Partial payments have been made to the company to the extent of $500 on notes still due, and these payments have been credited to an account called “Partial Payments on Notes Receivable.” This item is listed in the financial statement as a liability.
A customer’s note of $1,000 is found to have been given as collateral for the payment of a note of the company discounted at the bank.
A 30-day note given by an officer of the company for $200 is treated as a cash item. The note is 60 days past due.
You are asked to give the journal entry or entries for obtaining the proper account or accounts to record the above facts.
Depreciation
30. An engine installed in a factory December 31, 19—, at a cost of $1,000, is replaced four years later by one of larger capacity costing (second-hand) $2,800. The discarded machine was sold for $900. The cost of making the change was $200. It has been the practice of the company to charge off 10% depreciation annually (on the diminishing basis), carrying the credit to a Depreciation Reserve account.
Make the necessary journal entries.
31. A manufacturing concern has annually for the past six years made provision at the rate of 10% per annum for depreciation of its plant and machinery, crediting the amount of such depreciation to a suitable Reserve account. During the year an engine which cost originally $5,000, was replaced by an improved engine costing $6,800. The cost of the new engine was charged to Machinery account at time of purchase. $300 was realized from the salvage of the old engine, this amount being credited to “Scrap Sales,” when received, and later closed to Profit and Loss.
Draft the adjustment entries which you consider necessary and explain the principle upon which these entries are based.
Merchandise Inventories