Question 1*

The ledger of Maxx Company at the end of the current year shown Accounts Receivable $170,000, Sales Revenue $1,200,000, and Sales Returns and Allowances $50,000.

Instructions

(a)If allowance for Doubtful account has a credit balance of $3,500 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 10% of account receivable.

(b)If allowance for Doubtful Accounts has a debit balance of $370 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 6% of accounts receivable.

Question 2*

The Hartley Clinic purchased a new surgical laser for $90,000. The estimated salvage value is $5,000. The laser has a useful life of five years and the clinic expects to use it 10,000 hours. It was used 1,600 hours in year 1; 2,200 hours in year 2; 2,400 hours in year 3; 1,800 hours in year 4; 2,000 hours in year 5.

Instructions

(a)Compute the annual depreciation for each of the five years under each of the following methods:

(1)straight-line.

(2)units-of-activity.

(b)If you were the administrator of the clinic, which method would you deem as most appropriate? Justify your answer.

C.How is a gain or loss on the sale of a plant asset computed?