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136A_W07_MT2 - Anderson ECON 136A Midterm#2 v 1 Name THERE...

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February 28, 2007 Anderson ECON 136A Midterm #2 v. 1 Name _________________________ THERE IS A PROBLEM IN THIS EXAM WHICH REQUIRES THAT YOU COMPLETE IN THE SPACE PROVIDED... PLEASE BE SURE TO WRITE YOUR NAME ON THE EXAM AND TURN IT IN WITH YOUR BLUE-BOOK AND SCANTRON AT THE END OF CLASS. Complete questions 1-25 on scantron, and the problems in your blue-book unless specifically requested otherwise within the exam. 1. Which of the following is NOT considered cash for financial reporting purposes? a. Petty cash funds and change funds b. Money orders, certified checks, and personal checks c. Coin, currency, and available funds d. Postdated checks and I.O.U.'s 2. Which of the following is correct? 3. We buy an assortment of overstock items. We received 5,000 units of product A and 5,000 units of product B. The purchase price was not allocated between the two product types and we paid a total of $10,000 for both. We expect to sell product A for $2.00/ unit and product B for $1.00/ unit. What is the per unit cost under GAAP (when doing your computation, round to two decimals): 4. When using a perpetual inventory system,
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Midterm #2 v. 1--Page 2 5. XYZ, Inc. has properly applied their percentage of sales consistently all year in recording bad debt expenses. At the end of the year, they note that the allowance for doubtful accounts balance is $150,000. Management reviews the accounts receivable aging and notes that there are very old balances and other items which lead them to estimate that the allowance needs to be $225,000. Given these facts, which of the following statements is accurate: a. Management should adjust the percentage of sales to increase the allowance on future transactions, but do nothing to adjust the bad debt expense now; b. Management should report a restatement of $75,000; c. Management should do nothing as the additional expense could result in negative comments from financial analysts; d. Management should record an additional bad debt expense of $75,000, reflecting a change in their estimate.
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