Solutions – Exam #2195Exam #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 Receivableand credit Allowance for Bad Debtsand then debit Cashand 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 $27,500decrease in Accounts Receivable ($125,300 – $97,800) [this amount was not included in Revenue but was received in cash] – the $10,900decrease 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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