Bill Smith & Company purchased a new piece of equipment for their factory. The machine costs $125,000. They needed to build a platform on the factory floor to properly place the equipment ($20,000).  Minor repairs and adjustments to the equipment, which happened while getting the equipment installed, cost $1,000. The cost to insure the equipment is $5,000 per year. Costs incurred to test the new machine for proper operation are $1,000.

 

What is the total cost of the asset to get ready for use in the company? Show all your calculations, below (NOTE:  enter numbers without commas -- $1,000 =1000. If a line should have no value, enter 0 (as in zero)).

Machine costs $

platform costs $

adjustments   $

Testing       $

Insurance     $

Total cost     $

ii. Abernathy's Department Store offers credit to approved customers. In 2020, total sales for the store were $1,300,000. Of this, 30% of sales are made on Abernathy's own credit card. Bill Taylor, the VP-Finance for the store has looked over the sales that took place on the Store's own card, and determined the following information:

Accounts Receivable balance at year-end (December 31, 2020) = $21,666.66

 

On annual credit sales on the Department Store's own accounts, the bad debt amount is estimated at 3%

 

1. At the start of the year, the Allowance for Doubtful Accounts account had a credit balance of $1,800. During the year, the actual accounts written off against the allowance amounted to $930.94.

Required:

If Abernathy's made use of the Income Statement/Sales method for determining its Allowance for Doubtful Accounts, calculate and record the journal entry needed at year-end to account for bad debts.

Answer rating: 100% (QA)

total Cost of the Asset Machine costs 125000 Platform costs 20000 Adjustments 1000 Testin... View the full answer