Examination: FINC $0200($Part $2)$

Question $3(10$ Marks$)$

Ragnar Corporation purchased equipment for $$200,000.$ It is expected to have a useful life of $10$ years and salvage

value of $50,000$ at that time. The date of purchase was April $5$th$,2018$ and the company uses the nearest whole

month method. Requirements:

Calculate depreciation expense for $2018$ and for $2019$ using straight line depreciation.

Calculate depreciation expense for $2018$ and $2019$ using DDB$.$

Question $4(15$ Marks$)$

Journalize the following year end journal entries. Year end is December $31.$

A$.$ A short term note receivable was issued on October $1$ for the amount of $$100,000.$ The terms of the note

were as follows: $7$ months note at $2\%$ interest.

B$.$ The company uses the Statement of Financial Position method to record bad debt expense. At the end of

the year Allowance for Doubtful accounts had a $$2,000$ credit balance and Accounts Receivable had a

$$100,000$ balance. The company expects that $7\%$ of receivables will not be collected.

C$.$ We found an invoice for advertising expense in the amount of $$6,000.$ This invoice was not recorded in our

records.

D$.$ Prepaid insurance account has a balance of $$200,000$ and is for a $1-$year policy. The policy was purchased on

July $1.$

E$.$ The company uses the perpetual method for their merchandise inventory. At year end the inventory count

was $$5,000,000$ but the merchandise inventory general ledger account balance was $$5,500,000.$ Net

realizable value of the inventory at year end was calculated to be $$12,000,000.$

F$.$ Office supplies inventory was counted at the end of the year and was found to be $$27,500.$ The general

ledger account balance is $$30,000.$

G$.$ Unearned revenue has a balance of $10,000.$ This is for an $8-$month contract that we started on August $1.$