Question

 Question 6

 Which of the following describes shipping terms of FOB shipping point?

•  The purchaser is responsible for the shipping charges.

•  The shipping charges are debited to Delvery Expense by the buyer.

•  At the end of the year, any items in transit should be included as part of the seller's Inventory.

•  The seller must absorb the cost of shipping the items.

 

Question 8 

Michael Corporation bought the beginning of Year 1 paying $25,000 cash and signing an interest bearing not for $50,000. The estimated useful life of the equipment is 5 years and the estimated salvage value is $7.500. How much depreciation expense would be recorded for Your Miches the double-declining balance depreciation method.

 Question 10

 ABC Company showed the following information at the end of the first year:

 What is the company's net income for the year based on the accrual basis of accounting?

•  $214

•  $604

•  $554

•  $864

Question 12

Jennifer Company received a 3000, 12%, 90-day note on November 1, Year 1. Jennifer only makes adjusting entries at the end of the calendar year. Jennifer will record accrued interest receivable on this note December 31, Year 1 (the company's year-end of 

• $72 

• $6 

• $18 

• $12

Question 17

 Michael Company uses a perpetual inventory system and has the following account balances at the end of July:

Answer 1

Question 6

Answer: The purchaser is responsible for the shipping charges

Explanation: FOB shipping point indicates that the title and responsibility of goods transfer from the seller to the buyer when the goods are placed on a carriage vehicle. Thus after delivering the goods to the carrier, seller does not remain responsible for any expenses incurred on goods and ownership passes on to the buyer. Thus, the purchaser is responsible for the shipping charges.

Question 8

Answer: $ 18,000

Explanation: Under double declining balance method of depreciation, 100% is divided by useful life of years and the answer is multiplied by 2 to get the rate for double declining balance method. The same rate is applied every year to asset’s book value.

Calculation:

Cost of equipment = $ 25,000 + $ 50,000 = $ 75,000

Depreciation for year 1 = $ 75,000 x 40% = $ 30,000

Book Value at year 1 end = $ 75,000 - $ 30,000 = $ 45,000

Depreciation for year 2 = $ 45,000 x 40% = 18,000

Question 10:

Answer: $ 554

Explanation: Under accrual basis of accounting, all revenue earned, whether received or not and all expenses incurred, whether paid or not is taken into account.

Calculation:

Company’s net income for the year based on the accrued basis of accounting

= Revenue earned – Expenses incurred, including depreciation

= $ 700 - $ 146

= $ 554

Note: All cash payment and cash receipt are ignored for calculating the net income for the year based on the accrued basis of accounting.

Question 12:

Answer: $ 12

Explanation: Calculation of interest amount for 2 months, i.e. 60 days (1 Nov- 31 Dec)

= $ 600 x 12% x 5=60 days/360 days

= $12

Question 17        

Answer: $ 2,280

Explanation: Gross Profit is Net Sales less cost of sales. Net Sales is gross sales after deducting sales discounts and sales returns and allowances

Particulars	Amount ($)	Amount ($)
Sales		4,000
Less: Sales Returns and allowances	80
Less: Sales Discounts	120
Net Sales		3,800
Less: Cost of Goods Sold		1,520
Gross Profit		2,280