Question

PLEASE ANSWER BOTH QUESTION

1. For the year ended December 31, 2014, Dent Co. estimated its allowance for uncollectible accounts using the year-end aging of accounts receivable. The following data are available:

Allowance for uncollectible accounts, 1/1/14 $84,000

Provision for uncollectible accounts during 2014 (2% on credit sales of $3,000,000) 60,000

Uncollectible accounts written off, 11/30/14 69,000

Estimated uncollectible accounts per aging, 12/31/14 104,000

After year-end adjustment, the uncollectible accounts expense for 2014 should be

a. $69,000.

b. $60,000.

c. $104,000.

d. $89,000.

2. On January 15, 2014, Dolan Corp. adopted a plan to accumulate funds for environmental improvements beginning July 1, 2018, at an estimated cost of $6,000,000. Dolan plans to make four equal annual deposits in a fund that will earn interest at 10% compounded annually. The first deposit was made on July 1, 2014. Future value factors are as follows:

Future value of 1 at 10% for 5 periods 1.61

Future value of ordinary annuity of 1 at 10% for 4 periods 4.64

Future value of annuity due of 1 at 10% for 4 periods 5.11

Dolan should make four annual deposits of

a. $1,067,426.

b. $1,174,168.

c. $1,293,103.

d. $1,500,000.

Answer 1

1.

Answer is d. $89,000

Working:

Required balance in Allowance	104000
Actual balance (84000+60000-69000)			75000
Allowance to be increased (104,000 - 75,000)		29000
Add: Provision made during the year	60000
Bad debts expenses (29000+60000)			89000

2. b. $1,174,168

Working:

the 4 annual deposit are

future value of annuity in advance of 1 at 10 % for 4 period = 5.11

annual deposit = 6,000,000 / 5.11

= 1,174,168