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Instructions: Present the journal entries specified below; show supporting calculations.

The trial balance of Friendly Company at December 31, 2003 includes the following:
Debits Credits
Accounts Receivable 100,000
Allowance for Doubtful Accounts 500
Sales (all on credit) 600,000
Sales Returns and Allowances 60,000

If Friendly uses the aging method and estimates that $5,000 of receivables will be uncollectible, prepare the December 31, 2003 adjusting entry.

If Friendly estimates uncollectibles at 1% of net credit sales, prepare the appropriate adjusting entry for December 31, 2003.

Assume that on February 10, 2004 the specific account of Mark Shaw with a balance of $600, is deemed uncollectible. Record the write-off.

Assume that on May 12, 2004 Shaw pays one-half of the above balance in full and is expected to pay the remainder within 30 days. Record the appropriate entries.

B. SALE OF ACCOUNTS RECEIVABLE

Instructions: Present the journal entries specified below.

(1) On June 30, 2004 Stone Company sells $600,000 of accounts receivable to National Factors Inc. for cash less a 2.5% service charge. Record the sale.

(2) On July 31, 2004 American Express remits cash to Stone Company in settlement of credit card billings of $2,000 less a 2.5% service fee. Record the settlement on the books of Stone Company.

Instructions: Prepare journal entries to record the following events:

July 1 Stone Company received an 8%, 4-month $9,000 note dated July 1 from a customer on account.

Nov. 1 The note is honored and no interest has been accrued.

Nov. 1 Assume instead that the note is dishonored by its maker and there is hope of future collection.

Nov. 1 Assume instead that the note is dishonored and there is no hope of future collection.

DEPRECIATION METHODS
Schilling Corporation purchased a machine on January 1, 2002, at a total cost of $600,000. The machine has an estimated useful life of 10 years or 1,000,000 units of output and a salvage value of $100,000.

Instructions: Complete the following table by presenting the annual depreciation expense for the years 2002 and 2003, under the indicated depreciation methods. Assume actual activity in terms of units of output was: 2002?60,000 units and 2003?120,000 units.

Annual Depreciation Expense
2002 2003

Straight-Line: $ $

Double-Declining-Balance: $ $

Units-of-Activity: $ $

PLANT ASSETS
Instructions: Complete the requirements specified for each of the following independent situations.

A. Maddox Company purchased land and a modern office building on March 1 for a combined cash price of $800,000. The land had a cost of $470,000 and the building had a book value of $100,000 on the seller's books. The land and building had fair market values of $520,000 and $280,000, respectively on March 1. Maddox made the following entry at acquisition:

Land 470,000
Building 500,000
Gain on Purchase 70,000
Accumulated Depreciation 100,000
Cash 800,000

Prepare the correct entry for the acquisition.

B. Norton Company bought machinery on January 1, 2001 at a cost of $150,000. The machinery had an estimated life of 10 years and salvage value of $15,000. In January, 2004, Norton estimates that the machinery will have a life of only 5 more years and an $18,000 salvage value. Norton uses straight-line depreciation. Compute the revised annual depreciation for 2004.

C. Gwynn Company bought equipment on July 1, 2001 at a total cost of $400,000. The equipment has an estimated useful life of 5 years and salvage value of $80,000. Gwynn uses the double-declining-balance method of depreciation. Compute depreciation for 2001 and 2002. The company is on the calendar year.

Asset Purchases & Dispositons:
. Wells Construction gave up a used crane and $16,000 cash for a similar new crane. The old crane cost $24,000, had $9,000 of accumulated depreciation, and a fair market value of $17,000. In recording this exchange, the new crane should be recorded at

$_____________.

. Brown Builders gave up a used diesel-powered electric generator and $5,000 cash for a new truck. The generator cost $17,000, had $10,000 of accumulated depreciation, and a fair market value of $6,000. In recording this exchange, the new truck should be recorded at

$_____________.

. Midwest Mining purchased an iron mine for $3,000,000. The mine was expected to produce 10,000,000 tons of ore over twenty years with no salvage value. During the first year, 500,000 tons of ore were mined and sold. Depletion expense for the first year is

$_____________.

. Morris Industries purchased equipment costing $40,000 on January 1, 2001. The equipment has a four year useful life, $8,000 salvage value, and is being depreciated using the straight-line method. It was sold at a $12,000 loss on June 30, 2003. The selling price of the equipment was

$_____________.

. Hi-Tech Corporation incurred $85,000 of research and development costs to produce a high technology solar computer, paid filing fees of $8,000 to register a patent on this product, and paid $43,000 to defend the patent against infringement by a competitor. All of these costs were incurred in 2001. Production of solar computers began on January 1, 2002. Assuming the patent has a useful life of 17 years, patent expense for 2002 is

$_____________.

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Instructions: Present the journal entries specified below; show supporting calculations.

The trial balance of Friendly Company at December 31, 2003 includes the following:
Debits Credits
Accounts Receivable 100,000
Allowance for Doubtful Accounts 500
Sales (all on credit) 600,000
Sales Returns and Allowances 60,000

If Friendly uses the aging method and estimates that $5,000 of receivables will be uncollectible, prepare the December 31, 2003 adjusting entry.

If Friendly estimates uncollectibles at 1% of net credit sales, prepare the appropriate adjusting entry for December 31, 2003.

Assume that on February 10, 2004 the specific account of Mark Shaw with a balance of $600, is deemed uncollectible. Record the write-off.

Assume that on May 12, 2004 Shaw pays one-half of the above balance in full and is expected to pay the remainder within 30 days. Record the appropriate entries.

B. SALE OF ACCOUNTS RECEIVABLE

Instructions: Present the journal entries specified below.

(1) On June 30, 2004 Stone Company sells $600,000 of accounts receivable to National Factors Inc. for cash less a 2.5% service charge. Record the sale.

(2) On July 31, 2004 American Express remits cash to Stone Company in settlement of credit card billings of $2,000 less a 2.5% service fee. Record the ...

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