18900
There are 3 months left on the insurance policy
18900 x (3/12)= $4,725
On Dec 30, 2025, a company issued a note payable of $65,000 of which $13,000 will be repaid each year. What is the proper classification of this note on the Dec 31, 2025 balance sheet?
C)
When recording payroll
C)
Which of the following statements is true regarding secured and unsecured bonds?
C)
Which statement describes the market interest rate?
D)
The present value of a bond is also know as its
C)
On Jan 1, 2025, Indigo Corp. issues $331000 of 5-year, 8% bonds at face value. Which one of the following is one effect of the entry to record the issuance of the bonds?
C)
Four-Nine Corp issued bonds at par that pay every Jan 1. Which of the following is one effect of the entry to accrue bonds interest at December 31?
C)
Tanner, Inc. issued a 10%, 5-year, $100,000 bond when the market rate of interest was 12%. At what value will the bond sell?
B)
The issued value has a lower interest % (10%) compared to the market value (12%). Therefore, its a discount.
If the company issues a $100,000, 10%, 10-year bond, that pays interest annually when the market interest rate is 12%, the bond would sell at an amount
C)
Since the market rate of interest is higher than the contractual rate of interest, investors will have to pay less than face value for the bonds. Bonds will sell at discount.
Marigold Enterprises issued 2800 bonds with a face value of $1000 each at 96. What is the entry to record the issuance?
Cash 2,688,000
Discount on Bonds Pay. 112,000
Bonds Pay. 2,800,000
A $532,000 bond is retired at 101.25 when the unamortized premium is $5410. Which of the following is on effect of recording the retirement.
C)
Carrying Value: 532,000 + 5,410= 537,410
(532,000 x 1.0125)= 538,650
Bonds retired - CV
537,410 - 538,650 = -1240
A $1240 loss
When a company retires bonds before maturity, the gain or loss on redemption is the difference between the cash paid and the
A)
When a bond is sold at a premium, at what value is it reported on the balance sheet?
B)
Blossom Corp uses the percentage-of-receivables basis to record bad debt expense.
The company estimates that 2% of A/R will become uncollectible.
a) Prepare the JE to record bad debt expense for the year
b) What is the ending (adjusted) balance in Allowance for Doubtful Accounts?
c) What is the cash (net) realizable value?
a.
Allow. for Doubt. Acct: [($610,000 x 0.02) + 5,300]= 17,500
Bad Debt Exp 17,500
Allow. for Doubt. Acct. 17,500
b)
Allow. for Doubt. Accts
Unadj. Bal. 5,300 | Bad Debts 17,500
| Adj. Bal. 12,200
c)
Cash (net) realizable value of receivables: A/R (ending) - Ending (adjusted) bal. in Allowance for Doubtful Accounts
(610,000 - 12,200)= $597,800
At December 31, 2021, Wildhorse Co had a balance of $30,000 in the Allow. for Doubtful Accts. During 2022, Wildhorse wrote off accounts totaling $26,640. One of those accounts ($3,600) was later collected. At Dec. 31, 2022, an aging schedule indicated that the balance in the Allow. for Doubtful Accounts should be $38,400.
Prepare the JE to record the 2022 transactions of...
1) To record write-off of A/R
2) To reverse write-off of A/R
3) To record collection of accounts receivable
4) To adjust allowance account to total estimated uncollectibles
1)
Allow. for Doubtful Accts
26,640
A/R
26,640
2)
A/R
3,600
Allow. For Doubtful Accts
3,600
3)
Cash
3,600
A/R
3,600
4)
Allow. for Doubt Accts= [38,400-(30,000-26,640+3,600)]= $31,440
Bad Debt Expense
31,440
Allow. For Doubtful Accts
31,440
Crane Co. has the following transactions related to notes receivable during the last 2 months of the year. The company does not make entries to accrue interest except at Dec. 31.
Nov. 1: Loaned $59,400 cash to C. Bohr on a 12-month, 6% note.
Dec. 11: Sold goods to K.R. Pine, Inc., receiving a $1,800, 90-day, 9% note.
Dec. 16: Received a $16,800, 180-day, 11% note to settle an open account from A. Murdock.
