On July 1, 2017, Friedman Inc. invested $689,920 in a mine estimated to have 784,000 tons

On July 1, 2017, Friedman Inc. invested $689,920 in a mine estimated to have 784,000 tons of ore of uniform grade. During the last 6 months of 2017, 121,000 tons of ore were mined.

Calculate depletion cost per unit.

Prepare the journal entry to record depletion.

Calculate depletion cost per unit.
Cost (a) $689,920
Units estimated (b) 784,000 tons
Depletion cost per unit [(a) ÷ (b)] $0.88

Prepare the journal entry to record depletion.

Inventory Debit $106,480
Accumulated Depletion credit(121,000 × $0.88) = $106,480

Presented below are selected transactions at Ridge Company for 2017.

Presented below are selected transactions at Ridge Company for 2017.

Jan. 1 Retired a piece of machinery that was purchased on January 1, 2007. The machine cost $61,300 on that date. It had a useful life of 10 years with no salvage value.
June 30 Sold a computer that was purchased on January 1, 2014. The computer cost $44,500. It had a useful life of 5 years with no salvage value. The computer was sold for $15,300.
Dec. 31 Discarded a delivery truck that was purchased on January 1, 2013. The truck cost $38,220. It was depreciated based on a 6-year useful life with a $3,000 salvage value.

Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on assets disposed of. Ridge Company uses straight-line depreciation. (Assume depreciation is up to date as of December 31, 2016.)

Jan. 1
Accumulated Depreciation-Equipment Debit 61,300
Equipment Credit 61,300
June 30
Depreciation Expense Debit 4450
Accumulated Depreciation-Equipment Credit 4450
(To record depreciation to date of disposal)

Cash Debit 15,300
Accumulated Depreciation-Equipment Debit 31150
Gain on Disposal of Plant Assets credit 1950
Equipment Credit 44,500
(To record sale of computer at a gain)
Dec. 31
Depreciation Expense Debit 5870
Accumulated Depreciation-Equipment Credit 5870

(To record depreciation to date of disposal)

Loss on Disposal of Plant Assets Debit 8870
Accumulated Depreciation-Equipment Debit 29350
Equipment Credit 38,220
(To record retirement of truck at a loss)

June 30
Accumulated Depreciation-Equipment ($44,500 × 1/5 × 6/12) = $4,450

June 30
Accumulated Depreciation-Equipment ($44,500 × 3/5 = $26,700; $26,700 + $4,450) = $31,150
Gain on Disposal of Plant Assets [$15,300 – ($44,500 – $31,150)] = $1,950

Dec. 31
Accumulated Depreciation-Equipment [($38,220 – $3,000) × 1/6] = $5,870

Dec. 31
Accumulated Depreciation-Equipment [($38,220 – $3,000) × 5/6] = $29,350

Yello Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1, 2017, at a cost of $189,320. Over its 7-year useful life, the bus is expected to be driven 125,600 miles. Salvage value is expected to be $7,200.

Compute the depreciable cost per unit.

Compute the depreciable cost per unit.

Depreciation cost per unit is $1.45 per mile [($189,320 – $7,200) ÷ 125,600].

On March 1, 2017, Westmorlan Company acquired real estate on which it planned to construct a small office building

On March 1, 2017, Westmorlan Company acquired real estate on which it planned to construct a small office building. The company paid $75,000 in cash. An old warehouse on the property was razed at a cost of $8,000; the salvaged materials were sold for $1,500. Additional expenditures before construction began included $1,000 attorney’s fee for work concerning the land purchase, $4,000 real estate broker’s fee, $7,000 architect’s fee, and $13,000 to put in driveways and a parking lot.

(a)

Determine the amount to be reported as the cost of the land.

Determine the amount to be reported as the cost of the land.

Cost of land
Cash paid $75,000
Net cost of removing warehouse ($8,000 – $1,500) 6,500
Attorney’s fee 1,000
Real estate broker’s fee 4,000
Total $86,500

On May 2, McLain Company lends $57,800 to Chang, Inc., issuing a 6-month,

On May 2, McLain Company lends $57,800 to Chang, Inc., issuing a 6-month, 10% note. At the maturity date, November 2, Chang indicates that it cannot pay.

