Question

On September 12, Vander Company sold merchandise in the amount of $7,100 to Jepson Company, with credit terms of 2/10, n/30. The cost of the items sold is $5,300. Vander uses the periodic inventory system and the gross method of accounting for sales. The journal entry or entries that Vander will make on September 12 is: Multiple Choice 7,100 7,100 Accounts receivable Sales Cost of goods sold Merchandise Inventory 5,300 5,300 0 5,300 Accounts receivable Sales 5,300 0 7,100 Sales Accounts receivable 7,100 0 7,100 Accounts receivable Sales 7,100

A company borrowed $11,000 by signing a 90-day promissory note at 10%. The total interest due on the maturity date is: (Use 360 days a year.)

Multiple Choice

• $275.00

• $1,100.00

• $27.50

• $412.50

• $137.50

Marlow Company purchased a point of sale system on January 1 for $6,700. This system has a useful life of 5 years and a salvage value of $1,050. What would be the depreciation expense for the second year of its useful life using the double-declining-balance method?

Multiple Choice

• $2,680.

• $1,544.

• $2,260.

• $1,608.

• $1,130

Uniform Supply accepted a $7,600, 90-day, 6% note from Tracy Janitorial on October 17. What entry should Uniform Supply make on January 15 of the next year when the note is paid? (Assume reversing entries are not made.). (Use 360 days a year.)

Multiple Choice

• Debit Notes Receivable $7,600; debit Interest Receivable $114; credit Sales $7,714.

• Debit Cash $7,714; credit Interest Revenue $114; credit Notes Receivable $7,600.

• Debit Cash $7,714; credit Notes Receivable $7,714.

• Debit Cash $7,714; credit Interest Revenue $95; credit Interest Receivable $19; credit Notes Receivable $7,600.

• Debit Cash $7,714; credit Interest Revenue $19; credit Interest Receivable $95; credit Notes Receivable $7,600.

Answer 1

First 4 questions are being answered here.

1. Option (d) is correct

Under periodic inventory system, inventory records are not updated after each sale or purchase transaction. Inventory is recorded at year end. So, sale or purchase is recorded in sales or purchases accounts. Required journal entry is:

Debit Accounts receivable $7100

Credit Sales $7100

2. Option (a) is correct

Interest = $11000 * 10% * 90 / 360

Interest = $275

3. Option (d) is correct

Under double declining balance method, depreciation is calculated by the following formula:

Depreciation = 2 * 1 / N * (Cost - Accumulated depreciation)

where, n is the no. of years or useful life and accumulated depreciation is depreciation charged till date

For first year, accumulated depreciation will be zero.

So, depreciation for first year will be:

Depreciation for first year = 2 * 1 / 5 * ($6700 - 0)

Depreciation = 2 * 1 / 5 * $6700 = $2680

Now, in second year, accumulated depreciation will be $2680 (i.e. depreciation charged till date is depreciation for first year)

Depreciation for second year will be:

Depreciation = 2 * 1 / 5 * ($6700 - $2680) = 2 * 1 / 5 * $4020 = $1608

4. Option (b) is correct

First we will calculate interest on note as below:

Interest on note = $7600 * 6% * 90 / 360

Interest on note = $114

Required journal entry is:

Debit Cash $7714

Credit Interest revenue $114

Credit Notes receivable $7600