Suppose you are confronted with the following accounting dilemmas. In each case, what decision would you make and what accounting principles are relevant to the resolution:

1. A major customer with a $400,000 outstanding account receivable declares bankruptcy. What entries, if any, would you make?

2. Your company purchases $500 of merchandise from a vendor who offers a 10% discount if your company pays the invoice within 15 days. In the past, your company has always taken such lucrative discounts for prompt payment. At what value should you record this inventory and the corresponding account payable?

3. Your company pays $120 for telephone classified advertising for the coming year. Should you treat that as an advertising expense of the current period? If yes, why? If not, how might you account for it?

4. Annual interest charges on your five-year loan are $1,200, payable at the end of each calendar quarter. Should you recognize any interest expense in February? If so, how?

5.Your company owns a computer for which it paid $8,000 two years ago. The computer is still carried at that value in your fixed asset valuation. You now believe that the computer will be worthless in two more years. Should you adjust the value of the computer at this time? If so, how?