plugin-A471f10 Practice Exam 2 Key

plugin-A471f10 Practice Exam 2 Key - 1 PRACTICE EXAM #2...

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1 PRACTICE EXAM #2 ANSWER KEY 1. A 4. B 7. B 10. B 13. D 16. C 19. A 2. C 5. B 8. D 11. D 14. B 17. D 20. E 3. C 6. B 9. A 12. D 15. C 18. B Selected calculations and explanations: (Computed intermediate numbers are underlined and the final answer is in bold.) 1. A. Required adjusted balance in Allowance account at end of the year = ($80,000 x 3%) + ($12,000 x 20%) + ($400 x 75%) = $5,100 . Then, analyze the Allowance account: $8,600 beginning balance + $3,680 U-A expense – write-offs = $5,100 ending balance. Therefore, write-offs were $7,180 . 2. C. You can analyze this with T-accounts. First, analyze the Allowance T-account to solve for write- offs: beginning balance of $15,000 + $40,000 Bad Debt Expense – write-offs of $39,000 = ending balance of $16,000. Now, analyze the Accounts Receivable T-account: beginning balance of $250,000 + credit sales of $1,000,000 – accounts written-off of $39,000 (from above) – cash collections = ending balance of $270,000. Therefore, cash collections = $941,000 . 3. C. First, solve for total credit sales for the year: Total credit sales for year x 5% = Bad Debt Expense of $20,000. Therefore, total credit sales for the year = $400,000 . Then, $100,000 + $110,000 + $120,000 + fourth quarter sales = $400,000. Therefore, fourth quarter sales = $70,000 . 4. B. The purpose of using the allowance method is to achieve the matching of bad debt expense with the related sales revenue. 5. B. The entry would be a debit to the Allowance account (reducing its balance) and a credit to Accounts Receivable (reducing its balance). 6. B. You must first solve for 2004 beginning inventory: Beginning inventory + Net Purchases of $320,300 – Ending Inventory of $21,500 = Cost of Goods Sold of $316,100. Thus, 2004 beginning inventory = $17,300 . Now, use that information to solve for 2003 beginning inventory: Beginning inventory + Net Purchases of $323,000 – Cost of Goods Sold of $321,500 = 2003 Ending Inventory (i.e.,
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This note was uploaded on 01/26/2011 for the course ACCT 471 taught by Professor Jeffwilliams during the Fall '10 term at University of Michigan.

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plugin-A471f10 Practice Exam 2 Key - 1 PRACTICE EXAM #2...

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