EXAM2_ExampleSolution

EXAM2_ExampleSolution - AC221 Financial Accounting EXAM II...

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AC221 Financial Accounting Spring 2006 EXAM II (A) Answer Key Question 1 (33 points) (a) (7 points) Amount collected: $ 496,000 Calculations Accounts Receivable Beginning balance $ 90,000 Write-off $ 4,000 Credit sales 520,000 Cash collections ? Ending balance $ 110,000 Cash collection (?) = (90,000+520,000-4,000) – (110,000) = $ 496,000 (b) (4 points) Journal entry Dr. Cr. Allowance for doubtful accounts----------------------- 4,000 Accounts receivable----------------------------- 4,000 (c) (4 points) Journal entry Dr. Cr. Bad debt expense----------------------------------------- 15,600 Allowance for doubtful accounts-------------- 15,600 (3% of $520,000 = $15,600) (d) (6 points) Impact of writte-off. Assets Liabilities Stockholder’s Equity no change no change no change Impact of bad debt expense. Assets Liabilities Stockholder’s Equity decrease no change decrease (e) (12 points) Aging: Category Amount % expected to go bad Allowance 0-60 days 60,000 3 $1,800 61-90 days 30,000 10 $3,000 more than 90 days 20,000 30 $6,000 Total 110,000 $10,800 Journal entry Bad debt expense----------------------------------------- 7,800 Allowance for doubtful accounts-------------- 7,800 1
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EXAM2_ExampleSolution - AC221 Financial Accounting EXAM II...

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