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SolnExam2-1

# SolnExam2-1 - Exam#2 SOLUTIONS Part I 20 Multiple Choice...

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Solutions – Exam #2 195 Exam #2 SOLUTIONS Part I. 20 Multiple Choice Questions at 3 Points Each Intermediate numbers are shown in italics and the final answer is shown in bold. 1. A. Use the Allowance T-account: the beginning balance of \$27,100 + Bad Debt Expense – accounts written-off of \$162,900 = adjusted ending balance of \$23,800. Bad Debt Expense for the year was \$159,600 ; \$159,600 = credit sales (?) x .025, so credit sales = \$6,384,000 (\$159,600 ÷ .025). 2. C. Use the Allowance T-account: the beginning balance of \$25,600 + \$7,200 of recoveries + Bad Debt Expense – accounts written-off of \$199,000 = desired ending balance of \$26,200 (5% x \$524,000). Therefore, Bad Debt Expense for the year was \$192,400 . 3. D. The entries to record a recovery are: debit Accounts Receivable and credit Allowance for Bad Debts and then debit Cash and credit Accounts Receivable. 4. A. Use the Allowance and Accounts Receivable T-accounts: the aging analysis indicates the desired ending balance in the Allowance account is \$57,800 (\$173,000 x 10% + \$162,000 x 25%). Beginning balance in the Allowance for Bad Debts of \$56,800 + Bad Debt Expense of \$117,400 – write-offs (?) = \$57,800 desired ending balance. Therefore, write-offs = \$116,400 . The beginning balance in Accounts Receivable of \$310,100 + credit sales of \$3,913,500 – \$116,400 of write-offs – cash collected from customers (?) = ending balance in Accounts Receivable of \$335,000; this means cash collected from customers = \$3,772,200 . 5. B. Cash increased by \$726,800 , the Revenue of \$710,200 + the \$27,500 decrease in Accounts Receivable (\$125,300 – \$97,800) [this amount was not included in Revenue but was received in cash] – the \$10,900 decrease in Unearned Revenue (\$73,700 – \$62,800) [this amount was included in Revenue but was not received in cash]. Total Assets increased by \$699,300 , the \$726,800 increase in cash – the \$27,500 decrease in Accounts Receivable. Liabilities decreased by \$10,900 , the decrease in Unearned Revenue.

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