Dec. 31: Accrued interest revenue on all notes receivable
Nov. 1
Notes Receivable
59,400
Cash
59,400
Dec. 11
Notes Receivable
1,800
Sales Revenue
1,800
Dec. 16
Notes Receivable
16,800
Accounts Receivable
16,800
Dec. 31
Interest Receivable
680
Interest Revenue
680
Interest: [(59,400 x 0.06 x (2/12)) + (1,800 x 0.09 x (20/360)) + (16,800 x 0.11 x (15/360))] = 594 + 9 + 77 = $680
Blossom Co purchased a new machine on Sept 1, 2022, at a cost of $142,000. The company estimated that the machine will have a salvage value of $14,000. The machine is expected to be used for 10,000 working hours during its 5-year life.
a) Compute the depreciation exp under the straight-line method for 2022, 2023, and 2024.
b)Compute the depreciation exp under the units-of-activity for 2022, assuming machine usage was 910 hours.
c) Compute the depreciation exp under the declining-balance using double the straight-line rate for 2022, 2023, 2024.
d) Assume straight-line method is used. What amount of gain or loss would Blossom recognize if they sell the asset for $67,000 on 12/31/24?
e) Assume the double-declining balance method is used. What amount of gain or loss would Blossom recognize if they sell the asset for $67,000 on 12/31/24?
Carla Vista Machines reported the following information about two of its machines as of Dec. 31, 2023.
Machines
Data Acquired
Cost
Useful Life (in years)
Salvage Value
#1
Jan. 1, 2024
$768,000
20
$38,400
#2
July 1, 2023
$115,200
5
4,800
a. Calculate the annual depreciation for each asset using the straight-line method.
b) Calculate the accumulated depreciation and book value of each asset on Dec. 31, 2024.
c) If the company determined during 2025 the machine #2 now has a salvage value of $9,600, would you expect the accumulated depreciation as of Dec. 31, 2024, to change?
a)
Machine 1: (768,000 - 38,400) / 20= $36,480
Machine 2: (115,200 - 4,800) / 5= $22,080
b)
Accum. Dep. Machine 1: (36,480 x 11)= $401,280
Accum. Dep. Machine 2: (22,080 x 1.5)= $33,120
Book value Machine 1: (768,000 - 401,280)= $366,720
Book value Machine 2: (115,200 - 33,120)= $82,080
c)
No, the accumulated deprecation would not change.
There would be no effect.
Here are selected 2025 transactions of Concord Corporation.
Jan 1.
Retired a piece of machinery that was purchased on Jan 1, 2015. The machine cost $61,300 and had a useful life of 10 years with no salvage value.
Jan 30
Sold a computer that was purchased on Jan 1, 2023. The computer cost $35,000 and has a useful life of 4 years with no salvage value. The computer was sold for $4,400 cash.
Dec. 31
Sold a delivery truck for $9,450 cash. The truck cost $24,700 when it was purchased on Jan 1, 2022, and was depreciated based on a 5-year useful life with a $4,100 salvage value.
Journalize all entries required on the above dates, including entries to update depreciation on assets disposed of, where applicable. Concord Corporation uses straight-line depreciation.
Jan. 1
Accum. Depre. - Equip
61,300
Equip
61,300
Jun. 30
Depreciation Exp
4,375
Accum. Depre. - Equip
4,375
(35,000 / 4) x (6/12)= 4,375
Jun. 30
Accum. Depre. - Equip
21,875
Cash
4,400
Loss on Disposal of Plant Asset
8,725
Equipment
35,000
Dec. 31
Depreciation Exp
4,120
Accum. Depre. - Equip
4,120
Accum. Depre. - Equip
16,480
Cash
9,450
Gain on Disposal of Plant Assets
1,230
Equipment
24,700
On Aug 1, 2025, Flint Corp issued $502,800, 7%, 10-year bonds at face value. Interest is payable annually on Aug 1. Flint's year-end is Dec 31.
a. Prepare the JE to record the issuance of the bonds.
b) Prepare the JE to record the accrual of interest on Dec 31, 2025
c) Prepare the JE to record the payment on interest on Aug 1, 2026
a)
Aug 1, 2025
Cash
502,800
Bonds Payable
502,800
b)
Interest Pay: (502,800 x 0.07 x (5/12))= $14,665
Dec 31, 2025
Interest Expense
14,665
Interest Payable
14,665
c)
Int Exp: (502,800 x 0.07 x (7/12))= $20,531
Cash: (502,800 x 0.07)= $35,196
Aug 1, 2026
Interest Exp
20,531
Interest Payable
14,665
Cash
35,196
Company purchased equipment and incurred these costs:
Cash Price: $24,000
Sales Taxes: 1,200
Insurance during transit: 200
Installation and testing: 400 Total Costs $25,800
What amount should be recorded as the cost of the equipment?
