Mgmt 200 Fall 2010 Exam 2 solution

Mgmt 200 Fall 2010 Exam 2 solution - First name: _ Last...

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First name: ___________ Last name: ______________ PUID: ________________________ Purdue University Krannert School of Management MGMT 200 – Introductory Financial Accounting Fall 2010 Exam 2 – November 8, 2010 - SOLUTION This exam consists of 4 questions on 13 pages (excluding this cover page) for a total of 100 points. Pages 12 and 13 are the financial statements for Take-Two Interactive Software, Inc. Time allowed: 90 minutes. Answer all questions. To ensure full credit and to maximize partial credit, clearly show all supporting calculations. The exam is closed book. A calculator is permitted. GOOD LUCK . Question 1 (25 points) ________ Question 2 (25 points) ________ Question 3 (25 points) ________ Question 4 (25 points) ________ TOTAL (100 points) ________
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Question 1. Accounts Receivable (25 points) The following presentation of receivables is taken from Salsa Corporation’s 2009 annual report: December 31, 2009 Receivables, less allowance for doubtful accounts of $28,000 $732,000 Salsa Corporation’s sales in 2010 were $4,845,000, all on credit. An additional 7% or $339,150 was added for state sales tax. During 2010 customers paid $4,270,750 to Salsa Corporation. Customers are given 90 days to return unwanted product. During 2010 $320,000 worth of product was returned by customers. The $320,000 does not included state sales tax which will also need to be reimbursed. Salsa Corporation wrote off $36,000 of uncollectible accounts during 2010. An aging of accounts receivable outstanding as at December 31, 2010 estimates that $47,000 of these accounts receivable are unlikely to be collected. Required: a. Prepare the journal entry to record sales for 2010, including sales taxes. Accounts receivable 5,184,150 Sales revenue 4,845,000 Sales tax payable 339,150 b. Prepare the journal entry to record the collection of accounts receivable during 2010. Cash 4,270,750 Accounts receivable 4,270,750 c. Prepare the journal entry to record sales returns for 2010. Sales returns 320,000 Sales tax payable 22,400 Accounts receivable 342,400 Question 1 continued over . . . Mgmt 200 – Exam 2 – Fall 2010 – page 1
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Question 1 continued. d. Prepare the journal entry to record the write-off of accounts receivable during 2010. Writing-off an account receivable does NOT eliminate the sales tax due on the original sales transaction. Allowance for doubtful accounts 36,000 Accounts receivable 36,000 e. Prepare the journal entry to record bad debt expense for 2010. Bad debt expense 55,000 Allowance for doubtful accounts 55,000 (36,000 – 28,000 + 47,000 = 55,000) f. Complete the following ledger T account for the contra asset allowance for doubtful accounts, starting with the account balance as at December 31, 2009. After all transactions have been entered compute the account balance as at December 31, 2010. _________________ Allowance for doubtful accounts
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Mgmt 200 Fall 2010 Exam 2 solution - First name: _ Last...

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