Homework Answers
1) Under allowance method, accounts receivable account is credited and allowance for doubtful debts is debited (i.e. both accounts balance are reduced) when any account is written off. In the given case both accounts receivable and allowance account would reduced by $$4,400.
Therefore there will be no effect on net income or total assets.
Hence the correct option is A) No effect on net income or on total assets.
2) Account receivable turnover is calculated by dividing net credit sales by average accounts receivable. It measures how efficiently company can convert its accounts receivable into cash. It does not show any relationship between cash and credit sales and not related to inventory.
Therefore the correct option is B) how often a company converts its average accounts receivable balance into cash during the period.
3) Depreciation per year under straight line = (Cost - Residual value)/Useful life in yrs
= ($23,000 - $3,000)/5 yrs = $4,000 per year.
Depreciation under half year rule = $4,000*1/2 = $2,000
Therefore the correct option is D) $2,000.
4) Depreciation per unit = (Cost - Residual value)/Useful life in units
= ($190,000-$10,000)/750,000 units = $0.24 per unit
Depreciation for second year = Depreciation per unit*Units produced during second year
= $0.24 per unit*111,000 units = $26,640
Hence the correct option is A) $26,640.
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