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On November 1, GrubStop Company's sells $5,000 of groceries to PD Grocers, terms 2/10, n/30. PD Grocers uses GrubStop's credit card to complete the transaction. A. $5,000 credit to Accounts Receivable B. $4,704 credit to Accounts Receivable C. $5,000 debit to Accounts Receivable D. None of the above
C. $5,000 debit to Accounts Receivable Accounts Receivable: 5000 Sales Revenue: 5000
On November 3, PD Grocers returns $200 of the groceries to GrubStop. On November 3, GrubStop's required entry includes a A. $200 credit to Sales Revenue B. $200 credit to Accounts Receivable C. $200 debit to Sales Revenue D. None of the above
B. $200 credit to Accounts Receivable Sales Returns and Allowances: 200 Account Receivable: 200
On November 11, PD pays Grubstop for the purchased groceries A. $4,704 credit to Accounts Receivable B. $4,800 credit to Accounts Receivable C. $96 credit to Sales Discount D. None of the above
B. $4,800 credit to Accounts Receivable Cash: 4704 Sales Discount: 96 Accounts Receivable: 4800
What is the write off for uncollectible accounts?
Bad Debts Expense: debit Receivable: credit
What is Bad Debts Expense categorized as?
selling expense
When do you record bad debt expense in the direct write off?
If a particular account is deemed uncollectible
Why is direct write off approach inconsistent with GAAP?
Violates expense recognition principle
Fia's Furniture Store sells $25,000 of goods and accepts a U.S. Bank Visa card that charges a 2% service fee. If Fia's uses a periodic system, the required entry includes a A. $25,000 debit to Accounts Receivable B. $500 credit to Service Charge Expense C. $24,500 debit to Cash D. None of the above
C. $24,500 debit to Cash Cash: $24,500 Service Charge Expense: 500 Sales Revenue: 25,000
Accounts Receivable: 100 AFDA: 30 Accounts Receivable, net: 70 If AFDA has an unadjusted credit balance of $5 at the end of the period, the required adjusting entry includes A. $25 debit to Bad Debts Expense B. A $25 credit to Accounts Receivable C. Both (A) and (B) are correct D. None of the above
A. $25 debit to Bad Debts Expense Bad Debts Expense: $25 AFDA: 25 Do this to make the AFDA $30 as shown above
Crest Company estimate that $3000 of its $12,000 end of the period accounts receivable balance will be uncollectible. If the AFDA has a $1200 debit balance, the adjustment to record bad debts for the period includes a A. debit to Bad Debts Expense for $3,000 B. debit to Bad Debts Expense for $4,200 C. debit to Bad Debts Expense for $1,800 D. credit to AFDA for $4,000
B. debit to Bad Debts Expense for $4,200
What is the total interest on a $25,000, 10%, 1-year note receivable? A. $2,500 B. $25,900 C. $27,500 D. $25,000
A. $2,500 25,000 times .1 times (12/12)= 2500
What is total interest on a $21,000, 6%, 60-day note receivable (use 360 days for calculation) A. $630 B. $1260 C. $420 D. $210
D. $210 21,000 times .06 times (60/360) = 210
What is the total interest on a $21,000, 2%, 10-month note receivable is A. $420 B. $4200 C. $350 D. None of the above
C. $350
A local restaurant purchases dishwasher-safe plates and a vacant lot that is held for resale. The restaurant installs a cobblestone walkway leading to the front door of the restaurant. Which item below lists all the plant assets that appear on the restaurant’s balance sheet following the purchase of the plates and vacant lot and the installation of the walkway? a. Equipment and Land b. Equipment, Land and Land Improvements c. Land, Land Improvements d. Equipment and Land Improvements
d. Equipment and Land Improvements
Which of the following is not properly classified as property, plant, and equipment? A. Building used as a factory. B. Land used in ordinary business operations. C. A truck held for resale by a car dealership. D. Land improvement, such as parking lots and fences.
C. A truck held for resale by a car dealership.
Graft Company purchased land for a new parking lot. The company paid a total of $99,000 for the site, which included $24,000 for the lot and $75,000 for an existing building located on the property. Graft planned to demolish the existing building. The paving cost $35,000 and lights to illuminate the new parking area cost $12,000. Graft should A. record a $24,000 increase in the Land account. B. record a $47,000 increase in Land Improvements.C. record a $71,000 increase in the Land account. D. record a $71,000 increase in Land Improvements.
