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30-08-2018

Product code: Accounts-AW554

Question1

On 1 January 2000, Fabrisio Ltd purchased two new trucks at a total cost of \$250,000. It was estimated that the trucks would have a useful life of 7 years & a residual value of \$20,000 each. Fabrisio Ltd. uses straight line method of depreciation for all of its equipment. The company’s balance date is 31 December.

Required:

a. Record the purchase of the trucks on January 1, 2000.

b. Record the depreciation expense on trucks for 2005.

c. Assume that early in 2006, the company revalue the  trucks upwards by \$25,000 each & assessed that the trucks would last 4 more years instead of 1 but that they would still have the same residual value. Record all journal entries for the trucks in 2006.

d. Make the necessary entries to record the sale of one of the trucks on 31 December2006. The truck was sold for \$27,000. (Assume that the two trucks had the same carrying amount.)

e. How much depreciation expense would be recorded on the second truck during 2009 if it were still being used & if its estimated residual value were still \$20,000? Why?

Question 2 The following transactions of Gohart Ltd. occurred during the financial year 1 July 2013 to 30 June 2014

July 11: The Company accepted an 8%, 90 day promissory note in exchange for the overdue account receivable of Jones J for \$8,000

August 1: Wrote off the \$820 account receivable of K Hobbits as bad debt.

Sep 9: The note receivable from Jones J was discounted at the bank at a discount rate of 10% & the net proceeds banked.

Oct 9: Jones J defaulted on his note & the bank assessed a protest fee of \$10. Gohart Ltd.’s account was debited for the maturity value of the note plus the \$10 protest fee.

Nov 9 : Jones J unexpectedly paid the maturity value of his dishonoured note plus the protest fee & the interest at 10% on both for the 30 days beyond the note’s maturity date.

Dec 3: Gohart Ltd. received \$500 cash & a 60-day, 10% bill of exchange acceptance from P Pullman in granting an extension on his overdue account receivables of \$9,000.

Dec 28: Amex card sales of \$6,600. Credit charge of 5% was applicable.

Jan 31: Received payment from P Pullmanon his bill of 3 December.

May 2: The Company accepted a 90-day, 11% bill from S Solomon in settlement of an account receivable of \$7,000.

June 10: Sale on International Express credit card of \$750 (credit charge 5.5%

June 30: Interest was recorded on the bill receivable from S Solomon. Bad debt expense is recorded at 1% of net credit sales of \$328,000 using the allowance method of accounting for bad debts.

Required:

Prepare general journal entries to record the transactions in Gohart Ltd.’s records

Product code: Accounts-AW554

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