Mgmt 200 Spring 2011 Exam 2 Solution

Mgmt 200 Spring 2011 Exam 2 Solution - First name Last name...

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First name: ___________ Last name: ______________ PUID: ________________________ Purdue University Krannert School of Management MGMT 200 – Introductory Financial Accounting Spring 2011 Exam 2 – March 31, 2011 - SOLUTION This exam consists of 4 questions on 16 pages (excluding this cover page) for a total of 100 points. Pages 15 and 16 are the financial statements for General Mills. 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 2010 annual report: December 31,2010 Receivables, less allowance for uncollectible accounts of $40,000 $480,000 Salsa Corporation’s sales are all on credit. Credit terms are 2/10, n 30. Required: PART A: Prepare journal entries to record the following transactions: a. For the first three months of 2011 sales totaled $1,180,000. This includes sales of $188,000 in the first two weeks of February when Salsa offered a special snow-day 20% off discount. The normal sales value of these items is $235,000. Accounts receivable 1,180,000 Sales revenue 1,180,000 b. For the first three months of 2011 customers paid off $930,000 of the amount owed. This is the gross amount owed, not the cash amount paid. $800,000 was paid off within 10 days of the sale; the remaining $130,000 was paid well after 10 days from the date of sale. Cash 914,000 Sales discounts 16,000 Accounts receivable 930,000 Question 1 continued over . . . Mgmt 200 – Exam 2 – Spring 2011 – page 1
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Question 1 continued. c. Customers are given 60 days from the date of sale to return items for account credit. For the first three months of 2011 sales returns totaled $210,000. Sales returns 210,000 Accounts receivable 210,000 d. For the first three months of 2011, $44,000 of the accounts receivables were determined to be uncollectible and written-off. Allowance for uncollectible accounts 44,000 Accounts receivable 44,000 e. In early March 2011, an amount of $1,500 which had previously been written-off as uncollectible was paid in full. Accounts receivable 1,500 Allowance for uncollectible accounts 1,500 Cash 1,500 Accounts receivable 1,500 Question 1 continued over . . . Mgmt 200 – Exam 2 – Spring 2011 – page 2
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Question 1 continued. f. Record bad debt expense for the first three months of 2011 given the following aging of accounts receivable as at March 31, 2011 and the amount expected to be uncollectible in each category. Salsa Corporation uses the aging of accounts receivable method: Age category Amount % uncollectible est. Current accounts
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Mgmt 200 Spring 2011 Exam 2 Solution - First name Last name...

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