B. record a $47,000 increase in Land Improvements 35,000 + 12,000= 47,000
Avis Athletic Club paid $32,000 for used gym equipment for the health club and received a 10% discount for paying within the discount period. Avis also paid $200 for shipping, sales tax of $1,500 and $500 to have the equipment cleaned before installing the equipment in the athletic club. A. The $500 cleaning fee is a revenue expenditure. B. The $500 cleaning fee is capitalizable.
B. The $500 cleaning fee is capitalizable. It is capitalizable because it has to be done in order to install the equipment.
Roston Company pays a total of $62,000 to acquire land for a new parking lot. The land has an existing shed that is removed to prior to paving the lot. Additional costs include: Removal of shed $ 300 Filling and grading $1,500 Salvage value of shed $120 Broker commission $1,130 Paving of parking lot $10,000 Closing costs $560 What is the capitalizable cost of the land? A. $62,000. B. $63,690. C. $65,610. D. $65,370
D. $65,370 62,000 + 300 + 1500 - 120 +1130 +560= 65,370
What is Property, Plant and, Equipment (PPE)
Long-term, physical resources Used in the business Not intended for resale
What are the 4 plant assets?
Land, Land Improvements, Buildings, Equipment
PPE Plant Assets Land
A business site
PPE Plant Assets Land Improvements
physical structures attached to land
What are capital expenditures?
Acquire and improve. Include in cost of plant asset on balance sheet. Cost to acquire asset and get it ready for use. Costs that enhance or improve or extend useful life. Generally significant and infrequent
What are revenue expenditures? Maintain
record as expenses on income statement. Costs incurred to maintain plant asset. Generally recurring, less significant costs
Capitalizable Costs Land Examples
purchase price, relator fees, razing fees, subtract salvage, closing costs
Capitalizable Costs Land Improvements and Equipment examples
purchase price, sales tax, installation, subtract discounts, shipping
Capitalizable Costs Existing building
purchase price, relator fees, closing costs
Capitalizable Costs New construction building
construction cost, excavation fees, interests during construction, and architect fees
What is direct write off approach?
Method of accounting for bad debts that involves charging receivable balances to Bad Debts Expenses at the time receivable from a particular company are determined to be uncollectible.
What accounts are debited and credited in the direct write off method?
Debit Bad Debts Expense Credit Accounts Receivable
What is the allowance method?
method of accounting for bad debts that involves estimating uncollectible accounts at the end of the period
What accounts are debited and credited in allowance method?
Debit Bad Debt Expenses, Credit Allowance for Doubtful Accounts
What kind of account is Allowance for Doubtful Accounts?
contra account to Accounts Receivables
What debit and credit entries are done when actual uncollectible are written off for the allowance method?
Debit Allowance for Doubtful Accounts, Credit Accounts Receivable
What happens to Allowance for Doubtful Accounts at the end of the fiscal year?
AFDA is subtracted from Accounts Receivable. AFDA is not closed.
What does a write off of an uncollectible account affect?
reduces Accounts Receivable and Allowance for Doubtful Accounts
What is the journal entry for recovering a bad debt?
Reverse the entry made in writing off the account then journalize the collection in a usual matter
What is cash (net) realizable value?
net amount of a company expects to receive in cash from receivables
What are the five steps to managing accounts receivables?
determine to whom to extend credit
establish a payment period
monitor collections
evaluate the liquidity of receivables
accelerate cash receipts from receivables when necessary
What is a promissory note?
a written promise to pay a specified amount of money on demand or at a definite time
When can promissory notes be used?
when individuals and companies lend or borrow money, 2. when the amount of transactions and credit period exceed normal limits 3. settlement of accounts receivable
What is the equation for straight line depreciation?
Depreciable cost(cost - salvage value) times straight line rate (1/estimated useful life)
How is cost defined in depreciation terms?
All expenditures necessary to acquire the asset and make it ready for intended use
What is the definition of useful life in depreciation terms?
estimate of the expected life based on need for repair, service life, and vulnerability to obsolescence
What is salvage value in depreciation terms?
estimate of the asset's value at the end of its useful life
What type of accounting is depreciation expense recorded?
In accrual accounting
What is the depreciable cost equation?
Cost - Salvage Value
What is the straight line rate equation?
1/useful life
What is the annual depreciation expense equation for straight-line depreciation?
depreciable cost times straight line rate
What is the adjusting entry for straight line depreciation?
Depreciation Expense: debit Accumulated Depreciation: credit
When is an asset fully depreciated?
