Question

15. AT&U Company has the following data for the year ended December 31, Year 1: Sales (credit) $2,500,000 Sales returns and allowances 50,000 Accounts receivable (December 31, Year 1) 640,000 Allowance for doubtful accounts      (before adjustment at December 31, Year 1) 20,000 Estimated amount of uncollected accounts based on aging analysis (December 31, Year 1) 45,000

Refer to AT&U Company. If the company estimates its bad debt to be 2% of net credit sales, what will be the balance in the allowance for doubtful accounts after the adjustment for bad debt expense? a. $44,500 b. $45,000 c. $49,000 d. $69,000

16.Finicky Freight purchased a truck at the beginning of Year 1 for $80,000. The company decided to depreciate the truck over a five-year period using the double-declining-balance method. The company estimated the equipment’s salvage value at $8,000. Refer to Finicky Freight. What is the amount of depreciation expense to be recorded for Year 1? a. $14,400 b. $16,000 c. $28,800 d. $32,000

Answer 1

· Answer #15
>Bad Debt expense credited to Allowance account = $ (2500000 – 50000) net sale x 2% = $ 49,000
>Balance in Allowance account before adjustment = $ 20000
>Balance after adjustments = 20000 + 49000 credited = $ 69,000
Correct Answer = Option ‘D’ $ 69000

· Answer #16

A	Cost	$            80,000.00
B	Residual Value	$              8,000.00
C=A - B	Depreciable base	$            72,000.00
D	Life [in years]	5
E=C/D	Annual SLM depreciation	$            14,400.00
F=E/C	SLM Rate	20.00%
G=F x 2	DDB Rate	40.00%

Depreciation expense for Year 1 = $ 80000 x 40% = $ 32,000
Correct Answer = Option ‘D” $ 32,000