Accounting Answers

What is the last payment date on which the cash discount can be taken on goods sold on March 5

for USD 51,200; terms 3/10/EOM, n/60? Assume that the bill is paid on this date and prepare the correct entries

on both the buyer's and seller's books to record the payment.

a. Silver Company purchased USD 56,000 of merchandise from Milton Company on account.

Before paying its account, Silver Company returned damaged merchandise with an invoice price of USD 11,680.

Assuming use of periodic inventory procedure, prepare entries on both companies' books to record both the

purchase/sale and the return.

b. Show how any of the required entries would change assuming that Milton Company granted an allowance of

USD 3,360 on the damaged goods instead of giving permission to return the merchandise

In the following table, indicate how to increase or decrease (debit or credit) each account, and

indicate its normal balance (debit or credit).

Increased Decreased Normal

by by Balance

(debit (debit (debit

Title of Account or credit) or credit) or credit)

Merchandise Inventory

Sales

Sales Returns and Allowances

Sales Discounts

Accounts Receivable

Purchases

Purchase Returns and Allowances

Purchase Discounts

On June 30, Partyplace, a popular spot for receptions and other events, purchased a used limousine and used Hummer from a car dealership as a basket purchase. They received a good deal because they bought the vehicles together, paying only $75,000 for both. The market values were $45,000 for the limo and $40,000 for the Hummer.

1.

Record the purchase of the vehicles.

2.

During the year, Partyplace performed maintenance on the vehicles like oil changes that amounted to $600. Record this.

3.

During the year, Partyplace made some modifications to the limo that should make it more appealing to its customers, thus, in effect, increasing its productivity as it relates to the business. These modifications cost $4,000. Record this.

On April 1, 20X1, Chang and Chang Inc. invested in a new machine to manufacture soccer balls. The machine is expected to manufacture 1,400,000 balls over its life of three years and then it will be scrapped. The machine cost $50,000 including normal and necessary costs of setting it up. Chang will use units-of-production to depreciate the machine.

1.

Record depreciation for 20X1 and 20X2 assuming that 450,000 balls were manufactured and sold in 20X1 and 600,000 were manufactured and sold in 20X2.

2.

On January 1, 20X3, Chang decides to get out of the soccer ball business, and sells the machine for $15,000. Record this journal entry

Markov Corporation owns forests that are harvested and sold to papermaking companies. Markov purchases a new tract of forest on January 1, 20X6, for $360,000. Its experts estimate that 4,000 tons of wood can be harvested from the forest and sold. After that, the land will be worth about $20,000 (of course, Markov could replant trees, changing this value, but for ease of calculations, we’ll assume no replanting).

1.

In 20X6, 2,500 tons of wood are harvested and 2,200 are sold for $120 per ton. Make any necessary journal entries.

2.

In 20X7, the remaining 1,500 tons are harvested and 1,800 tons are sold for $120 per ton. Make any necessary journal entries.

3.

Determine the balance in land account at the end of 20X7. Does this make sense to you? Why?

3.

Assume that you determined that the plant’s future cash flows were below its book value. The company must now perform the fair value test. Several appraisers are called in, and the average fair value they give the plant is $15,600,000. Determine if Fairfield must record an impairment loss and, if so, make the journal entry to do so.

1.Fairfield purchased the plant on March 1, 20X2, for $46,790,000. Additional costs to get it up and running were $3,780,000. Fairfield assigned a thirty-year useful life and residual value of $4,000,000 and used double-declining balance to depreciate the plant. Record the acquisition of the plant and depreciation for three years, assuming that Fairfield does not use the half-year convention.

2.On Dec 31, 20X4, Fairfield’s auditors raise concerns that the plant’s market value might be below its book value due to the failure of the j phone. They believe this decline is permanent and decide to test for impairment. The accountants and auditors agree that the plant will generate net cash flows of approximately $2,000,000 each year for the next fifteen years. Perform a test of recoverability on the plant.

4.

Janus Corporation was unable to find a store suitable for its business, so it decided to build one. It was able to secure debt financing from the Southeast Bank in the amount of $4,000,000 at an interest rate of 5 percent. During 20X8, Janus spent $2,500,000 on construction, but did not complete the building. Janus continued work on the building into 20X9, eventually completing it on July 1 at a total cost of $3,800,000. Janus does not use the half-year convention.

1.

Determine the amount at which Janus should record the building, including any applicable capitalized interest.

2.

If Janus expects the building to be in use for twenty years with negligible residual value, what would depreciation expense be in 20X9?

j. Webworks purchases one hundred shares of RST Company for $18 per share in cash. This is considered a trading security.

k. Webworks pays off its salaries payable from January.

l. Webworks is hired to design Web sites for a local photographer and bakery. It is paid $600 in advance.

m. Webworks pays off $11,300 of its accounts payable.

n. Webworks pays Leon a salary of $2,000.

o. Webworks completes the salon Web site and earns the $450 paid in January.

p. RST Company pays Webworks a dividend of $25.

q. Webworks pays taxes of $1,558 in cash.

Required:

A. Prepare journal entries for the above events.