Instructions:

Complete these for extra credit by July 12, 2017. Each Problem is worth 10 points and the points will be added to your grade of test 3. So you have a chance for 20 points.

At the end of the year, the M. I. Wright Company showed the following selected account balances:

Sales (all on credit)............................................................................................................................................. $300,000

Accounts Receivable.......................................................................................................................................... 800,000

Allowance for Doubtful Accounts.................................................................................................................... 38,000

Required:

1. Assume the company estimates that 1% of all credit sales will not be collected. a. Prepare the proper journal entry to recognize the expense involved. b. Present the balances in Accounts Receivable and Allowance for Doubtful Accounts as they would appear on the balance sheet. Also show the net realizable Accounts Receivable.

2. Assume the company estimates that 5% of its accounts receivable will never be collected. a. Prepare the proper journal entry to recognize the expense involved. b. Present the balances in Accounts Receivable and Allowance for Doubtful Accounts as they would appear on the balance sheet. Also show the net realizable Accounts Receivable.

3. Under assumptions 1 and 2 above, give the proper journal entries for the following events.

June 3 John Shifty, who owes us $500, informs us that he is broke and cannot pay. We believe him.

Nov. 9 We learned that John Shifty has won the lottery and is willing to pay off all his old debts.

A new machine costs $120,000, has an estimated useful life of five years and an estimated salvage value of $15,000 at the end of that time. It is expected that the machine can produce 210,000 widgets during its useful life.

The New Times Company purchases this machine on January 1, 2013, and uses it for exactly three years. During these years the annual production of widgets has been 80,000, 50,000, and 30,000 units, respectively. On January 1, 2016, the machine is sold for $45,000.

Required:

1. Calculate the depreciation expense for each of the first three years using:

a. Straight-line

b. Units-of-production

Double-declining-balance

2. Prepare the proper journal entry for the sale of the machine under the three different depreciation methods.