Exam2W10 - NAME BUS 214 Financial Accounting Exam 2 —...

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Unformatted text preview: NAME BUS 214, Financial Accounting Exam 2 — Winter 2010 Question 1 (20 points) J Company uses the Double-Declining-Balance method to depreciate its Manufacturing equipment. The following were the balances in J Company’s Manufacturing equipment related accounts as of December 31, 2009 (at the end of the fifth year of the equipment’s life): Accumulated depreciation— Manufacturing equipment Manufacturing equipment Bal 1,200,000 * * 806,784 Bal * * The Manufacturing equipment has an expected total life of 10 years and an expected salvage value of $60,000 at the end of 10 years. J Company will switch from the Double-Declining-Balance method to the Straight-Line method in the year when Straight-Line depreciation is greater than Double-Declining-Balance depreciation. Double-Declining-Balance depreciation formula: (Beginning of year Book value) x 1/Life x 2 Straight-line depreciation formula: [(Beginning of year Book value) - Salvage]/(Remaining life) Required: A. Complete the following. Be sure to show your computations. Remember that computations after the “switch-over year” are not necessary. Double-Declining- Balance Depreciation 2010 (year 6) 2011 (year 7) 2012 (year 8) 2013 (year 9) 2014 (year 10) Straight-Line Depreciation 2010 (year 6) 2011 (year 7) 2012 (year 8) 2013 (year 9) 2014 (year 10) Depreciation Expense Actually Recorded 2010 (year 6) 2011 (year 7) 2012 (year 8) 2013 (year 9) 2014 (year 10) 1 B. Prepare the journal entry for J Company to record depreciation for the year when the depreciation method was changed from the Double-Declining-Balance method to the Straight-Line method. Be sure to identify the year. Year ended December 31, (year ) Question 2 (95 points) X Company operates a retail store that sells Office Supplies. The store is located in rented space in a Shopping Mall. X Company started business on January 1, 2009. At December 31, 2009, the X Company had the following account balances: X Company Trial Balance December 31, 2009 Debit Credit Cash $ 205,000 Accounts receivable 450,000 Allowance for bad debts $ 9,000 6% Note receivable-0- Interest receivable-0- Merchandise inventory 575,000 Purchases-0- Freight-in-0- Purchase returns & allowances-0- Purchase discounts-0- Land 90,000 Store fixtures 150,000 Accumulated depreciation—Store fixtures 30,000 Wages payable 7,500 Accounts payable 902,800 Interest payable-0- 6% Serial note payable-0- Common stock, $1 par 60,000 Additional paid-in capital 450,000 Retained earnings 10,700 Sales revenue-0- Sales returns & allowances-0- Sales discounts-0- Gain on sale of land-0- Interest income-0- Cost of goods sold-0- Wage expense-0- Depreciation expense-0- Bad debt expense-0- Loss on sale of store fixtures-0- Interest expense-0- 2 Totals $ 1,470,000 $ 1,470,000 Required: Prepare journal entries to record the following transactions and events that occurred during the month of January 2010....
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Exam2W10 - NAME BUS 214 Financial Accounting Exam 2 —...

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