ACCT 217 - FINAL EXAM

Ch. 7-14

What are the two steps required for the Bank Reconciliation?

1. Books vs. Bank

2. Add vs. Deduct

Prepare the structure of the Bank Reconciliation.

What account type is Allowance for Doubtful Accounts (AFDA)?

Contra-Asset Account

What is the formula for Carrying Amount regarding the Allowance Method?

Carrying Amount = Accounts Receivable - AFDA

After the estimate of uncollectible accounts has been determined, what is the adjusted journal entry that must be recorded?

DR Bad Debts Expense XXX

CR Allowance For Doubtful Accounts XXX

What is the required journal entry for writing-off uncollectible accounts?

DR Allowance for Doubtful Accounts XXX

CR Accounts Receivable XXX

What are the journal entries required when recording a Bad Debt Recovery

1. Reverse the write-off
   DR Accounts Receivable XXX
   CR Allowance for Doubtful Accounts XXX

2. Record cash collection
   DR Cash XXX
   CR Accounts Receivable XXX

Summarize the Allowance Method

1. Measure and Record Estimated Uncollectible Accounts (AFDA)

2. Record Write-Off of Uncollectible Account

3. Record Recovery of Uncollectible Account (Two Journal Entries Required)

What is the process for Notes Receivable?

1. Record Notes Receivable

2. Interest

3. Derecognize Notes Receivable

How would we Record Notes Receivable in the following scenarios?
- Good/Service exchanged for Note Receivable
- Outstanding Accounts Receivable for Notes Receivable
- Cash exchanged for Note Receivable

1. Good/Service
   DR Notes Receivable XXX
   CR Sales XXX

2. Outstanding A/R
   DR Notes Receivable XXX
   CR Accounts Receivable XXX

3. Cash
   DR Notes Receivable XXX
   CR Cash XXX

What are the possible journal entries when recording interest regarding notes receivable?

1. Accruing
   DR Interest Receivable XXX
   CR Interest Income XXX

2. Receiving
   DR Cash XXX
   CR Interest Income XXX

What journal entry is required when derecognizing notes receivable that is honored?

DR Cash XXX
CR Notes Receivable XXX
Interest Receivable XXX

What journal entry(s) is required when derecognizing notes receivable that is dishonored?

1. If payment is expected:
   DR Accounts Receivable XXX
   CR Notes Receivable XXX
   Interest Receivable XXX

2. If payment is not expected:
   DR Bad Debts Expense XXX
   CR Notes Receivable XXX
   Interest Receivable XXX

What is the difference between Bad Debts Expense and AFDA regarding journal entries

Bad Debts Expense should be used when recording your estimated loss or recognized expense, and use AFDA when directly writing off an uncollectible note or establishing the reserve pool.

How can we determine if something is CAPEX or OPEX?

CAPEX:

• Did we buy or improve a long-term asset?

• Did we increase the capacity, useful life, or efficiency?

OPEX:

• Did we maintain/restore asset in original condition?

What does the structure of the Depreciation Schedule - Straight-Line Depreciation look like?

YR  Dep. Amount Dep. Rate Dep. Exp End Acc. Dep. End Carry Amount

What are the two formulas needed for Straight-line Depreciation?

1. Depreciation Expense = (Cost - Residual) / Estimated Useful Life

2. Depreciation Rate = 100% / Estimated Useful Life

What does the structure of the Depreciation Schedule - Double Diminishing Balance look like?

YR   Beg. Carry Amount Dep. Rate Dep. Exp. End. Acc. Dep. End Carry Amount

What are the two formulas needed for Double Diminishing Balance Depreciation?

1. Depreciation Rate = (100% / Estimated Useful Life)*(2)

2. Depreciation Expense = (Beginning Carrying Amount)*(Depreciation Rate)

What does the structure of the Depreciation Schedule - Units of Production look like?

YR  Units of Production Dep. Rate Dep. Exp. End Acc. Dep. End Carry Amount

What are the two formulas needed for Units of Production Depreciation?

1. Depreciation Rate = (Cost - Residual) / Estimated Total Units

2. Depreciation Expense = (Units Consumed)*(Depreciation Rate)

What are the mandatory Employee Deductions?
Bonus: What are the voluntary deductions

Mandatory Deductions:

• CPP

• EI

• Income Tax

Voluntary Deductions:

• Benefits

• Union

• Charity

What are mandatory Employer Deductions?

• CPP (1:1)

• EI (1.4:1)

• Workers Compensation Benefit (WCB)

What are the three types of Interest-Bearing Liabilities?

1. Operating Lines of Credit

2. Single Principle Payments

3. Principle Instalment Payments

What is the process for Single Principle Payments?

1. Recognize Notes Payable

2. Interest

3. Derecognize Notes Payable

What is the structure of the Instalment Payment Schedule?

Date Cash PMT Interest Exp. Principle Red. Principle Bal.