1. the Cost of the Two-Year-Old Machine Is $197,600. It Has an Estimated Residual Value

Chapter 8 & 9 Review
Supplemental Instruction
IowaStateUniversity / Leader: / Chen
Course: / ACCT 284 AD
Instructor: / Clem
Date: / Nov 3, 2009

1. The cost of the two-year-old machine is $197,600. It has an estimated residual value of $36,400, and has an estimated useful life of four years. The company uses straight-line depreciation. Calculate the book value of the machine at the end of second year.

2. The cost of a two-year-old machine is $24,300. It has an estimated residual value of $1,800, and has an estimated useful life of 25,000 machine hours. The company uses units-of-production depreciation and ran the machine 3,750 hours in year 1 and 10,250 hours in year 2. Calculate the book value of the machine at the end of second year.

3. The cost of a two-year-old machine is $20,600. It has an estimated residual value of $1,140, and has an estimated useful life of four years. The company uses double-declining-balance depreciation. Calculate the book value of the machine at the end of second year.

4. For each of the following impaired assets, indicate the amount of impairment loss to report.

Book Value / Fair Value / Amount of Loss
a. / Machine / $ / 15,700 / $ / 6,430 / $ /
b. / Copyright / $ / 35,500 / $ / 34,435 / $ /
c. / Factory building / $ / 46,600 / $ / 37,900 / $ /
d. / Building / $ / 242,000 / $ / 191,600 / $ /

5. The following are the transactions of Morrell Corporation.

Morrell Corporation disposed of two computers at the end of their useful lives. The computers had cost $3,370 and their Accumulated depreciation was $3,370. No residual value was received.

Assume the same information as (a),except that Accumulated depreciation, updated to the date of disposal, was $2,160.

Prepare journal entries to record these transactions:

6. The following information was reported by Amuse Yourself Parks (AYP) for 2005:

Net fixed assets (beginning of year) / $ / 8,850,000
Net fixed assets (end of year) / 8,400,000
Net sales for the year / 4,685,000
Net income for the year / 1,751,000

Compute the company's fixed asset turnover ratio for the year.

7. At the end of 2008, Extreme Fitness has adjusted balances of $729,113 in accounts receivable and $44,191 in allowance for doubtful accounts. On January 2, 2009, the company learns that certain customer accounts are not collectible, so management authorizes a write-off of these accounts totaling $6,757.

As on December 31, 2008, what amount did Extreme Fitness expect to collect?

Prepare the journal entry to write off the accounts on January 2, 2009.

Assuming no other transactions occurred between December 31, 2008, and January 3, 2009, what amount did Extreme Fitness expect to collect?

8. Scotia Corporation hired a new product manager and agreed to provide her a $28,600 relocation loan on a six-month, 5 percent note.

a. The company loans the money on January 1, 2008.

b. The new employee pays Scotia the full principal and interest on its maturity date.

Prepare journal entries to record the above transactions for Scotia Corporation.

9. Prepare journal entries for each transaction listed.

a. During the period, customer balances are written off in the amount of $16,232.

b. At the end of the period, bad debt expense is estimated to be $12,425.