When book value= salvage value
what is the units of activity rate equation?
estimated activity over useful life= $/unit
What is the depreciation expense equation for units of activity method?
rate times actual activity during the period
What plant assets cannot be used in units of activity method?
Buildings and furniture
On January 1, 2022, BD Company purchased equipment for $150,000, paid shipping of $7,000 and paid $20,000 to build a foundation and have the equipment installed. BD’s records showed an estimated salvage value of $30,000 and an estimated useful life of five years. If BD uses straight-line depreciation, the depreciation expense for 2022 is a. $35,400. b. $29,400. c. $24,600. d. $24,000.
b. $29,400. 150,000 + 7,000 + 20,000= 177,000 177,000-30,000= 147,000 147,000 times (1/5) = 29,400
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. If the equipment is depreciated using the units-of- activity method, what is the depreciation expense if the equipment is used 2,700 hours during the period? a. $75,000. b. $70,000. c. $75,600. d. $72,500.
c. $75,600. 300,000 - 20,000 = 280,000 280,000/10,000 hrs = 28 28 times 2700 = 75,600
Depreciable cost equals a. Cost minus Salvage Value. b. Cost plus Salvage Value. c. Cost minus Accumulated Depreciation d. Cost plus Accumulated Depreciation.
a. Cost minus Salvage Value.
Capital expenditures include a. the cost of improving a Land Improvement. b. the cost of maintaining a Land Improvement. c. Both (a) and (b) are correct. d. The cost of maintaining equipment.
a. the cost of improving a Land Improvement.
An asset is fully depreciated if a. book value equals depreciable cost. b. book value equals salvage value. c. accumulated depreciation equals depreciable cost. d. Both (b) and (c) are correct.
d. Both (b) and (c) are correct. For a fully depreciated plant asset, book value will equal salvage value and accumulated depreciation will equal depreciable cost.
Which statement below is a true statement? a. When purchasing delivery equipment, sales taxes should be charged to Equipment and motor vehicle licenses should be classified as revenue expenditures. b. When purchasing delivery equipment, sales taxes should be classified as revenue expenditures and motor vehicle licenses should be charged to Equipment. c. When purchasing delivery equipment, sales taxes and motor vehicle licenses should be charged to Equipment. d. When purchasing delivery equipment, sales taxes and motor vehicles should be classified as revenue expenditures.
a. When purchasing delivery equipment, sales taxes should be charged to Equipment and motor vehicle licenses should be classified as revenue expenditures. Explanation: Capitalizable costs include all costs to acquire a plant asset and get it ready for use. Sales tax is capitalizable as part of the cost of the equipment. Recurring costs such as a motor vehicle license are revenue expenditures and are listed as expenses on the income statement.
Which item below explains the underlying rationale for depreciation? a. The fair market value of plant assets declines over time. b. The productivity of plant assets is assumed to decline over time. c. Plant assets should be retired if the assets are fully depreciated. d. The likelihood that plant assets will be converted into cash increases over time.
b. The productivity of plant assets is assumed to decline over time.
Vince Corporation purchases an old warehouse as its training facility. The warehouse requires some work before the company can use the building. After replacing the wiring to satisfy code standards and replacing the roof, the company pays a cleaning company to clean all rooms. Due to the unclean conditions in the warehouse, the cleaning must be completed to begin using the building as a training facility. Which of the following statements is true? a. The cost of the building will not include the cleaning cost. b. The cost of the building will include the cost of rewiring, replacing the roof and cleaning. c. The cost of the building is the purchase price of the building, while the additional expenditures are all capitalized as Building Improvements. d. Costs incurred to rewire the warehouse, replace the roof and clean the warehouse are classified as revenue expenditures.
b. The cost of the building will include the cost of rewiring, replacing the roof and cleaning. Explanation: Costs incurred to acquire a plant asset and get it ready for use are capitalizable, included in the cost of the plant asset that is shown on the balance sheet. Here, the warehouse cannot be used until it is rewired, the roof is replaced and the building is cleaned. These costs are all capitalizable. Note that plant assets include Land, Buildings, Land Improvements and Equipment. “Building Improvements” is not a plant asset.
