ACC 101/112 - WAGERS
REVIEW SHEET FOR
TEST FOUR (101) AND TEST ONE (112)
CHAPTERS 9 - 10
This test will consist of two large groups of multiple-choice questions, as well as
FOUR work problems (computing depreciation expense, estimating bad debt
expense, writing off/recovery of uncollectible accounts, notes receivable
entries). This test will require you to do the following:
 ANSWER “GENERAL” MULTIPLE-CHOICE QUESTIONS -addressing various topics we have covered in both of these chapters.
 ANSWER
“NUMBER-CRUNCHING!”
MULTIPLE-CHOICE
QUESTIONS --where you must compute the correct answer to the
question, addressing the following topics:

ESTIMATING BAD DEBT EXPENSE (discussed later on review)

COMPUTING MATURITY VALUE OF A PROMISSORY note
 Interest = Principal * Rate * Days / 360
 Always divide by 360 – never anything else!!
 Maturity value = Principal + total interest

COMPUTING
RECEIVABLE
NET
REALIZABLE
VALUE
OF
Total Accounts Receivable
– Allowance for Doubtful Accounts
= Net Realizable Value
ACCOUNTS
ACC 101 - Review for Test 4
Chapters 9 - 10 - Wagers
Page 2 of 8


DEPLETING A NATURAL RESOURCE

Depletion Rate = Cost of Resource / Total Units of Resource

Depletion Expense = Depletion Rate * Number of Units Extracted

Journal entry
Depletion Expense
Accumulated Depletion
PURCHASING AN ASSET - know the various costs that are (and ones
that are not, like operating costs, vandalism, damage, etc.!) debited to
the asset account

What you pay for the asset plus all reasonable and necessary costs
incurred to get the asset in place and in service

COMPUTING DEPRECIATION EXPENSE AND BOOK VALUE,
including computing depreciation expense for partial periods (discussed
later on this review)

DISPOSING OF AN ASSET
Cash (proceeds, if any)
Accumulated Depreciation (to zero out)
Loss on Sale (debit losses, like expenses)
Asset (ORIGINAL COST: to zero out)
Gain on Sale (credit gains, like revenues)

One or other, not both!

Compare the PROCEEDS to the asset’s BOOK VALUE (Cost Accumulated Depreciation) to see if you have a gain or loss

Are proceeds LESS THAN book value? Difference is a loss

Are proceeds GREATER THAN book value? Difference is a gain
REVISING DEPRECIATION EXPENSE
Book Value – Revised Residual
REMAINING life
ACC 101 - Review for Test 4
Chapters 9 - 10 - Wagers
Page 3 of 8
 PROBLEM: COMPUTE DEPRECIATION EXPENSE FOR THREE
YEARS USING STRAIGHT-LINE, PRODUCTION UNIT,
AND DOUBLE DECLINING BALANCE METHODS

Hint: remember to start all calculations with the FULL cost of the
asset – what we pay for it plus all reasonable and necessary costs to
get it in place and in service!

Straight-Line



Depr. per Period = (Cost - Residual) / Estimated Useful Life
Production Unit

Depr. per UNIT = (Cost - Residual) / Estimated Units of Life

Depreciation per PERIOD = Actual Units * Depreciation per Unit
Double Declining Balance


Depreciation per Period = Book Value * (2 / Life)

Remember: Book Value = Cost - Accumulated Depreciation

For the FIRST year of an asset’s life, Book Value is same as
COST (since Accumulated Depreciation is ZERO to start off
the first year)!
You will not be required to compute depreciation expense for the
last year of the asset’s life (where you have to “plug” the expense
as the difference between its book value and its residual)
ACC 101 - Review for Test 4
Chapters 9 - 10 - Wagers
Page 4 of 8
 PROBLEM: RECORD ADJUSTING ENTRY REQUIRED TO
ESTIMATE BAD DEBT EXPENSE IN THE ALLOWANCE
METHOD

ADJUSTING ENTRY (regardless of method used to figure the
amount, the entry itself is the same!)
Bad Debt Expense ()
Allowance for Doubtful Accounts ()


“BASED ON NET SALES” Method (to compute amount of entry)

Expense = Net Sales * %

Ignore the existing balance in the Allowance account
“BASED ON ACCOUNTS RECEIVABLE” AGING Method (to compute
amount of entry)


Compute the DESIRED ENDING BALANCE (target) for the
Allowance account by aging

Multiply amount in each category times the percent estimated to
be uncollectible

Add up all these amounts to determine the desired ending
balance in the Allowance account
Draw a T-Account for the Allowance account (record the current
balance AND the target) then WORK BACKWARDS to figure the
EXPENSE needed!

