acct1501 questions help (1 Viewer)

[megaman64]

Hi, i have some questions on acct1501. so if you can help, it will be much appreciated.


1.At year-end Shifty Ltd had a balance of Accounts Receivable of $90 000 and an Allowance for Doubtful Debts of $4000. It was decided to write off the debt of Wriggler totalling $2500 as irrecoverable. It was further decided that the Allowance for Doubtful Debts should stand at 5% of Accounts Receivable.
What was the journal entry needed to write off the debt of Wriggler as irrecoverable?
Answer

a.Dr Bad Debts Expense..........$2500 Cr Accounts Receivable..........$2500

b.Dr Bad Debts Expense..........$2500 Cr Allowance for Doubtful Debts..........$2500

c.Dr Allowance for Doubtful Debts..........$2500 Cr Accounts Receivable..........$2500

d.none of the above

2.The trial balance of Allen Ltd at balance date showed a credit balance of $5000 in the Allowance for Doubtful Debts account. Although the account of a customer outstanding at $1400 had been determined to be uncollectable, this had not been written off. What was the effect of this neglect on the year-end balance sheet?
Answer

a.there was an understatement of total liabilities

b.there was an overstatement of total assets and shareholders’ equity

c.there was an understatement of total assets and shareholders’ equity

d.there was no effect on total liabilities, assets or shareholders’ equity

3.A customer provides a deposit of $500 000 near year-end. The product will not be delivered until next year. This transaction will:
Answer

a.increase net profit, total assets and cash

b.increase net profit and cash but not total assets

c.increase total assets and cash but not net profit

d.increase cash but not increase net profit or total assets

4.Additional credit sales of $2 million (cost price $1.5 million) are made on credit. This transaction will:
Answer

a.increase net profit, increase cash, and increase total assets

b.increase net profit, increase total assets but not affect cash

c.increase net profit, and not affect cash or total assets

d.none of the above

5.Management uses the percentage-of-sales approach method to calculate the allowance for doubtful debts. Management calculated the allowance for doubtful debts on the basis of 2% of sales. However, by year-end it was aware that the rate should have really been 3% of sales. Management does not adjust the allowance for doubtful debts at year-end. As a result:
Answer

a.assets are overstated, and net profit is overstated

b.assets are overstated, and net profit is understated

c.assets are understated, and net profit is overstated

d.assets are understated, and net profit is understated

 

[Trans4M]

Assuming I still remember my 1st year accounting (don't do accounting anymore)

1 - C

Allowance fo Doubtful Debts (ADD) is a Credit Account while Accounts Receivable (A/R) is a Debit Account. When you write off ADD, you wrtie off A/R. To write something off, you write the opposite to it's account time. Hence Dr ADD and Cr A/R

2 - D

It's the same transaciton type as question 1. Forgot the term for it but ADD is a counter-asset. It already decreased the net Assets when you originally wrote it up.

e.g A/R = $50,000 ADD = $5,000. Net Asset = $45,000 (A/R - ADD)

Now when you write off ADD say $1000. A/R = $49,000 ADD = $4,000 Net Asset = $45,000 (A/R - ADD)

Hence no change in asset, liability or shareholders equity.

3 - C

You receive cash so increase in Asset and Cash. However, no increase in proft as it's still a liability since you haven't delivered the product.

4 - B

Credit Sales = increase in A/R and hence increase in Asset but no change in cash. Since you sold for more than what it cost you, there is an increase in net profit.

5 - A

When you originally write up bad debt expense the journal entry is:

DR Bad Debt Expense
CR ADD

Since you are short of 1% of Bad Debt Expense. Your profit is a bit higher than what it actually should be. Since your ADD is lower than what i should be, your assets are higher than what they should be. Hence Assets/Profit are overstated.

Hope that helps

 

[megaman64]

Thanks this helped a lot.
I have one more question.

