| |
|
$320,000
Big Bear Company deals in distressed properties and makes high risk sales. In 2012, the company sold for $250,000 a piece of property that cost $150,000. The cost recovery method was appropriately used. Collections on the sale were: $80,000 in 2012, $120,000 in 2013, and $50,000 in 2014. What is the balance in the deferred gross profit account at the end of 2013? Answer
| |
|
$100,000 |
| |
|
$80,000 |
| |
|
$50,000 |
| |
|
$0 |
Beck Construction Company began work on a new building project on January 1, 2012. The project is to be completed by December 31, 2014, for a fixed price of $108 million. The following are the actual costs incurred and estimates of remaining costs to complete the project that were made by Beck’s accounting staff:
|
|
Estimating remaining costs to |
|
Actual costs incurred |
to complete project |
| Years |
in each year |
(measured at Dec. 31 each year) |
| 2012 |
$30 million |
$60 million |
| 2013 |
$45 million |
$45 million |
| 2014 |
$35 million |
$0 |
What amount of gross profit (or loss) would Beck record on this project for the year 2013?
Answer
| |
|
$2 million loss |
| |
|
$12 million loss |
| |
|
$10 million loss |
| |
|
$10 million gain |
- Dobson Contractors is considering buying equipment at a cost of $75,000. The equipment is expected to generate cash flows of $15,000 per year for eight years and can be sold at the end of eight years for $5,000. Interest is at 12%. Assume the equipment would be paid for on the first day of year one, but that all other cash flows occur at the end of the year. Ignore income tax considerations. Determine the net present value of the cash flows and if Dobson should purchase the machine. Answer
| |
|
$194,256 negative net present value of the cash flows. Based on present value considerations, Dobson Construction should not buy the machine. |
| |
|
$194,256 positive net present value of the cash flows. Based on present value considerations, Dobson Construction should buy the machine. |
| |
|
$1,534 negative net present value of the cash flows. Based on present value considerations, Dobson Construction should not buy the machine. |
| |
|
$1,534 positive net present value of the cash flows. Based on present value considerations, Dobson Construction should buy the machine. |
-
On March 12, 2013, Admiral Electronics sold 20 fax machines to Cool Stuff Co. for $10,000, subject to terms 2/10, n30. Admiral uses the gross method of accounting for sales discounts. Which of the following is the correct journal to record receipt of the payment, assuming the correct amount was received on March 20, 2013.
Answer
| |
|
| Cash |
9,800 |
|
| Sales discounts |
200 |
|
| Accounts receivable |
|
10,000 |
|
| |
|
| Cash |
9,800 |
|
| Accounts receivable |
|
9,800 |
|
| |
|
| Cash |
10,000 |
|
| Accounts receivable |
|
10,000 |
|
| |
|
| Cash |
10,200 |
|
| Accounts receivable |
|
10,000 |
| Sales discount |
|
200 |
|
A summary of Klugman Company’s December 31, 2013, accounts receivable aging schedule is presented below along with the estimated percent uncollectible for each age group:
| Age Group |
Amount |
% |
| 0 60 days |
$60,000 |
0.5% |
| 61 90 days |
$22,000 |
1% |
| 91 120 days |
$3,000 |
10% |
| Over 120 days |
$1,000 |
50% |
The allowance for uncollectible accounts had a balance of $1,400 on January 1 at the beginning of the year. During the year, bad debts of $750 were written off. What year end adjusting entry should be made?
Answer
| |
|
Debit bad debt expense $670; Credit allowance for uncollectible accounts $670 |
| |
|
Debit bad debt expense $1,320; Credit allowance for uncollectible accounts $1,320 |
| |
|
Debit bad debt expense $1,400; Credit allowance for uncollectible accounts $1,400 |
| |
|
Debit bad debt expense $1,000; Credit allowance for uncollectible accounts $1,000 |
| |
|
Debit cash $720; Credit accounts receivable $720
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