Question

32.

Burke Company sold 5,000 widgets this month. The widgets have a warranty for free replacement. In the past, an average of 10% of widgets sold were eventually replaced under the warranty. The cost of producing a widget is $25. This month, 420 widgets were actually replaced under the warranty. The journal entry for the 420 units replaced under warranty in the current month would be:

		a. debit Inventory, $10,500; credit Estimated Warranty Liability, $10,500
		b. debit Estimated Warranty Liability, $10,500; credit Inventory, $10,500
		c. debit Inventory, $10,500; credit Warranty Expense, $10,500
		d. debit Warranty Expense, $10,500; credit Inventory, $10,500

37.

The proper way to account for the cost of adding a new wing to a building would be to debit

		a. the building's Accumulated Depreciation account.
		b. the Building account.
		c. the Repairs Expense account.
		d. none of the above.

39.

Question 39

A truck was purchased for $25,000. It had a five-year life and a $4,000 residual value. Under the straight-line method, depreciation expense each year is

		a. $4,000
		b. $5,000
		c. $4,200
		d. $2,000

50.

A debit balance in Allowance for Uncollectible Accounts indicates that

		a. the actual amount of uncollectible accounts was less than the company estimated they would be
		b. the company uses the percent of credit sales method to allow for uncollectible accounts
		c. the actual amount of uncollectible accounts was more than the company estimated they would be

Answer 1

32

Cost of widgets replaced = 420*25= $10,500

debit Estimated Warranty Liability, $10,500; credit Inventory, $10,500

Option B is correct

37

The cost of adding a new wing to a building would be to debit the Building account.

Option B is correct

39

Depreciation expense each year = Depreciable cost/Useful life

Depreciation expense each year = (25000-4000)/5= $4,200

Option C is correct

50

A debit balance in Allowance for Uncollectible Accounts indicates that the actual amount of uncollectible accounts was more than the company estimated they would be.

Option C is correct