ACCOUNTING 1010 TEST IV CHAPTERS 8-11 Page 2 If the beginning of the year 1/01/2

Question

ACCOUNTING 1010 TEST IV CHAPTERS 8-11 Page 2 If the beginning of the year 1/01/2018 balance of the Allowance for Doubtful Accounts was a credit of $20,000 and the 12/31/2018 balance before adjustment was a debit of $1.200, evalate the adequacy of the January 15 beginning balance of the account. A. The beginning 7 balance of the allowance account was adequate to cover the accounts receivables charged off as uncollectable in 2018. B. The beginning balance of the allowance account was not adequate to cover the accounts receivable charged off as uncollectable in 2018. 8· The formula for calculating interest on notes receivable is (X A. B. C. D. multiply / divide) Face Amount X Interest Rate X Days the note is held X Days in a Year Face Amount X Interest Rate X Days the note is held / Days in a Year Face Amount X Interest Dollar Amount X Days in a Year Face Amount X Days the note is held / Days in a Year 9 Which one of the following statements is true? A. B. C. D. Using the units-of- production method, it is possible to depreciate more than the depreciable cost Regardless of the depreciation method, the amount of total depreciation expense during the asset's life will be the same Using the straight-line method, the amount of depreciation expense will vary each year Using the double-declining-balance depreciation method will result in depreciation expense being the same amount each year The depreciation method that does not subtract residual value when calculating the first year's depreciation expense is: A. double declining balance B. straight-line C. units of production 10. When an asset is purchased during the year, the depreciation method that does not require consideration for the partial year is: A. declining balance B. straight-line C. units of production I1. When a company discards equipment that is fully depreciated, this transaction would be recorded with which one of the following entries? A. debit Depreciation Expense; credit Accumulated Depreciation B. debit Accumulated Depreciation; credit Equipment C. debit Equipment; credit Accumulated Depreciation 12.

Explanation / Answer

7. B- The beginning balance of the allowance account was not adequate to cover the account receivable charged off as uncollectable for the year 2018.

Explanation: Allowance for doubtful debts is created on the basis of the estimation that how much of the account receivable will not be able to received and the same is deducted from the amount of Account receivable in the balance sheet. In general, Such allowances will have credit balance because these are decreasing the assets of the Company.  

At the year end company computes the actual bad debts and reduce the same from the allowances for Doubtful debts. Now, it such allowance is sufficient to meet the bad debts , it will have a credit balalnce and if not than it will have a debit balance. In the given question at the year end it have a debit balance of $ 1200, which means that allowance was not sufficient.

8. B-Face Amount* Interest Rate*(days the note is held/no of days in a year)

Explanation: Interest on note receivable is calculated to calculate the amount of interest on the face value of the note for the year for whcih note is held by the receipient. So interest is calculated foronly that period on which note is helds. So, number of days will be divided by the total number of days in a year.

9. C -Regardless of method of depreciation the amount of total depreciation expense in life of the asset will be same

Explanation: Since the total amount of the depreciation cannt be more than the cost of the asset or saying technically, it cannt't be more than ( Cost of the asset-salvage value) . So, irrespective of any method of depreciation the total amount of depreciation over the life of the asset will be the same.

10- Double Declining Methods

Explanation: Under Double Declining Method formula for calculting depreciation is :

Annual depreciation = Book value * 100% / life * 2

which means that it doesnot take into account scrap value of the asset.

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