Businesses accounting

a. Double-Entry Bookkeeping

A business purchases office supplies on credit for $500. Indicate the journal entry for the business.

Solution

b. Calculating Depreciation

A machine was bought for $20,000. It is expected to last for 5 years and has a residual value of $2,000. What is the straight-line method of depreciation?

Solution

c. Cash Basis and Accrual Basis Accounting

A company has revenue of $10,000 in December but receives payment in January. When is the revenue recorded under cash basis accounting? When is it recorded under accrual basis accounting?

4. Inventory Valuation (FIFO Method): A company has the following inventory transactions. Beginning inventory: 100 units at $10 each Purchase: 50 units at $12 each

– Sale: 80 units

Calculate COGS if FIFO was applied.

5.Bank Reconciliation:

A company’s bank statement shows $5,000. A company’s general ledger shows $4,500. The bank statement shows a $100 service charge. The general ledger shows a $400 deposit not yet reflected in the bank statement. Make the bank statement to become equal to the general ledger.

6.Calculation of Net Income:

A company accrues the following:

– Revenue: $50,000

– Cost of Goods Sold: $30,000

– Operating Expenses: $10,000

– Interest Expense: $2,000

– Tax Expense: $3,000

Compute the net income for the company.

7.Break-Even Analysis:

A firm has fixed cost of $25,000, variable unit cost of $5, and it sells a product for $10. What is the break-even point in units?

A company takes a loan of $100,000 and the fixed interest on the loan is 6%, for the next 5 years. The company is to repay the loan by equal monthly installments. In this case, calculate the total interest paid during the term of the loan.

9.Inventory Valuation (LIFO Method):

Consider the same as given in problem 4 and calculate the cost of goods sold by adopting the LIFO method.

10.Accounts Receivable Aging:

A firm has the following accounts receivable:

– 30 days: $5,000

– 60 days: $3,000

– 90 days: $2,000

If the firm makes an estimate of bad and doubtful debts on the basis of the age of the receivables at 2% for 30 days, 5% for 60 days, and 10% for 90 days, find the total estimated bad debts.