1101AFE Accounting Principles Workshop Chapter 9 & 10

Question 1
The trial balance of ABC Ltd shows the following balances as at 31 st May
31/5

Accounts receivable
$58,000

Allowance for doubtful debts

31/5
$2,600

a. In the journal below record the following and post to the ledger accounts above
Credit sales during June were $420,000
Cash collections during June were $360,000
An amount owing of $2,000 is considered uncollectable and is written off
The percentage of credit sales method is used to calculate the allowance for doubtful debts.
Prepare the journal entry to record bad debts expense if 2% of credit sales are estimated to be
uncollectable
Date

Account name

Dr

Cr

b. Show how Accounts receivable would be reported in the classified Balance Sheet at 30 th June

c. If the direct write off method is used to record bad debts and a debt of $2,000 is considered
uncollectable, prepare the journal entry to record the write off then show how the Accounts receivable
would be reported in the classified Balance Sheet at 30 th June
Date
Account name
Dr
Cr

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1101AFE Accounting Principles Workshop Chapter 9 & 10

Question 2
On 3rd July 2010, Leightons Ltd paid $244,000 for a machine. In addition to the basic purchase price the
following incidental costs were paid: freight $800 and installation costs $3,200
It is estimated that the machine will remain in service for 4 years (or 40,000 machine hours) and have a
residual value of $48,000. Actual usage over the 4 year life of the machine will be
12,000 8,000 13,000 and 7,000 machine hours respectively.
a. What is the total cost of the machine
b. Complete the following depreciation schedules for each depreciation method for the years ended 30 th June.
Reducing balance method (rate = 35
Date
Depreciation expense
Accumulated depreciation Carrying amount
th
30 June 2011
30th June 2012
30th June 2013
30th June 2014
Straight line method Date
30th June 2011

Depreciation expense per year =

Depreciation expense
Accumulated depreciation

Carrying amount

30th June 2012

30th June 2013
30th June 2014
Units of production method - Rate per machine hour =
Date
30th June 2011

Depreciation expense

Accumulated depreciation

Carrying amount

30th June 2012

30th June 2013
30th June 2014
Question 3
On 1st July 2011, Hollows Ltd paid $24,000 for a computer. It is estimated that the computer will remain in
use for 3 years (or 3,000 machine hours) and have a residual value of $3,000. Machine hour per year will be
1,200 in 2012, 1,100 in 2013, and 350 to 31st December, 2013. Prepare the following depreciation
schedules for the years ended 30th June 2012, 30th June 2013 and 31st December 2013.
Straight line method
Date
Depreciation expense
Accumulated depreciation Carrying amount
th
30 June 2012
30th June 2013
31st December 2013
Units of production method - Rate per machine hour =
Date
30th June 2012

Depreciation expense

Accumulated depreciation

Carrying amount

30th June 2013

31st December 2013

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1101AFE Accounting Principles Workshop Chapter 9 & 10

Question 3 (cont)
Reducing balance method (rate = 33%)
Nearest $
Date
Depreciation expense
Accumulated depreciation
30th June 2012

Carrying amount

30th June 2013

31st December 2013
Question 4
Record the sale transaction for each of the following situations

Abbey Group purchased a truck on 30th June 2010. The truck cost $30,000. At 30th June 2014 (after
4 years of use) accumulated depreciation was $24 000. The truck was sold for $5 000 cash on 3rd
July 2014.
Date

Account name

Dr

Cr

Abbey Group purchased a truck on 30th June 2010. The truck cost $30,000. At 30th June 2014 (after
4 years of use) accumulated depreciation was $24,000. The truck was sold for $7,000 cash on 3rd
July 2014.
Date

Account name

Dr

Cr

Abbey Group purchased a truck on 30th June 2010. The truck cost $30,000. At 30th June 2014 (after
4 years of use) accumulated depreciation was $24,000. The truck was sold for $7,000 cash on 30th
September 2014. Straight line depreciation is used with no residual.
Date

Account name

Dr

Cr

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