Prepare the entry to record the issuance of the note.

Prepare the entry to record the dishonor of the note, assuming that McLain Company expects collection will occur.

Prepare the entry to record the dishonor of the note, assuming that McLain Company does not expect collection in the future.

Prepare the entry to record the issuance of the note.

Notes Receivable debit 57800
Cash Credit 57800

Prepare the entry to record the dishonor of the note, assuming that McLain Company expects collection will occur.

Accounts Receivable Debit 60690
Interest Revenue Credit ($57,800 × 10% × 1/2) = $2,890
Notes Receivable Credit 57800

Prepare the entry to record the dishonor of the note, assuming that McLain Company does not expect collection in the future.

Allowance for Doubtful Accounts Debit 57800
Notes Receivable Credit 57800

On May 10, Fillmore Company sold merchandise for $19,000 and accepted the customer’s America Bank MasterCard.America Bank charges

On May 10, Fillmore Company sold merchandise for $19,000 and accepted the customer’s America Bank MasterCard. America Bank charges a 4% service charge for credit card sales. Prepare the entry on Fillmore Company’s books to record the sale of merchandise.


May 10 Cash Debit($19,000 – $760) = $18,240
Service Charge Expense Debit(4% × $19,000) = $760
Sales Revenue credit 19,000


On March 3, Kitselman Appliances sells $649,500 of its receivables to Ervay Factors Inc. Ervay Factors assesses a finance charge of 3% of the amount of receivables sold. Prepare the entry on Kitselman Appliances’ books to record the sale of the receivables.

Mar. 3 Cash Debit ($649,500 – $19,485) = $630,015
Service Charge Expense Debit (3% × $649,500) = $19,485
Account Receivable credit 649,500

Menge Company has accounts receivable of $107,000 at March 31

Menge Company has accounts receivable of $107,000 at March 31. Credit terms are 2/10, n/30. At March 31, Allowance for Doubtful Accounts has a credit balance of $1,300 prior to adjustment. The company uses the percentage-of-receivables basis for estimating uncollectible accounts. The company’s estimate of bad debts is shown below.

Age of Accounts

Balance,
March 31

Estimated Percentage
Uncollectible
1–30 days $68,000 3%
31–60 days 21,900 5%
61–90 days 9,500 25%
Over 90 days 7,600 50%
107,000

Determine the total estimated uncollectibles.

Prepare the adjusting entry at March 31 to record bad debt expense.

Determine the total estimated uncollectibles.

nts Receivable

Amount

%

Estimated
Uncollectible
1–30 days $68,000 x3%= $2,040
31–60 days 21,900 x5%= 1,095
61–90 days 9,500 x25%= 2,375
Over 90 days 7,600 x5%= 3,800
total estimated uncollectibles = $9,310

Prepare the adjusting entry at March 31 to record bad debt expense.

Bad Debt Expense debit ($9,310 – $1,300) = $8,010
Allowance for Doubtful Accounts credit 8010

The ledger of Costello Company at the end of the current year shows Accounts Receivable

The ledger of Costello Company at the end of the current year shows Accounts Receivable $121,000, Sales Revenue $854,000, and Sales Returns and Allowances $31,000.

If Costello uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Costello determines that L. Dole’s $2,100 balance is uncollectible.

If Allowance for Doubtful Accounts has a credit balance of $2,800 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 1% of net sales, and (2) 12% of accounts receivable.

If Costello uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Costello determines that L. Dole’s $2,100 balance is uncollectible.

Bad Debt Expense Debit 2100
Accounts Receivable Credit 2100

If Allowance for Doubtful Accounts has a credit balance of $2,800 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 1% of net sales, and (2) 12% of accounts receivable.

(1) Bad Debt Expense Debit [($854,000 – $31,000) × 1%] = $8,230
Allowance for Doubtful Accounts Credit 8230

(2)Bad Debt Expense Debit [($121,000 × 12%) – $2,800] = $11,720
Allowance for Doubtful Accounts Credit 11720