Exam 8: Accounting for Selected Assets

George, a sole trader, sells goods on credit, and uses the direct write-off method for recording bad debts. The balance for accounts receivable at the end of the last financial year ended 31 December was $12 000. There was $1000 of bad debts that were written off this year. From an accrual perspective, for last year, which of the following is incorrect?

Grey Egret Ltd purchased an item of equipment at a total cost of $85 000 nine months ago on 1 October. The equipment was expected to have residual value of $20 000 at the end of its five-year useful life to the firm. The company's financial year ends on 30 June.

Accumulated depreciation, as used in accounting, primarily represents:

An asset has a cost of $80 000, estimated residual value of $20 000 and estimated useful life of five years. What is the amount of the depreciation expense for the first year, assuming the reducing-balance method is used and the annual rate is 30%?

The inventory valuation method that results in the recognition of the oldest inventory costs on the balance sheet and statement of comprehensive income, respectively, is: Balance Sheet Statement of Comprehensive Income

Owens Office Supplies collected $300 that had previously been recorded in Accounts Receivable. Recording this event in the accounting system caused:

An advocate of the LIFO inventory method would maintain that:

Firms should ideally recognise the expense related to uncollectable accounts:

Consider the following information and answer the question(s) below. If Machine HRB-09 was purchased 21 months ago, what is the total accumulated depreciation as at 30 June for this machine?

Depreciation expense has the effect of reducing profit, equity and assets.

The bookkeeper at Kupertino Company is recording information into the accounting system to recognise the estimated amount of bad debt expense for the fiscal period. This entry into the accounting system will affect which of the account balances below? Allowance For Doubtful Debts Bad Debts Expense

A credit sale results in increases in which of the following pairs of items on the financial statements? Statement of comprehensive income Balance Sheet

Different valuation rules affect inventory values and therefore cost of sales and profits.

Which of the following is not an intangible asset?

During the year ended 30 June Excelsior Soccer sold 1800 soccer balls at $12.50 each. The entity uses the periodic method of recording inventory. Beginning inventory from 1 July last year amounted to 200 balls at a cost of $1200. Purchases during the year were made in the following order: 580 units @ $6.20 1100 units @ $6.80 300 units @ $7.00 100 units @ $7.10

The accumulated depreciation account, unlike the allowance for doubtful debts, is not a contra account.

The key to the effective management of accounts receivable relies on maximising the benefits from selling goods on credit, not minimising the losses from bad debts.

The reducing-balance method is an alternative method to the units-of-output method, and may be a better reflection of the actual usage of most assets, such as plant and equipment.

LIFO is a method of inventory valuation based on the assumption that cost price attached to the goods sold is the cost of the most recently purchased inventory. Closing inventory is therefore assumed to consist of the cost of the earliest units purchased.

The collection of an account receivable will: