At the end of 2011, Delong Co. has accounts receivable of $700,000 and an allowance
for doubtful accounts of $54,000. On January 24, 2012, the company learns that its receivable
from Ristau Inc. is not collectible, and management authorizes a write-off of $5,400.
(a) Prepare the journal entry to record the write-off.
(b) What is the cash realizable value of the accounts receivable (1) before the write-off and
(2) after the write-off?
Chris Rock has prepared the following list of statements about depreciation.
1. Depreciation is a process of asset valuation, not cost allocation.
2. Depreciation provides for the proper matching of expenses with revenues.
3. The book value of a plant asset should approximate its market value.
4. Depreciation applies to three classes of plant assets: land, buildings, and equipment.
5. Depreciation does not apply to a building because its usefulness and revenue-producing
ability generally remain intact over time.
6. The revenue-producing ability of a depreciable asset will decline due to wear and tear and to
7. Recognizing depreciation on an asset results in an accumulation of cash for replacement of
8. The balance in accumulated depreciation represents the total cost that has been charged to
9. Depreciation expense and accumulated depreciation are reported on the income statement.
10. Four factors affect the computation of depreciation: cost, useful life, salvage value, and residual
Identify each statement on page 430 as true or false. If false, indicate how to correct the statement.
Guyer Company publishes a monthly sports magazine, Fishing Preview. Subscriptions
to the magazine cost $20 per year. During November 2011, Guyer sells 12,000 subscriptions
beginning with the December issue. Guyer prepares financial statements quarterly and recognizes
subscription revenue earned at the end of the quarter. The company uses the accounts
Unearned Subscriptions and Subscription Revenue.
(a) Prepare the entry in November for the receipt of the subscriptions.
(b) Prepare the adjusting entry at December 31, 2011, to record subscription revenue earned in
(c) Prepare the adjusting entry at March 31, 2012, to record subscription revenue earned in the
first quarter of 2012.
Grossman Corporation issued 1,000 shares of stock.
Prepare the entry for the issuance under the following assumptions.
(a) The stock had a par value of $5 per share and was issued for a total of $52,000.
(b) The stock had a stated value of $5 per share and was issued for a total of $52,000.
(c) The stock had no par or stated value and was issued for a total of $52,000.
(d) The stock had a par value of $5 per share and was issued to attorneys for services during
incorporation valued at $52,000.
(e) The stock had a par value of $5 per share and was issued for land worth $52,000.
Dossett Company had the following transactions pertaining to stock investments.
Feb. 1 Purchased 600 shares of Goetz common stock (2%) for $6,000 cash, plus brokerage
fees of $200.
July 1 Received cash dividends of $1 per share on Goetz common stock.
Sept. 1 Sold 300 shares of Goetz common stock for $4,400, less brokerage fees of $100.
Dec. 1 Received cash dividends of $1 per share on Goetz common stock.
(a) Journalize the transactions.
(b) Explain how dividend revenue and the gain (loss) on sale should be reported in the income
Villa Company reported net income of $195,000 for 2011.Villa also reported depreciation
expense of $45,000 and a loss of $5,000 on the sale of equipment.The comparative balance
sheet shows a decrease in accounts receivable of $15,000 for the year, a $17,000 increase in
accounts payable, and a $4,000 decrease in prepaid expenses.
Prepare the operating activities section of the statement of cash flows for 2011. Use the indirect
The comparative condensed income statements of Hendi Corporation are shown below.
Comparative Condensed Income Statements
For the Years Ended December 31
Net sales $600,000 $500,000
Cost of goods sold 483,000 420,000
Gross profit 117,000 80,000
Operating expenses 57,200 44,000
Net income $ 59,800 $ 36,000
(a) Prepare a horizontal analysis of the income statement data for Hendi Corporation using
2011 as a base.
(b) Prepare a vertical analysis of the income statement data for Hendi Corporation in columnar
form for both years.