AB SW-1 Flashcards
When the allowance method of recognizing uncollectible accounts is used, the entry to record the write-off of a specific account
(Dr.) Allowance for doubtful accounts xxx
(Cr.) Accounts receivable xxx
A company uses the allowance method to recognize expenses for uncollectible accounts.
(Dr.) Accounts receivable xxx
(Cr.) Allowance for doubtful accounts xxx
(Dr.) Cash xxx
(Cr.) Accounts receivable xxx
April Co. determined that the net value of its accounts receivable on December 31, 20x1, based on an aging of the receivables, was $325,000. Additional information is as follows;
Allowance for uncollectible accounts at 1/1/20x1 $30,000
Uncollectible accounts are written off during 20x1 18,000
Uncollectible accounts recovered during 20x1 2,000
Accounts receivable at 12/31/20x1 350,000
(Dr.) Allowance for uncollectible accounts 18,000
(Cr.) Accounts receivable 18,000
(Dr.) Accounts receivable 2,000
(Cr.) Allowance for uncollectible accounts 2,000
On January 1, 20x1, April Corp. signed a 3-year non-cancelable purchase contract, which allows Card to purchase up to 500,000 units of a computer part annually from March Supply Co. at $.10 per unit and guarantees a minimum annual purchase of 100,000 units. During 20x1, the part unexpectedly became obsolete. April had 250,000 units of this inventory on December 31, 20x1, and believes these parts can be sold as scrap for $.02 per unit.
(Dr.) Loss on obsolescence 20,000
(Cr.) Inventory 20,000
(Dr.) Probable loss on purchase commitment 16,000
(Cr.) Accrued loss on purchase commitment 16,000
On July 1, 20x1, in an exchange with commercial substance, Kate Co. exchanged a truck for 25 shares of Jody Corp.’s common stock. On that date, the truck’s carrying amount was $2,500, and its fair value was $3,000. Also, the book value of Jody’s stock was $60 per share. On December 31, 20x1, Kate had 250 shares of common stock outstanding and its book value per share was $50. What amount should Katel report in its December 31, 20x1 balance sheet as an investment in March?
(Dr.) Investment in Ace stock 3,000
(Cr.) Truck (BV) 2,500
Gain on disposal 500
On March 31, 20x1, in an exchange with commercial substance, April Company exchanged its used delivery trucks with a carrying amount of $42,000 and cash $17,000 for a parcel of vacant land. The fair value of used truck was $49,000. On March 31, 20x1, what gain should Able recognize on this exchange?
(Dr.) Land 66,000
(Cr.) Trucks 42,000
Cash 17,000
Gain 7,000
On January 1, April traded a delivery truck and paid $10,000 cash for a tow truck owned by March. The delivery truck had an original cost of $140,000, accumulated depreciation of $80,000, and an estimated fair value of $90,000. April estimated the fair value of March’s tow truck to be $100,000. The transaction had commercial substance. What amount of gain should be recognized by April?
(Dr.) Truck (March) 100,000
Accumulated Depreciation 80,000
(Cr.) Truck (April) 140,000
Cash 10,000
Gain 30,000
On March 31, 20x1, Kate Company exchanged its trucks with carrying amount of $135,000 and $10,000 cash for Jody Company’s trucks. The fair value of Kate Company’s trucks was $160,000. The fair value of Jody Company’s trucks was $170,000. The cash flows from the trucks received are not expected to be significantly different than the cash flows from the trucks provided. On March 31, 20x1, what amount of gain should Kate recognize on this exchange?
(Dr.) Trucks (New) 145,000
(Cr.) Trucks (Old) 135,000
Cash 10,000
No gain is recorded
Kate, Inc. exchanged a truck with a carrying amount of $12,000 and a fair value of $20,000 for a truck and $5,000 cash. The fair value of the truck received was $15,000. The cash flows from the trucks received are not expected to be significantly different than the cash flows from the trucks provided. At what amount should Kate record the truck received in the exchange?
(Dr.) Truck (new) 15,000
Cash 5,000
(Cr.) Truck (old) 12,000
Gain on sales 8,000
On January 2, 20x1, April Corp. bought machinery under a contract that required a down payment of $10,000, plus 24 monthly payments of $5,000 each, for total cash payments of $130,000. The cash equivalent price of the machinery was $110,000. The machinery has an estimated useful life of 10 years and an estimated salvage value of $5,000. April uses straight-line depreciation. In its 20x1, income statement, what amount should April report as depreciation for this machinery?
(Dr.) Machinery 110,000
Discount on N/P 20,000 ($130,000－$110,000)
(Cr.) Notes payable 120,000 (24×$5,000)
Cash 10,000
Kate Orchestra, a not-for-profit organization, is developing a fundraising campaign for construction of a new concert hall. A music enthusiast promised to contribute the equivalent of half of the amount of fund raised, with a $1,000,000 limitation. The orchestra actually raised $1,000,000.
Dr. Pledge receivable 500,000
Cr. Revenue from contributions 500,000
