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# Lahore School of Economics

Financial Accounting II

Quiz 1b

Name:_________________________

Section:___________

## 1. Journalize the following transactions in the accounts of Simmons Company:

Mar. 1 Received a \$60,000, 60-day, 6% note dated March 1 from Bynum Company
on account.
Apr. 30 The note dated March 1 from Bynum Company is dishonored, and the customers
account is charged forthe note, including interest.
July 29 Cash is received for the amount due on the dishonored note dated March 1 plus interest
for 90 days at 8%on the total amount debited to Bynum Company on April 30.
Mar. 1 Notes Receivable 60,000

## Interest Revenue 600*

*(\$60,000 6% 60/360)

## *60,600 0.08 90/360 = \$1,212

2. Equipment purchased at the beginning of the fiscal year for \$360,000 is expected to have a useful
life of 5 years, or14,000 operating hours, and a residual value of \$10,000. Compute the
depreciation for the first and second years ofuse by each of the following methods:
(a) straight-line
(b) units-of-output (1,200 hours first year; 2,250 hours second year)
(c) double-declining-balance

## (a) \$70,000 [(\$360,000 \$10,000) 5]

(b) \$30,000 [(\$360,000 \$10,000) 14,000 hours
1,200]
(c) \$144,000 (\$360,000 0.40)

## (d) 2nd Year

(a) \$70,000 [(\$360,000 \$10,000) 5]
(b) \$56,250 [(\$360,000 \$10,000) 14,000hours
2,250]
(c) \$86,400 [(\$360,000 \$144,000) 0.40]

3. Equipment acquired at a cost of \$126,000 has a book value of \$42,000. Journalize the
disposal of the equipment under the following independent assumptions.
b. The equipment is sold for \$54,000.
c. The equipment is sold for \$24,000.
Post.Re
Date Description f. Debit Credit

## Accumulated DepreciationEquipment 84,000

Equipment 126,000

b. Cash 54,000

## Accumulated DepreciationEquipment 84,000

Equipment 126,000
Gain on Sale of Equipment 12,000
c. Cash 24,000

## Loss on Sale of Equipment 18,000

Equipment 126,000

4. Chasteen Company acquired mineral rights for \$9,100,000. The mineral deposit is
estimated at 65,000,000tons. During the current year, 18,375,000 tons were mined and
sold.
Required:
(1) Determine the amount of depletion expense for the current year.
(2) Journalize the adjusting entry to recognize the depletion expense.

## (1) \$9,100,000/65,000,000 tons = \$0.14 depletion per ton

18,375,000 \$0.14 = \$2,572,500 depletion
expense

## (2) Depletion Expense 2,572,500

Accumulated Depletion
2,572,500
Depletion of mineral deposit.