How direct write-off method and allowance method applied

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Reference no: EM133204665

Accounting Assignment - Methods of Depreciation Discussion

Questions -

Q1. How are the direct write-off method and the allowance method applied in accounting for uncollectible accounts receivables? Explain with examples.

Q2.Explain what is meant by depreciation. Describe the methods of depreciation and give a numerical example for each method.

Q3. The following information is related to PQR company and XYZ company for the year 2013:

	PQR Company	XYZ Company
Cash dividend declared and paid during the year	750,000	124,800
Common stock	25,000,000	12,000,000
Number of shares of common stock outstanding	50,000	24,000
Par value of a share	50	50
Market value of a share	60	52

Both the companies belong to same industry. PQR is an old and well-established company where as XYZ is a new company. The historical data shows that the PQR has a stable annual dividend distribution to stockholders.

Required - Calculate dividend yield ratio of both the companies. Which company would you recommend for investment in shares? Explain with reasons.

Q4. A company's income statement for 2021 showed the following:

Net income, SR150, 000;

Depreciation expense, SR20,000

- Changes in current assets and current liabilities:

Accounts receivable decreased SR20, 000

Merchandise inventory increased 8,000

Accounts payable increased 3,000.

Required - Prepare the operating activity section of the statement of cash flow using the indirect method.

Q5. Why does the management of any companies analyze financial statements? Explain by using the different tools in analyzing financial statement with proper numerical example?

Q6. a) Explain the methods that can estimate bad debt expenses in business. (Give numerical examples)

b.) Differentiate between Accounts receivable and Notes receivable.

c) On 1st of October 2019, XYZ Inc. has sold an equipment for SAR 25,000 to ABC Ltd.by issuing an 8% note receivable for 90 days. Calculate the interest on the note and on what would be the maturity date. Pass Journal entry in the books of the company to record these transactions.

Reference no: EM133204665

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