Financial Accounting, 8th Edition
8th Edition
ISBN: 9780078025556
Author: Robert Libby, Patricia Libby, Daniel Short
Publisher: McGraw-Hill Education
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Chapter 8, Problem 12Q
To determine
Explain the asset impairment and the way in which it is accounted for.
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Rocky Mountain Tours Co. is a travel agency. The nine transactions recorded by Rocky Mountain Tours during June 20Y2, its first month of operations, are
indicated in the following T accounts:
Cash
(1) 40,000 (2) 4,000
(7) 13,100 (3) 5,000
(4) 6,175
(6) 6,000
(9) 1,500
Equipment
(3) 15,000
Dividends
(9) 1,500
Accounts Receivable
Accounts Payable
Service Revenue
(5) 20,500 (7) 13,100
(6) 6,000 (3) 10,000
(5) 20,500
Supplies
(2) 4,000 (8) 2,200
Common Stock
(1) 40,000
Operating Expenses
(4) 6,175
(8) 2,200
a. Prepare an unadjusted trial balance. List all the accounts in the order of Assets, Liabilities, Stockholders' equity, Revenues, and Expenses. Place the
amounts in the proper columns. If an entry is not required in an amount box, leave it blank.
Transactions and T Accounts
The following selected transactions were completed during July of the current year:
1. Billed customers for fees earned, $112,700.
2. Purchased supplies on account, $4,500.
3. Received cash from customers on account, $88,220.
4. Paid creditors on account, $3,100.
a. Journalize these transactions in a two-column journal, using the appropriate number to identify the transactions. Journal entry explanations may be
omitted. If an amount box does not require an entry, leave it blank.
(1) Accounts Receivable
Fees Earned
(2) Supplies
Accounts Payable
(3) Cash
Accounts Receivable
(4) Accounts Payable
Cash
Isabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received a $20,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $20,000 bill anytime before January 30 of next year without penalty. Assume her marginal tax rate is 37 percent this year and next year, and that she can earn an after-tax rate of return of 12 percent on her investments.
a. What is the after-tax cost if Isabel pays the $20,000 bill in December?
b. What is the after-tax cost if Isabel pays the $20,000 bill in January? Use Exhibit 3.1. (Round your answer to the nearest whole dollar amount.)
c. Based on requirements a and b, should Isabel pay the $20,000 bill in December or January?
multiple choice
December
January
Chapter 8 Solutions
Financial Accounting, 8th Edition
Ch. 8 - Define long-lived assets. Why are they considered...Ch. 8 - Prob. 2QCh. 8 - What are the classifications of long-lived assets?...Ch. 8 - Prob. 4QCh. 8 - Prob. 5QCh. 8 - Prob. 6QCh. 8 - Prob. 7QCh. 8 - In computing depreciation, three values must be...Ch. 8 - The estimated useful life and residual value of a...Ch. 8 - Prob. 10Q
Ch. 8 - Prob. 11QCh. 8 - Prob. 12QCh. 8 - Prob. 13QCh. 8 - Prob. 14QCh. 8 - Prob. 15QCh. 8 - Why is depreciation expense added to net income...Ch. 8 - Prob. 1MCQCh. 8 - Prob. 2MCQCh. 8 - Prob. 3MCQCh. 8 - Prob. 4MCQCh. 8 - Prob. 5MCQCh. 8 - Prob. 6MCQCh. 8 - Prob. 7MCQCh. 8 - Prob. 8MCQCh. 8 - Prob. 9MCQCh. 8 - (Chapter Supplement) Irish Industries purchased a...Ch. 8 - Prob. 1MECh. 8 - Prob. 2MECh. 8 - Prob. 3MECh. 8 - Prob. 4MECh. 8 - Computing Book Value (Double-Declining-Balance...Ch. 8 - Computing Book Value (Units-of-Production...Ch. 8 - Identifying Asset Impairment LO8-4 For each of the...Ch. 8 - Prob. 8MECh. 8 - Prob. 9MECh. 8 - Prob. 10MECh. 8 - Prob. 1ECh. 8 - Prob. 2ECh. 8 - Computing and Recording Cost and Depreciation of...Ch. 8 - Prob. 4ECh. 8 - Prob. 5ECh. 8 - Prob. 6ECh. 8 - Prob. 7ECh. 8 - Computing Depreciation under Alternative Methods...Ch. 8 - Prob. 9ECh. 8 - Prob. 10ECh. 8 - Computing Depreciation and Book Value for Two...Ch. 8 - Prob. 12ECh. 8 - Prob. 13ECh. 8 - Prob. 14ECh. 8 - Prob. 15ECh. 8 - Prob. 16ECh. 8 - Prob. 17ECh. 8 - Prob. 18ECh. 8 - Prob. 19ECh. 8 - Prob. 20ECh. 8 - Prob. 21ECh. 8 - Prob. 22ECh. 8 - Prob. 23ECh. 8 - Prob. 1PCh. 8 - Prob. 2PCh. 8 - Prob. 3PCh. 8 - Prob. 4PCh. 8 - Evaluating the Effect of Alternative Depreciation...Ch. 8 - Prob. 6PCh. 8 - Prob. 7PCh. 8 - Prob. 8PCh. 8 - Prob. 9PCh. 8 - Prob. 10PCh. 8 - Prob. 11PCh. 8 - Prob. 1APCh. 8 - Prob. 2APCh. 8 - Computing the Acquisition Cost and Recording...Ch. 8 - Prob. 4APCh. 8 - Prob. 5APCh. 8 - Prob. 6APCh. 8 - Prob. 7APCh. 8 - Prob. 1ACOMPCh. 8 - Prob. 1BCOMPCh. 8 - Prob. 1CCOMPCh. 8 - Prob. 1DCOMPCh. 8 - Prob. 1ECOMPCh. 8 - Prob. 1CPCh. 8 - Prob. 2CPCh. 8 - Prob. 3CPCh. 8 - Prob. 4CPCh. 8 - Prob. 5CPCh. 8 - Prob. 6CPCh. 8 - Prob. 7CPCh. 8 - Prob. 9CPCh. 8 - Prob. 1CC
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Asset impairment explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=lWMDdtHF4ZU;License: Standard Youtube License