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Quiz 3 - Solution

This document contains information about a quiz for a financial accounting course, including two calculation questions. The first question involves computing depreciation expense for a truck using different depreciation methods for 2020 and 2021. The second question provides multiple transactions for a company and asks to record the journal entries for both the company and its supplier. The document provides the solutions and journal entries for both questions.

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Abrar Yasin
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55 views3 pages

Quiz 3 - Solution

This document contains information about a quiz for a financial accounting course, including two calculation questions. The first question involves computing depreciation expense for a truck using different depreciation methods for 2020 and 2021. The second question provides multiple transactions for a company and asks to record the journal entries for both the company and its supplier. The document provides the solutions and journal entries for both questions.

Uploaded by

Abrar Yasin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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BBA Program

Spring 2022
ACT201: Financial Accounting
Quiz 3
Total: 15 Marks

Answer the following calculation

Student Name:
Student ID:
Section:

Q1. ABC Company purchased a delivery truck for $30,000 on January 1, 2020. The truck has
an expected salvage value of $2,000, and is expected to be driven 100,000 miles over its
estimated useful life of 8 years. Actual miles driven were 15,000 in 2020 and 12,000 in 2021.
Instructions a. Compute depreciation expense for 2020 and 2021 using (1) the straight-line
method, (2) the units-of-activity method, and (3) the double-declining-balance method.
b. Assume that ABC uses the straight-line method and no salvage value.
1. Prepare the journal entry to record 2020 depreciation.
2. Show how the truck would be reported in the December 31, 2020, balance sheet.
[Total Marks 8]

Solution:
a) (1) 2020: ($30,000 – $2,000)/8 = $3,500
2021: ($30,000 – $2,000)/8 = $3,500

(2) ($30,000 – $2,000)/100,000 = $0.28 per mile


2020: 15,000 X $0.28 = $4,200
2021: 12,000 X $0.28 = $3,360

(3) 2020: $30,000 X 25% = $7,500


2021: ($30,000 – $7,500) X 25% = $5,625
(b) (1) Depreciation Expense .................................................. 3,750
Accumulated Depreciation—Delivery Truck........ 3,750

(2) Delivery Truck................................................................. $30,000


Less: Accumulated Depreciation ............................. (3,750)
$26,250

2. On June 10, Diaz Company purchased $8,000 of merchandise on account from Taylor
Company, FOB shipping point, terms 2/10, n/30. Diaz pays the freight costs of $400 on June
11. Damaged goods totaling $300 are returned to Taylor for credit on June 12. The fair value
of these goods is $150. On June 19, Diaz pays Taylor Company in full, less the purchase
discount. Both companies use a perpetual inventory system.
Instructions
a. Prepare separate entries for each transaction on the books of Diaz Company.
b. Prepare separate entries for each transaction for Taylor Company. The merchandise
purchased by Diaz on June 10 had cost Taylor $5,000.
[Total Marks 7]

(a) June 10 Merchandise Inventory................................ 8,000


Accounts Payable ................................ 8,000
11 Merchandise Inventory................................ 400
Cash.......................................................... 400
12 Accounts Payable......................................... 300
Merchandise Inventory....................... 300
19 Accounts Payable ($8,000 – $300)........... 7,700
Merchandise Inventory....................... 154
($7,700 X 2%)
Cash ($7,700 – $154) ........................... 7,546
(b)
June 10 Accounts Receivable................................... 8,000
Sales ........................................................ 8,000
Cost of Goods Sold...................................... 5,000
Merchandise Inventory ...................... 5,000
12 Sales Returns and Allowances................ 300
Accounts Receivable.......................... 300
Merchandise Inventory............................... 150
Cost of Goods Sold............................. 150
19 Cash ($7,700 – $154).................................... 7,546
Sales Discounts ($7,700 X 2%)................. 154
Accounts Receivable.......................... 7,700 ($8,000 – $300)

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