I. James Co. uses the direct write-off method to account for bad debts. (a) What entry would be made to record a write off of an account receivable balance of $6,500? (b) As opposed to the allowance method of recording bad debts, why is the direct write-off method against U.S. generally accepted accounting principles (GAAP)?

II. JamesCompany acquired 35% of the voting common stock of XYZ, Inc. on January 1, 20X4 for $400,000. For the year ended December 31, 20X4, XYZ, Inc.s audited financial statements reported a net income of $80,000. Also, XYZ, Inc. declared and paid total dividends to its shareholders of $40,000 on December 31, 20X4. The fair value of the shares purchased by James Company was $450,000 on December 31, 20X4. How should James Company account for its investment in XYZ, Inc.?

III. On April 1, 20X6, ABC Co. purchased factory equipment with a list price of $56,000. ABC Co. received a 5% discount off the list price. ABC Co. paid the seller $23,200 down and signed a three-month note payable for the $30,000 principal balance due on June 30, 20X6. The note payable agreement also requires that ABC Co. pay the seller interest of $75 per month (3% annual rate) at the end of each of the next three months beginning April 30, 20X6. Additionally, ABC Co. paid sales tax on the purchase of $1,600 and equipment delivery and installation costs of $1,700. The equipment was damaged when it was unloaded resulting in repair costs to ABC Co. of an additional $800.

What is the total equipment cost that will be recorded by ABC. Co.?

a. $56,000. b. $53,200. c. $54,800. d. $56,500.