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If prepaid costs are initially recorded as an asset, no adjusting entries will be required in
the future.
Answer:
Luis Rodriguez wants to buy a car in 3 years. He will need $3,000 for a down payment.
The annual interest rate is 9%. How much money must Luis invest today for the
purchase?
Answer:
Ace Distributors has the following transactions related to notes receivable during the
last month of the year.
Instructions
Journalize the transactions for Ace Distributors.
Answer:
Roberts Company is preparing monthly adjusting entries at December 3 An analysis
reveals the following:
1> During December, Roberts Company sold 3,000 units of a product that carries a
60-day warranty. The sales for this product totaled $100,000. The company expects 4%
of the units to need repair under the warranty and it estimates that the average repair
cost per unit will be $20.
2> The company has been sued by a disgruntled employee. Legal counsel believes that
it is reasonably possible that the company will have to pay $200,000 in damages.
3> The company has been named as one of several defendants in a $400,000 damage
suit. Legal counsel believes it is unlikely that the company will have to pay any
damages.
4> Employees earn vacation pay at a rate of 1 day per month. During December, ten
employees qualify for vacation pay. Their average daily wage is $80 per employee.
Instructions
Prepare adjusting entries, if required, for each of the four items.
Answer:
Times interest earned is calculated by dividing _____________ before
_______________ and ________________ by interest expense.
Answer:
Your roommate is uncertain about the advantages of a promissory note. Compare the
advantages of a note receivable with those of an account receivable.
Answer:
Farley Corporation purchased land adjacent to its plant to improve access for trucks
making deliveries. Expenditures incurred in purchasing the land were as follows:
purchase price, $70,000; broker's fees, $6,000; title search and other fees, $5,000;
demolition of an old building on the property, $5,700; grading, $1,200; digging
foundation for the road, $3,000; laying and paving driveway, $25,000; lighting $7,500;
signs, $1,500. List the items and amounts that should be included in the Land account.
Answer:
A current liability must be paid out of current earnings.
Answer:
The time period assumption is often referred to as the expense recognition principle.
Answer:
