Question

On August 1, 2019, ABC Co. borrowed $10,000 on a one-year Note Payable with an interest rate of 12% per year.

a) What is the adjusting journal entry on November 30, 2019 to record the relevant expense for the month of November?

Debit	Credit	Amount

b) When the December 31, 2019 adjusting journal entry is made, a balance sheet account is impacted. Select the name of this account. Also, on January 1, 2020, after making the December 31 adjusting journal entry, what is the balance of this account?

Account Name	Balance on January 1, 2020

c) As of August 1, 2020, after paying off the loan with interest, what is the total amount of interest expense the company will have recorded for 2020 and the total cash paid for interest in 2020? Do not include the $10,000 principal repayment.

2020 Interest Expense	2020 Cash Paid for Interest

d) If the company incorrectly recognized interest expense for August 2019 through July 2020 at the time cash was paid rather than when the expense was incurred, what would be the impact on the 2019 and 2020 income statements?

2019 Income Statement	2020 Income Statement

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Question 2415 pts

Note: There are 5 parts to this question (3 points each).

Capital expenditures are added to the balance sheet as assets and (usually) are expensed over time. Revenue expenditures are expensed in the period in which the cost is incurred. Select the appropriate accounting treatment under GAAP for each equipment-related expenditure below by classifying it as a capital expenditure or a revenue expenditure.

Expenditure	Classification
a) Purchase price of equipment
c) Cost of assembling equipment on site
d) Reconditioning to extend its useful life
e) Ordinary ongoing repairs and maintenance
f) Monthly electricity costs for equipment

A company purchased equipment on January 1, 2017 for $102,000. The equipment has an estimated residual value of $6,000 and an estimated useful life of 8 years. The company uses the straight-line method to depreciate the equipment and makes the relevant adjusting entry at the end of each month.

a) What is the annual depreciation for the equipment?

  

b) In general, what is the journal entry to record depreciation? (Ignore the amount.)

Debit	Credit

c) What is the value of the Accumulated Depreciation--Equipment account on January 1, 2019?

  

d) What is the book value of the equipment on January 1, 2019?

                             

e) On January 1, 2019, the company sells the equipment for $85,000 cash. What is the gain or loss on the sale of the equipment?

Gain or Loss?	Amount of Gain or Loss

Answer 1

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