Grover Inc. uses the allowance method to account for uncollectible accounts expense. Grover Inc. experienced the following four accounting events in Year 1: Recognized $88,000 of revenue on the account. Collected $82,000 cash from accounts receivable. Wrote off uncollectible accounts of $1,500. Recognized uncollectible accounts expense. Grover estimated that uncollectible accounts expense will be 2 percent of sales on account.
Show the effect of each event on the elements of the financial statements, using a horizontal statement model like the one shown here. Use for an increase," for decrease, and NA for not affected. In the cash flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). The first transaction is entered as an example.
GROVER INC.
Horizontal Statements Model
Event No. Assets = Liabilities + Equity Income Statement Cash Flow
Retained Earnings Revenue - Expense = Net Income
1. = + - =
2. = + - =
3. = + - =
4. = + - =
Southwest Milling Co. purchased a front-end loader to move stacks of lumber. The loader had a list price of $118,640. The seller agreed to allow a 6.25 percent discount because Southwest Milling paid cash. Delivery terms were FOB shipping point. Freight cost amounted to $2,800. Southwest Milling had to hire a specialist to calibrate the loader. The specialist's fee was $850. The loader operator is paid an annual salary of $42,300. The cost of the company's theft insurance policy increased by $1,910 per year as a result of acquiring the loader. The loader had a four-year useful life and an expected salvage value of $13,200.
Determine the amount to be capitalized in the asset account for the purchase of the front-end loader. (Round your answers to the nearest whole dollar. Amounts to be deducted should be indicated with a minus sign.)