Principles of Financial Accounting Exam 3 Questions With
Complete Solutions
Accounting for Contingent Liabilities Correct Answers
Accounts Receivable Methods Correct Answers Percent of
Accounts Receivable, Aging of Accounts Receivable
Accounts Receivable Turnover Correct Answers Ratio
provides useful info for evaluating how efficient management
has been in granting credit to produce revenue (=net sales /
average accounts receivable, net)
Accounts Receivable-Uncollectible Correct Answers
Uncollectible amounts are referred to as bad debts
Acquisition Cost excludes... Correct Answers financing
charges and cash discounts
Actual Warranty Service Correct Answers Debit Estimated
Warranty Liability, Credit Inventory
allowance method Correct Answers A method of accounting
for bad debts that involves estimating uncollectible accounts at
the end of each period.
Advantages: Records estimated bad debts expense in the period
when the related sales are recorded. Reports accounts
receivables on the balance sheet at the estimated amount of cash
to be collected
Allowance Method Correct Answers Transactions
, Sales
Collection
Estimate bad debt
Write off A/R
Receive payments for written-off account
Bonus Correct Answers Assume bonus will be paid equal to
5% of the companies annual income of 210,000. B
= .05(210,000 - B) = 10,000 (Debit Employee Bonus Expense,
Credit Bonus Payable)
Book Value Correct Answers = cost - accumulated
depreciation
Capital Expenditure Correct Answers Betterment and
extraordinary repairs. Major overhaul or partial replacements,
extends life beyond original estimate
Changes in Estimates for Depreciation Correct Answers (book
value - revised salvage value) / revised remaining useful life
Over the life of an asset, new info may come to light that
indicates the original estimates were inaccurate
Contingent Liability Correct Answers a potential liability that
depends on some future event
Cost Determination Correct Answers Acquisition Cost
-Purchase price
-All expenditures needed to prepare the asset for its intended use
Complete Solutions
Accounting for Contingent Liabilities Correct Answers
Accounts Receivable Methods Correct Answers Percent of
Accounts Receivable, Aging of Accounts Receivable
Accounts Receivable Turnover Correct Answers Ratio
provides useful info for evaluating how efficient management
has been in granting credit to produce revenue (=net sales /
average accounts receivable, net)
Accounts Receivable-Uncollectible Correct Answers
Uncollectible amounts are referred to as bad debts
Acquisition Cost excludes... Correct Answers financing
charges and cash discounts
Actual Warranty Service Correct Answers Debit Estimated
Warranty Liability, Credit Inventory
allowance method Correct Answers A method of accounting
for bad debts that involves estimating uncollectible accounts at
the end of each period.
Advantages: Records estimated bad debts expense in the period
when the related sales are recorded. Reports accounts
receivables on the balance sheet at the estimated amount of cash
to be collected
Allowance Method Correct Answers Transactions
, Sales
Collection
Estimate bad debt
Write off A/R
Receive payments for written-off account
Bonus Correct Answers Assume bonus will be paid equal to
5% of the companies annual income of 210,000. B
= .05(210,000 - B) = 10,000 (Debit Employee Bonus Expense,
Credit Bonus Payable)
Book Value Correct Answers = cost - accumulated
depreciation
Capital Expenditure Correct Answers Betterment and
extraordinary repairs. Major overhaul or partial replacements,
extends life beyond original estimate
Changes in Estimates for Depreciation Correct Answers (book
value - revised salvage value) / revised remaining useful life
Over the life of an asset, new info may come to light that
indicates the original estimates were inaccurate
Contingent Liability Correct Answers a potential liability that
depends on some future event
Cost Determination Correct Answers Acquisition Cost
-Purchase price
-All expenditures needed to prepare the asset for its intended use
