Section A - Quiz No. 3 Sol

Section A - Quiz No. 3 Sol - ADM 2340 A Quiz No. 3...

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ADM 2340 A Quiz No. 3 Financial Accounting - Fall 2006 Solutions Question No. 1 (12 marks) Dorion Incorporated generated $2,500,000 in credit sales during the 2005 current year. Based on past experience, it is estimated that 1.5% of all credit sales will prove to be uncollectible. The credit balance of the allowance for doubtful accounts at December 31, 2005 is $6,900. Accounts receivable at December 31 consists of the following: Account Classification Amount Current $1,900,000 1-30 days past due 150,000 31-60 days past due 90,000 61-90 days past due 50,000 Over 90 days past due 20,000 Required: (a) Calculate the amount of bad debts expense and prepare the corresponding journal entry using the percentage of credit sales approach. (3 marks) (b) If Dorion decides to write-off all accounts that are over 90 days past due, prepare the corresponding journal entry required. (2 marks) (c) Calculate the balance in the accounts receivable control account to be shown on Dorion’s December 31, 2005 balance sheet. (5 marks) (d) Assume one of Dorion’s customers, Joe Slo, whose $3,000 account had been written off, unexpectedly paid off his debt. Prepare the journal entry. (2 marks)
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Section A - Quiz No. 3 Sol - ADM 2340 A Quiz No. 3...

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