1. Quitzau Inc. follows the aging-of-receivables method in preparing its allowance for uncollectible accounts (allowance). The opening allowance balance as at January 1, 20X7, was a credit of $8,700. During the 20X7 fiscal year, a total of $7,860 was written off as uncollectible for the year and a total of $650 in previously written-off accounts was recovered.

Quitzau has the following accounts receivable balances as at December 31, 20X7, including a breakdown of the percentage estimated by management to be uncollectible:

Number of days

outstanding

Dollar amounts

Estimated %

uncollectible

0-30

$480,520

0.5%

31-60

187,600

1.8%

61-90

77,250

2.5%

Over 90

38,760

4.5%

What is the total amount of bad debt expense that Quitzau needs to record for the December 31, 20X7, fiscal year? Round to the nearest dollar.

a) $ 7,965

b) $ 8,615

c) $ 9,455

d) $10,945

2. Liberty Underwriter Corp. (LUC) is in the process of preparing its bank reconciliation for the month ended August 31, 20X4. Pertinent information follows:

August 31, 20X4, book balance of the general ledger (GL)

$18,752

August 31, 20X4, bank statement balance

$18,764

Deposits in transit as at August 31 that were not processed by the bank until September 1

1,296

Outstanding cheques that have not yet been processed by the bank

1,455

Customer cheque returned non-sufficient funds (NSF)

322

Bank service charges for the month

185

The bank correctly processed a $480 cheque issued by LUC. LUC had erroneously recorded this as an $840 payment in its cash account in its GL (book error).

LUC was not aware of the NSF cheque, service charges, or its error recording the $480 cheque until it received its bank statement on September 4, 20X4.

What amount should LUC report on its August 31, 20X4, balance sheet for cash?

a) $17,885

b) $18,593

c) $18,605

d) $18,923

3. Gretta Cat Corp. (GCC) loaned one of its customers $10,000 on May 1, 20X7. The 6% note was due on May 1, 20X8. GCC's year end is December 31. It calculates interest based on the number of days the note is outstanding. What is the amount of interest revenue that GCC will record at its year ended December 31, 20X7, rounded to the nearest dollar?

a) $400

b) $401

c) $403

d) $600

4. Information for Gidget Cat Co.'s perpetual inventory system follows:

Date

Transaction type

Units

Price per unit

Opening inventory

200

$5.00

April 12

Purchase

300

$5.10

April 30

Sale

100

$8.00

July 7

Purchase

400

$5.25

December 15

Sale

500

$8.20

Assuming that Gidget uses the weighted average cost flow assumption, what is the average value per unit in inventory on May 1, immediately after the April 30 sale, rounded to three decimal places?

a) $5.060

b) $5.075

c) $5.144

d) $5.155

5. Details of ABC Corp.'s inventory transactions for the month of December 20X5 are set out below. ABC uses a FIFO inventory costing method and a periodic inventory system.

Date

Transaction type

Amount (units)

Price per unit

Dec. 1

Opening balance

400

$5.12

Dec. 3

Purchase

1,100

$5.23

Dec. 15

Purchase

600

$5.48

Dec. 2

Sale

300

$6.50

Dec. 6

Sale

900

$6.50

Dec. 18

Sale

100

$8.00

What was ABC's cost of goods sold for December 20X5, rounded to the nearest dollar?

a) $4,224

b) $4,334

c) $6,755

d) $6,865

6. Scott's Electronics Corp. (SEC) sells high-end televisions and other electronic equipment. As all televisions are serial-numbered goods, SEC uses the specific identification method to track its inventory. An extract from its inventory holdings of a particular brand of televisions on March 1, 20X8, follows:

Model

Serial number

Inventory cost

Ultimate Clear Vision V

SNX020476

$2,487

Ultimate Clear Vision V

SNX021455

$2,516

Ultimate Clear Vision V

SNX021457

$2,516

Ultimate Clear Vision V

SNX022481

$2,644

Ultimate Clear Vision V

SNX023220

$2,637

During March 20X8, SEC sold three televisions, specifically serial numbers SNX020476, SNX021455, and SNX023220, for $4,300 each.

How much gross profit will SEC report on its financial statement for the month ended March 31, 20X8, pertaining to the sale of these items?

a) $5,160

b) $5,220

c) $5,260

d) $5,381

7. Mega Miners Inc. (MMI) began operating a diamond mine on April 1, 20X4. Details of the mining equipment used by MMI follow:

MMI paid $1,000,000 for the equipment.

MMI estimates that the equipment, which was brought into use when the mine opened, will last approximately eight years based on scheduled production and will have a residual value of $100,000 once production is finished.

MMI depreciates its mining equipment using the units of production method.

MMI estimates that the equipment is capable of processing 20,000 carats of diamonds. In 20X4, the mine processed 1,500 carats of diamonds.

What is the amount that MMI will report as depreciation expense relative to the mining equipment for its year ending December 31, 20X4?

a) $50,625

b) $67,500

c) $75,000

d) $84,375

8. During 20X6, Manufacturing Consortium Inc. (MCI) purchased new machinery from an overseas manufacturer. The cost of the machine totalled $512,000. Shipping and duties incurred by the company totalled $35,000. MCI paid $15,000 to bring a mechanic from overseas to assist with the installation. MCI received a rebate of $40,000 from the manufacturer because MCI purchased two machines this year. It cost MCI $9,000 to insure the machinery for one year.

What is the total asset cost that MCI should record for the new machinery?

a) $487,000

b) $522,000

c) $531,000

d) $562,000

9. Belle's Boutiques Inc. (BBI) recently expanded its business. On February 1, 20X6, BBI purchased land and buildings for $600,000 to house its operations. An independent appraisal of the asset obtained at time of purchase indicated that the fair market value was $248,000 for the building and $372,000 for the land.

The building is expected to have a residual value of $40,000 at the end of its 20-year useful life. BBI uses the straight-line method to record depreciation expense and it has a December 31 fiscal year end.

How much depreciation expense will BBI record in its 20X6 fiscal year for these assets?

a) $ 9,167

b) $ 9,533

c) $10,000

d) $11,000

10. Machine Shop Corp.'s (MSC) year end is December 31. It depreciates all equipment on a straight-line basis. On January 1, 20X1, it paid $7,000,000 to purchase a specialized piece of machinery. At the time of purchase, the machine was expected to last for 10 years and have a residual value of $100,000. At its December 31, 20X6, year end, before depreciation was recorded for the year, the company determined that the total useful life of the equipment was seven years, which means that the remaining useful life of the equipment is two years, including 20X6. The residual value of the equipment at the end of its remaining useful life is now expected to be $50,000.

What amount will MSC charge to depreciation expense in 20X6 for this piece of equipment?

a) $ 700,000

b) $1,725,000

c) $1,750,000

d) $1,775,000