Boston Incorporated pays $10,000 to purchase used welding equipment, $400 to install the welding equipment, $500 to test the equipment before the equipment can be used in its manufacturing plant and $1,000 to replace a motor on the equipment. What is the capitalizable cost of the equipment? a. $11,900 b. $10,900 c. $10,400 d. $10,000
a. $11,900 Capitalizable costs include the acquisition cost of a plant asset and costs incurred to get the plant asset ready for use. Capitalizable costs also include improvements, relatively significant costs that extend the useful life or improve the plant asset. The cost to replace a motor in equipment is therefore capitalizable.
The units-of-activity method of depreciation a. applies a depreciation rate that is determined by dividing the cost of an asset by the total expected activity during the useful life of the asset. b. results in a constant depreciation rate each period. c. declining depreciation rate each period. d. constant amount of depreciation expense each period.
b. results in a constant depreciation rate each period. Explanation: Under the units-of-activity method, depreciable cost (defined as cost minus salvage) is divided by total estimated activity over the useful life to determine the depreciation rate. The rate is then multiplied by actual activity during the accounting period to calculate depreciation expense. Choice A is incorrect because depreciable cost, not cost, is divided by the total expected activity during the useful life in calculating the depreciation rate.
Under the direct write-off method of recording bad debts, an entry to write off a specific account as uncollectible results in a. a debit to Accounts Receivable. b. a credit to Allowance for Doubtful Accounts. c. a debit to Bad Debts Expense. d. Both (a) and (b) are correct.
c. a debit to Bad Debts Expense. Explanation: Under the direct write-off method, the entry to write off a specific account as uncollectible requires a debit to Bad Debts Expense and a credit to Accounts Receivable. The account “Allowance for Doubtful Accounts” is not used if the direct write-off method is applied. Allowance for Doubtful Accounts is only used under the Allowance Method.
An airline company lists the salvage value of its airplanes as $10,000. The airline’s salvage value is equal to the a. cost of the airplanes on the date of purchase. b. depreciable cost of the airplanes. c. expected value at the end of the useful life of the airplanes. d. expected repair costs that will be incurred during the useful life of the airplanes.
c. expected value at the end of the useful life of the airplanes. Explanation: Salvage value is defined as the estimated value of a plant asset at the end of its expected useful life.
Downbeat Company paid $25,000 to purchase land for a new corporate office. The company paid $1,500 to remove an existing barn from the land, $1,000 to install an underground sprinkler system and $20,000 to an architect to design the new corporate office. What is the cost of the Land that is shown on Downbeat Company’s balance sheet? a. $25,000 b. $26,500 c. $27,500 d. $47,500
b. $26,500 Explanation: The Land account includes all costs to acquire the land and get it ready for use, $25,000 and $1,500. The $1,000 installation for the sprinkler system is a Land Improvement cost (cost to get a physical structure placed on land ready for use) and the $20,0000 architect fee is part of the Building cost.
Phillips Incorporated uses straight-line depreciation and closes its books every December 31. On January 1, 2019, Phillips Incorporated purchased $180,000 of equipment with an estimated salvage value of $30,000 and an estimated useful life of six years. What is the book value of Phillips Incorporated’s equipment at December 31, 2020? a. $180,000. b. $150,000. c. $130,000. d. $50,000.
c. $130,000. Book Value is Cost minus Accumulated Depreciation. Here, the problem asks for the book value two years after the purchase of the equipment. That means that two periods of depreciation have been recorded as of December 31, 2020. Accumulated Depreciation at December 31, 2020 is determined by calculating Depreciation Expense and determining total depreciation as of December 31, 2020. Depreciation Expense = $180,000-$30,000/6 = $25,000/year Depreciation Expense Accumulated Depreciation at December 31, 2020 is $25,000 x 2 = $50,000 Now, determine the book value at December 31, 2020: Cost $180,000 - $50,000 Accumulated Depreciation at Dec. 31, 2020 = $130,000
Which item below is classified as a revenue expenditure? a. Cost to replace an underground sprinkler system b. Cost to replace a roof c. Cost to replace a hinge on a shelving unit d. All items listed above are revenue expenditures.
c. Cost to replace a hinge on a shelving unit Explanation: Maintenance costs are considered revenue expenditures and are shown on the income statement as expenses. Here, the cost to replace a hinge is a maintenance cost. The cost to replace an underground sprinkler is a capitalizable cost as a Land Improvement. The cost to replace a roof is a capitalizable cost and is added to the cost of a Building.
