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:

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