D)
The benefits to leasing include each of the following except:
B)
Additions to plant assets are:
A)
Depreciation is a process of:
B)
Pierce Co incurred $150,000 if research and development costs in its laboratory to develop a new product. It spent $20,000 in legal fees for a patent granted on Jan 2, 2025. On July, 2025, Pierce paid $15,000 for legal fees in a successful defense of the patent. What is the total amount that should be debited to Patents through July 31, 2025?
C)
Legal fees + defense of patents
= 20,000 + 15,000
= 35,000
If a company reports goodwill as an intangible asset on its books, what is the one thing you know with certainty?
A)
Which of the following measures provides an indication of how efficient a company is in employing its assets?
A)
Alexis Co has total proceeds from sales of $4,515. If the proceeds include sales taxes of 5%, what is the amount to be credited to Sales Revenue?
D)
(4,515 / 1.03)= $4,300
When recording payroll:
A)
Employer payroll taxes do not include:
A)
What term is used for bonds that have specific assets pledged as collateral?
C)
The market interest rate:
B)
Laurel Inc. issues 10-year bonds with a maturity value of $200,000. If the bonds are issued at a premium, this indicates that:
B)
Goethe Corp. redeems its $100,000 face value Bonds at 105 on Jan 1, following the payment of interest. The carrying value of the bonds at the redemption date is $103,745. The entry to record will include a:
Dalglish Co purchased a new piece of equipment for $355,000 at the beginning of the year. The equipment is expected to last 8 years and produce 559,000 units. The estimated value is $11,800. Calculate the depreciation expense for the third year using the declining balance using double declining rate.
Year 1: [355,000 x ((1/8) x 2))]= 88,750
Year 2: (355,000-88,750) x 0.25= 66,563
Year 3: (355,000-88,750-66,563) x 0.25= 49,922
Leiva LLC sold a very fancy vehicle on 3/1/2022. Cost of the vehicle was $346,000. The estimated salvage value was $7,000. The estimated useful life was 12 years. The vehicle was purchased on 1/1/2017. It was sold for $247,000. Assume straight-line depreciation. Record the entries at the time of sale.
1) Record partial year depreciation before sale
2) Record Sale: Determine accumulated Depreciation
3) Record Sale: Determine gain or loss
4) Record Sale: Record the journal entry
1) Partial year depreciation before sale
(346,000 - 7,000) / 12= 28,250
28,250 x (2/12)= $4,708
Depreciation Exp
4,708
Accumulated Deprec. - Vehicle
4,708
2) Determine Accumulated Depreciation
Depreciation Exp= $28,250 (1 year)
28,250 x 5= 141,250 (Accum. Depre. 2017-2021)
28,250 x (2/12)= 4,708 (Partial year deprec. exp 2022)
c) Determine Gain or Loss
Net book value= Cost - accum. deprec
= 346,000 - (141,250+4,708)= 200,042
We sold it for $247,000, so this is a gain becaue 247,000> 200,042
d) Record the JE
Cash
247,000
Accum. Deprec. - Vehicle
14,958
Vehicle
346,000
Gain on sale of plant Assets
46,958
Paisley Corp issues $253,000 of 10% 15-year bonds on 1/1/2020. Interest payable annually on 1/1. Record the entries on:
1) Date of issuance
2) Year-end 12/31
3) Payment of interest on 1/1
4) Repayment of bond
1) Date of issuance
Cash
253,000
Bonds Payable
253,000
2) Year-end 12/31
253,000 x .10= $25,300
Interest Exp
25,300
Interest Pay
25,300
3) Payment of interest on 1/1
254,000 x .10= $25,300
Interest Payable
25,300
Cash
25,300
4) Repayment of bond
Bonds payable
253,000
Cash
253,000
Lideel Corp issues 7,000 bonds each at $1,000. The bonds are for 15 years and have 8% interest. They are issued on 1/1/2020 at 102. Which of the following is correct about the JE?