Shareholders invest $100 000 in a business. $80 000 worth of inventory was bought on credit, and of that, $10 000 worth of damaged inventory was returned. Equipment costing $200 000 was purchased, which was financed by a loan from the seller, repayable in 5 years. The business paid $40 000 to accounts payable. Total assets increased by:
Answer

a.$100 000

b.$170 000

c.$330 000

d.none of the above

 

[lordfraction]

is this the online quiz?

 

[Trans4M]

Thanks this helped a lot.
I have one more question.

Shareholders invest $100 000 in a business. $80 000 worth of inventory was bought on credit, and of that, $10 000 worth of damaged inventory was returned. Equipment costing $200 000 was purchased, which was financed by a loan from the seller, repayable in 5 years. The business paid $40 000 to accounts payable. Total assets increased by:
Answer

a.$100 000

b.$170 000

c.$330 000

d.none of the above

Not entirely sure cause long time no accounting

100,000 investment = increase by 100,000 (I am assuming thet shareholders give company the 100k so journal entry = DR Cash 100k Cr Shareholders Equity 100k)
80,000 inventory = increase by 80,000 (Dr Inventory 80k Cr Accounts Payable 80k)
10,000 damaged inventory returned = decrease by 10,000 (Dr Accounts Payable 10k Cr Inventory 10k)
200,000 equipment = increase by 200,000 (Dr Equipments 200k Cr Loan Payable 200k)
40,000 to accounts payable = decrease by 40,000. (Dr Accounts Payable 40k Cr Cash 40k)
Net change = increase 330,000

Someone want to double check for me? Accounting major kids?

 

[Validity]

a randmo question but can the acct quiz answers be saved and continued another day?

 

[Trans4M]

Think for your year yes. In my year no cause there is a time limit when we did it... Once it starts it cannot be paused haha.

 

[lordfraction]

on behalf of acct1501, I thank Trans4M for your invaluable help

 

[Trans4M]

on behalf of acct1501, I thank Trans4M for your invaluable help

haha. Not sure if my answers are correct though Not majoring in accounting so I am probably wrong

 

[megaman64]

Anyone know a reason why interest expense and interest paid on the financial statements can have different values?

 

[Trans4M]

Anyone know a reason why interest expense and interest paid on the financial statements can have different values?

I think one of the assumptions you learnt in ACCT 1A is accrual accounting. This means we recognise transactions the moment they take place rather than when we receive cash.

For example. I borrow $100,000 and the interest rate for it is 5.00% per annum. Every year I will pay the bank $4,000.

Under accrual accounting, at the end of the year, my interest expense is $5,000 (due date for interest took place) however, I only paid $4,000 in interest.

 

[fusionillusion]

Could someone please help me with this question?

Red Shoes Ltd has gone bankrupt and will not pay $10 000 to XYZ. XYZ has accounts receivable of $12 million and an allowance for doubtful debts of $500 000. XYZ does not adjust the accounts for the $10 000 that will not be paid by Red Shoes Ltd. Which of the following statements is true about the balance sheet of XYZ?
Select one:
a. total assets are overstated
b. total assets are understated
c. net accounts receivable is correctly stated
d. none of the above

Thank you in advance!

 

[twinshadow]

Hey everyone! I ahave some questions on acct1501. so if you can help, it will be much appreciated. I am stuck at the moment!

V Ltd's records at year end showed that there were 60 units on hand at cost of $50 each. A stock count at year end found there were only 52 units of inventory on hand. V Ltd had sold 100 units of inventory in the last month of the year realising a net price of $45 after selling costs. Which of the following statements is true?

Select one:
a. Sales in the last month of the year $4 500
b. Loss of inventory $660
c. Inventory on hand at year end $2 600
d. Inventory on hand at year end $2 340


Design Ltd has $200 000 in current assets and $150 000 current liabilities. What would have been the impact on current ratio if the company borrows $50 000 from the bank as a long term loan, repayable in five years?
Select one:
a. Increase
b. Decrease
c. No change
d. Increase and decrease