Question

1. An aging of a company's accounts receivable indicates that the estimate of uncollectible receivables totals $4,173. If Allowance for Doubtful Accounts has a $974 credit balance, the adjustment to record the bad debt expense for the period will require a

a.debit to Bad Debt Expense for $4,173.

b.credit to Allowance for Doubtful Accounts for $974.

c.debit to Bad Debt Expense for $5,147.

d.debit to Bad Debt Expense for $3,199.

2. If a fixed asset, such as a computer, were purchased on January 1 for $2,107 with an estimated life of 3 years and a salvage or residual value of $242, the journal entry for monthly expense under straight-line depreciation is

a.

Depreciation Expense	51.81
Accumulated Depreciation		51.81

b.

Accumulated Depreciation	621.67
Depreciation Expense		621.67

c.

Accumulated Depreciation	51.81
Depreciation Expense		51.81

d.

Depreciation Expense	621.67
Accumulated Depreciation		621.67

3. Sneed Corporation issues 9,500 shares of $46 par preferred stock for cash at $65 per share. The entry to record the transaction will consist of a debit to Cash for $617,500 and a credit or credits to

a.Preferred Stock for $437,000 and Paid-In Capital in Excess of Par—Preferred Stock for $180,500.

b.Preferred Stock for $437,000 and Retained Earnings for $180,500.

c.Paid-In Capital from Preferred Stock for $617,500.

d.Preferred Stock for $617,500.

Answer 1

1. Required adjustment for Bad debts for the period= Total estimated uncollectible receivable - credit bal. in allowance account

= $4,173 - $974

= $3,199

Ans: d. Debit to bad debt expense for $3,199

2. Yearly expense = (Cost - Salvage value)/ Useful life

= ($2,107 - $242) / 3 years

= $621.667

Monthly expense = Yearly expense / 12 months

= $621.667 /12

= $51.81

Ans a. Depreciation expense $51.81

Accumulated depreciation $51.81

3.

Debit Cash $617,500 (9,500 shares ×$65 per share)

Credit Preferred stock $437,000 (9,500 shares ×$46 par value)

Credit Paid in capital in excess of par- preferred stock ($617,500-$437,000) $180,500

Ans. A   Preferred stock for $437,000 and Paid-in capital in excess of par-preferred stock for $180,500