QuestionQuestion

(1) The Steel You Blind Company hires a bookkeeper who says that intangible assets can only be amortized over their legal lives. Is she right or wrong and why?
(2) We Move Ya moving company purchased a new cross country moving truck and trailer on July 1, 2015. The cost of the new equipment was $150,000. The truck and trailer is expected to have a 5 year useful life and a salvage value of $12,000. The truck is a diesel and is expected to have a useful life of 10,000 hours.

Compute the depreciation expense under the following scenarios:
(a) Straight line for 2015.
(b) Units of Activity for 2015 assuming 1,700 hours of on-road use.
(c) Double declining balance using twice the straight line rate for 2015 and 2016.

Problem #1
Using the code letters below, indicate how each of the items listed would be handled in preparing a bank reconciliation. Enter the appropriate code letter in the space to the left of each item.
Code
A Add to cash balance per books
B Deduct from cash balance per books
C Add to cash balance per bank
D Deduct from cash balance per bank
E Does not affect the bank reconciliation

Items:
1 Outstanding checks.
2 Bank service charge.
3 Check for $420 correctly written and paid by the bank but incorrectly entered in the cash payments journal for $240.
4 Deposit in transit.
5 Bank returns deposited check marked NSF.
6 Bank collects notes receivable and interest for depositor.
7 Bank debit memorandum for check printing fees.
8 Petty cash custodian has $91 in paid petty cash vouchers that have not been reimbursed.
9 Bank charged a check against the company which should have been charged to another company.
10 A check for $246 was correctly paid by the bank but was incorrectly entered in the cash payments journal for $264.

Problem #2
Prepare a multiple-step income statement, in proper form, for the year ended December 31, 2014 for Cosey Inc. Also known as a classified income statement.
The adjusted trial balance accounts:
Advertising Expense         $ 15,000
Cost of Goods Sold             347,000
Depreciation Expense         3,500
Freight-out                           2,000
Income Tax Expense          21,700
Interest Expense                19,000
Interest Revenue                25,000
Merchandise Inventory       35,750
Prepaid Rent                        4,500
Sales                                    575,000
Sales Discounts                   9,500
Sales Returns and Allowances 50,000
Store Salaries Expense       74,000
Unearned Revenue             8,000
Utilities Expense                   18,000

Problem #3
On December 31, 2013, the balance in Accounts Receivable was $680,000 and net credit sales amounted to $3,800,000 during 2013. An aging analysis of the accounts receivable indicated that $40,000 in accounts are expected to be uncollectible. Past experience has shown that about 1% of net credit sales eventually are uncollectible.

Instructions
Prepare the adjusting entries to record estimated bad debts expense using the percentage of receivables basis under each of the following independent assumptions:
(a) Allowance for Doubtful Accounts has a credit balance of $3,200 before adjustment.
(b) Allowance for Doubtful Accounts has a debit balance of $730 before adjustment.

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