You MUST CONSIDER existing balance in the Allowance account

Hint: Aging – draw a T-Account for the Allowance Account (all
the “A’s!”)
ACC 101 - Review for Test 4
Chapters 9 - 10 - Wagers
Page 5 of 8
 PROBLEM: RECORD JOURNAL ENTRIES TO WRITE-OFF
AN UNCOLLECTIBLE ACCOUNT AND RECORD THE
RECOVERY OF AN ACCOUNT PREVIOUSLY WRITTEN OFF

WRITE-OFF of an uncollectible account - ALLOWANCE Method
Allowance for Doubtful Accounts ()
Accounts Receivable, Customer Name ()

WRITE-OFF of an uncollectible account - DIRECT WRITE-OFF
(CHARGE-OFF) Method
Bad Debt Expense ()
Accounts Receivable, Customer Name ()

RECOVERY of previously written-off account - ALLOWANCE Method TWO ENTRIES
Accounts Receivable, Customer Name ()
Allowance for Doubtful Accounts ()
Cash ()
Accounts Receivable, Customer Name ()

RECOVERY of previously written-off account – DIRECT WRITE-OFF
Method - TWO ENTRIES
Accounts Receivable, Customer Name ()
Bad Debt Expense ()
Cash ()
Accounts Receivable, Customer Name ()
NOTE: underlined accounts are just to emphasize to you the difference
between the entries in the allowance method versus direct write-off
method
ACC 101 - Review for Test 4
Chapters 9 - 10 - Wagers
Page 6 of 8
 PROBLEM: RECORD JOURNAL ENTRIES FOR A NOTE
RECEIVABLE (TWO notes – one that matures in the SAME period it is
issued, and another that is issued one period and matures the NEXT
period, so you will be required to make an adjusting entry for the interest!)

Formula to compute INTEREST = Principal * Rate * Days / 360
Please DON’T forget to multiply by the # days / 360 – students forget this
often and then they get the wrong answer!! And never divide by any number
other than 360!!

Journal entries: for note that DOESN’T CROSS OVER YEAR-END

To record receiving the note
Notes Receivable ()
Accounts Receivable (), Cash (), Sales (), etc.

To record the receipt of payment at maturity
Cash () (amount = maturity value: principal + total interest)
Note Receivable () (amount = principal)
Interest Income () (amount = earned this period)

To record maturity of note if note maker does NOT pay at
maturity
Accounts Receivable ()
Note Receivable ()
Interest Income ()
credits are the same as if we
were paid!
ACC 101 - Review for Test 4
Chapters 9 - 10 - Wagers
Page 7 of 8

Journal entries: for note that DOES CROSS OVER YEAR-END
 To record receiving the note
Notes Receivable ()
Accounts Receivable (), Cash (), Sales (), etc.

Adjusting journal entry to accrue interest
Interest Receivable ()
Interest Income ()

To record the receipt of payment at maturity
Cash () (amount = maturity value: principal + total interest)
Note Receivable () (amount = principal)
Interest Receivable () (amount = accrued last period)
Interest Income () (amount = earned this period)

To record maturity of note if note maker does NOT pay at
maturity
Accounts Receivable ()
Note Receivable ()
Interest Receivable ()
Interest Income ()
credits are the same as if we
were paid!

Remember, every time you debit/credit Notes Receivable it MUST
BE for the PRINCIPAL amount ONLY (never any interest)!!

You only credit Interest Receivable (at maturity) IF the note was
issued one period and matured in the next period, so you had to
make an adjusting entry.

If the note matures in the same period it was issued, you
DON’T credit Interest Receivable at maturity
ACC 101 - Review for Test 4
Chapters 9 - 10 - Wagers
Page 8 of 8
The key to doing well on this test is PRACTICE, PRACTICE, and
PRACTICE!! Some EXTRA homework problems (in addition to those that
were assigned for in-class work or homework AND in addition to those given in
the “Extra Practice Problems” on the web site) from your textbook that will
help you assess your current level of knowledge on the certain topics are:

Chapter 9 – Accounts Receivable (write-off/recovery entries;
estimating bad debt expense)
Exercises 9-5, 9-9, 9-10, 9-13, 9-14, 9-17
Problem 9-3A, 9-1B, 9-2B, 9-3B

Chapter 9 – Notes Receivable
Exercises 9-19, 9-23
Problem 9-5A, 9-6A, 9-4B, 9-5B, 9-6B

Chapter 10 - Depreciation Expense
Exercise 10-12, 10-11, 10-16
Problems 10-5A, 10-2B, 10-3B, 10-5B

Multiple-choice questions
Cost of asset: problems 10-1A, 10-1B
Revising depreciation expense: practice exercises 10-5A. 10-5B
Disposal of fixed asset: problem 10-5A, 10-5B
Depletion: practice exercises 10-8A, 10-8B, problem 10-6B
Be sure that by test day you can work homework problems WITHOUT having to
constantly flip back to the textbook, handouts, etc.! Answers to all homework
problems are available on-line! GOOD LUCK!!