Newtown Arena uses straight-line depreciation and issues financial statements every December 31. On July 1, 2019, Newtown Arena sells equipment for $66,000. The equipment originally cost $180,000, had an estimated useful life of five years and an estimated salvage value of $30,000. The Accumulated Depreciation account had a balance of $105,000 on January 1, 2019. Newtown Arena’s sale of equipment results in a a. $9,000 gain on disposal. b. $6,000 loss on disposal. c. $9,000 loss on disposal. d. $6,000 gain on disposal.
d. $6,000 gain on disposal. Explanation: Proceeds minus book value results in a gain if proceeds exceed book value. Here, $66,000 is the proceeds. The book value is Cost – Accumulated Depreciation. Determine accumulated depreciation as of July 1, 2019. We are given the Accumulated Depreciation balance at January 1, 2019, so we need to add another six months of depreciation for the period from January through June 2019. Annual Depreciation Expense = (Cost $180,000 – Salvage Value $30,000)/useful life 5 yrs = $30,000/year Depreciation Expense. We only need to add ½ year of depreciation to the January 1, 2019, balance so add $15,000 (1/2 of $30,000) to $105,000 for an Accumulated Depreciation balance of $120,000 at July 1, 2019. Now, proceeds $66,000 – Book Value ($180,000-$120,000) = $6,000 gain
Hugo’s Brewery sells its old beer brewing equipment and records a gain. This means that a. the sales price of the brewing equipment exceeds its book value. b. sales price of the brewing equipment exceeds the capitalizable cost of the brewing equipment. c. the book value of the brewing equipment exceeds the sales price of the equipment. d. the sale prices of the brewing equipment the depreciable cost of the equipment.
a. the sales price of the brewing equipment exceeds its book value.
During the current accounting period, Boyd Company records include the cost of a revenue expenditure in the cost of Land. As a result, a. Boyd Company’s net income will be overstated during the current accounting period. b. Boyd Company’s net income will be correctly stated during the current period. c. Boyd Company’s plant assets will be correctly stated during the current period. d. Both (b) and (c) are correct.
a. Boyd Company’s net income will be overstated during the current accounting period. Explanation: Revenue expenditures should NOT be included in the cost of plant assets such as Land. Here, Boyd Company has overstated the cost of Land by including a revenue expenditure on the balance sheet and understated expenses on the income statement by not including the revenue expenditure as an expense on the income statement. Understating expenses results in overstating net income.
Avis Company’s balance sheet shows Accounts Receivable of $10,000 at the end of the current period. If the company estimates that 10% of its receivables will be uncollectible, what is the cash realizable value of the company’s receivables at the end of the current period? a. More information is needed to answer this question.b. $11,000 c. $10,000 d. $9,000
d. $9,000 Explanation: Cash realizable value shows the amount that is estimated as collectible. Here, cash realizable value is $9,000. Avis Company’s balance sheet will show the cash realizable value on the balance sheet as shown below. Accounts Receivable $10,000 Allowance for Doubtful Accounts 1,000 Accounts Receivable, net $9,000 The net amount of the receivable shows the difference between the total receivable of $10,000 and the amount estimated as uncollectible $1,000 (or 10% x $10,000). The $9,000 cash realizable value shows the amount of the receivable that Avis Company expects to collect.
Stevenson Company operates a plant that manufactures and sells farm machinery. The company pays $25,000 to purchase used welding equipment for its manufacturing plant. The company pays $1,000 to install the equipment and $500 to refurbish the equipment to comply with current regulations. After using the equipment for one week, Dawson pays $50 to replace a worn part on the welding equipment. What is the amount of Stevenson’s total capital expenditures? a. $26,550 b. $26,500 c. $26,000 d. $25,000
b. $26,500 Explanation: Capital expenditures include the acquisition cost of a plant asset and costs incurred to get the plant asset ready for use and costs that improve or extend the useful life are capitalizable. All costs except for the $50 replacement of the worn part are capitalizable. The $50 cost is a revenue expenditure since it is a maintenance cost.
When an account is written off using the direct write-off approach, the write-off a. reduces assets. b. reduces net income. c. Both (a) and (b) are correct. d. does not affect net income.
c. Both (a) and (b) are correct. Explanation: Under the direct write-off approach, writing off an account results in an increase in Bad Debts Expense and a decrease in Accounts Receivable. The increase in Bad Debts Expense reduces net income and the decrease in Accounts Receivable reduces assets.
