Question 1

O'Brien Pty Ltd pays salaries on Friday to cover the five working days including the Friday. The weekly wages bill is $100 000. If 30 June 2019 falls on a Monday, what will be the adjusting journal entry on 30 June 2019?

Accepted Answer

Since the company pays salaries on Friday for the week including that Friday, and 30 June 2019 falls on a Monday, it means the wages for two days (the previous Thursday and Friday) have not been accounted for in the financial statements of the year ending 30 June 2019. The weekly wages bill is $100,000, so each day's wages are $20,000 ($100,000/5). For two days, this amounts to $40,000, but the correct entry to record the expense incurred but not yet paid (accrued) for these two days is to debit Wages Expense and credit Accrued Wages for the two days' wages, which is $40,000, not $20,000 as stated. Therefore, my initial selection was incorrect based on the provided calculation. The correct choice should reflect the accrual of two days' wages totaling $40,000.

Question 2

When the accumulated depreciation is deducted from the long-term asset account, the figure is known as the:

Accepted Answer

The figure obtained after deducting the accumulated depreciation from the long-term asset account is known as the net book value. This represents the value of the asset that the company still has on its books after accounting for depreciation. It is not the market value, replacement value, or liquidation value of the asset.

Question 3

Alby Ltd purchased a machine for $32 000 on 1 January 2018. The machine was expected to have a useful life of four years. The financial year ends on 31 December. The straight-line method of depreciation is employed. What was the depreciation expense for year ended 31 December 2019?

Accepted Answer

The depreciation expense using the straight-line method is calculated by dividing the cost of the asset by its useful life. Therefore, $32,000 / 4 years = $8,000 per year.

Question 4

Equipment with a cost of $15 000 and accumulated depreciation of $12 500 was sold for $1 700. The journal entry to record the disposal would include:

Accepted Answer

The answer of Equipment with a cost of $15 000...

Question 5

XYZ invested $1 million with a bank for 1 year on 1 April 2019 at 10 per cent (interest payable at end of loan). What is the debit side of the adjusting entry at 30 June 2019?

Accepted Answer

Since the interest is payable at the end of the loan, no revenue has been recognized on the income statement for the period ending 30 June 2019. However, XYZ has earned interest revenue for the first three months of the loan (April, May, and June). Therefore, XYZ needs to recognize accrued revenue receivable, which is the amount of interest revenue earned but not yet received. The debit side of the adjusting entry will be DR Accrued revenue receivable $25,000.

Question 6

A machine purchased on 1 July 2018 cost $100 000 and has a zero estimated salvage value. The useful life of the machine is five years. What is the balance of Accumulated depreciation at 30 June 2020?

Accepted Answer

Depreciation expense per year = (Cost - Salvage Value) / Useful Life 
Depreciation expense per year = ($100,000 - $0) / 5 = $20,000

Accumulated depreciation as of 30 June 2020 (end of year 3) = Depreciation expense per year x Number of years = $20,000 x 3 = $60,000

Therefore, the balance of Accumulated depreciation at 30 June 2020 is $60,000.

Quiz 5: Accrual Accounting Adjustments

O'Brien Pty Ltd pays salaries on Friday to cover the five working days including the Friday. The weekly wages bill is $100 000. If 30 June 2019 falls on a Monday, what will be the adjusting journal entry on 30 June 2019?

When the accumulated depreciation is deducted from the long-term asset account, the figure is known as the:

Alby Ltd purchased a machine for $32 000 on 1 January 2018. The machine was expected to have a useful life of four years. The financial year ends on 31 December. The straight-line method of depreciation is employed. What was the depreciation expense for year ended 31 December 2019?

Equipment with a cost of $15 000 and accumulated depreciation of $12 500 was sold for $1 700. The journal entry to record the disposal would include:

XYZ invested $1 million with a bank for 1 year on 1 April 2019 at 10 per cent (interest payable at end of loan) . What is the debit side of the adjusting entry at 30 June 2019?

A machine purchased on 1 July 2018 cost $100 000 and has a zero estimated salvage value. The useful life of the machine is five years. What is the balance of Accumulated depreciation at 30 June 2020?