ASSIGNMENT 2 WEEK 2 INSTRUCTIONS TO STUDENTS This Assignment carries 20% of your final grade. Please read carefully and answer ALL questions which carry equal marks. EXERCISE 1 Uncollectible Receivables The Fast &Furious Car Rentals starts business on January 1, 2014. At December 31, 2014, the total accounts receivable of the company are $350,000; out of which, management estimates that receivables amounting to 54,500 will turn out to be uncollectible. At February 12, 2015, Astra Ltd who is a receivable of $1,200, becomes bankrupt and nothing can be recovered from them. At December 31, 2015, the accounts receivable show a balance of $475,000. On this date, the company revises the estimates of its credit losses and determines that receivables amounting to 54,800 will become uncollectible receivables. Required: a. Prepare an adjusting entry to recognize uncollectible accounts expense at December 31, 2014, b. Prepare an entry to write off accounts receivable at February 12, 2015. c. Prepare an adjusting entry to recognize uncollectible accounts expense at December 31, 2015. (25 marks) EXERCISE 2 Methods of writing off uncollectible receivables Compare and contrast the allowance and direct write off method for uncollectible receivables. (25 marks) EXERCISE 3 Fixed Assets & Depreciation At 31 July 20X6, Helios International had non-current assets which had cost $310,000. At the same date, the accumulated depreciation on the assets was $120,000. The company had not disposed of any non-current assets during the year to 31 July 20X7, but acquired an asset at a cost of $79,200 on 1 January 20X7. Helios International depreciates non-current assets at a rate of 25% per annum. What is the company's depreciation charge for the year to 31 July 20X7 using: a. The straight line method b. The reducing balance method Assume that depreciation is charged from the first year of acquisition. (25 marks) EXERCISE 4 Disposal of Asset During the year to 30 June 20X7, Eugene Ltd sold a non-current asset for $36,000. It had been acquired three years ago at a cost of $180,000. At the date of disposal of the asset, the accumulated depreciation was $138,000. What was the profit or loss on disposal, and what journal entries are needed to record the disposal? (25 marks)