Rider Company retires a plant asset and records a loss. The company’s loss will equal a. the book value of the plant asset at the date of retirement. b. the depreciable cost of the plant asset at the date of retirement. c. the salvage value of the plant asset at the date of retirement. d. the cost of the plant asset minus the estimated salvage value
a. the book value of the plant asset at the date of retirement. Explanation: To determine the gain or loss on the disposal of a plant asset, subtract book value from proceeds. Since proceeds are zero if a plant asset is retired, Any book value existing at retirement will result in a loss at disposal equal to the book value of the asset at the date of retirement.
Reed Company acquires land for $105,000 cash. Additional costs are as follow. Removal of tool shed on the land $ 1,000 Filling and grading 3,000 Salvage value of lumber of shed 640 Real estate agent’s commission 2,260 Outdoor lighting 20,000 23 Attorney fees 1,700 Reed Company will record the land on the balance sheet at a. $112,320. b. $113,600. c. $112,960. d. $105,000.
a. $112,320. Explanation: Capitalizable costs that are included in the Land account are costs to acquire the land and get it ready for use. Here, determine the cost of the land as follows: $105,000 + $1,000 + $3,000 - $640 + $2,260 + $1,700 = $112,320. The salvage value of the lumber is subtracted since the lumber is sold as helps to offset the cost of the land. The outdoor lighting cost is a Land Improvement cost, not a Land cost.
Smithson Corporation’s unadjusted trial balance includes the following balances (assume normal balances): • Accounts Receivable $3,357,000 • Allowance for Doubtful Accounts $ 63,900
Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debt expense will the company record? a. $137,520 b. $201,420 c. $133,686 d. $205,254
a. $137,520 Explanation: Calculate the bad debt expense recorded in the adjusting entry as the amount by which the Allowance for Doubtful Accounts must be increased to get from the existing $63,900 balance to the new estimate for uncollectible accounts of $201,420 (.06 x $3,357,000). The bad debt expense is therefore $137,520, the difference between the new estimate for uncollectible accounts of $201,420 and the existing $63,900 balance in the Allowance for Doubtful Accounts.
On September 1, 2021, Barber Company lends Monroe Company $30,000 and accepts a four-month, 6% interest note. If Barber Company uses accrual accounting and prepares financial statements on September 30, 2021, what adjusting entry should Barber Company prepare on September 30, 2021? a. Note Receivable 30,000 Cash 30,000 b. Cash 150 Interest Revenue 150 c. Interest Receivable 450 Interest Revenue 450 d. Interest Receivable 150 Interest Revenue 150
d. Interest Receivable 150 Interest Revenue 15
Laurel Company uses straight-line depreciation. On October 1, 2019, the company paid $80,000 cash for new equipment. The equipment had an estimated useful life of five years and an estimated salvage value of $20,000. What amount of depreciation expense will the Laurel Company record in 2019? a. $3,000. b. $16,000. c. $4,000. d. $8,000.
a. $3,000 Calculation: $80,000-$20,000/5 = $12,000/year Depreciation Expense Since the equipment was only owned for 3 months in 2019, we need to multiply by 3/12 to get the Depreciation Expense for 2019. $12,000 x 3/12 =$3,000
Benson Company uses straight-line depreciation. On January 1, 2019, Benson Company paid $68,000 for new equipment. Additional costs included delivery of $2,800 and $8,000 to conduct safety testing prior to using the equipment at the company. At January 1, 2019, Benson recorded an estimated salvage value of $12,000 salvage value and an estimated useful life of five years. What amount of accumulated depreciation will be recorded on Benson Company’s balance sheet at December 31, 2020?a. $26,720. b. $13,360. 24 c. $11,440. d. $22,880.
a. $26,720 Cost: $68,000+$2,800+$8,000=$78,800 $78,800-$12,000/5=$13,360/year Depreciation Expense After two years, at December 31, 2020, the Accumulated Depreciation balance will be $13,360x2=$26,720
On January 1, 2020, Regal Company purchased equipment for $90,000 and paid $4,200 in delivery charges and $12,000 to have the equipment installed in its production facility. Regal’s records show a $18,000 estimated salvage value and an estimated useful life of five years. What amount of depreciation expense will Regal Company record for the year ending December 31, 2020, using straight-line depreciation? a. $21,240. b. $17,640. c. $14,760. d. $14,400.
b. $17,640. Cost: $90,000 +$4,200 + $12,000= $106,200 ($106,200 - $18,000)/5=$17,640/year Depreciation Expense
Return on Assets Equation
Net Income/Average Total Assets
Asset Turnover Equation
Net Sales/Average Total Assets
Note 
Flashcard (44)