Accounting exam questions

Question

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Exam #3

1. Explain why a company would offer terms on their sales invoice such as 2/10, n/30. (10 Points)

2. The HeadSet Company sells headsets (very creative name for a company). The management of the HeadSetcompany does not like to prepare journal entries so they called you for help. .

Following is the information they provided you

Selling price of Headset is $45

Purchase price for the Headset is $29.

May 1 Purchased 3,000 Headsets from Vendor #1 with terms of 2/10, n/30, FOB Destination.

May 2 Freight bill for May 1 purchase was $350, and was paid on May 2.

May 3 Returned 250 Headsets to Vendor #1

May 10 Paid the amount owed to Vendor #1

May 03 Sold 1,800 Headsets to Customer Collaborate.

May 14 Customer Collaborate returned 75 injured Headsets

May 20 Received amount owed from Customer Collaborate

Required

A. Prepare the journal entries for the above transactions

B. Prepare a partial income statement (Gross sales through Gross Profit)

C. Compute the gross profit % from your partial income statement

D. Explain the meaning of your answer in “C” --- short sentence.

(Total Points for Problem 30)

3. The Did Our Customers Pay on Time Company wants to prepare their aging schedule for December 3, 2013. They started the aging schedule but decided to call you to help them finish You are such a nice person so you said yes. Following is the information that was provided to you.

Name Total Not Past Due 1-30 days Past Due 31 – 60 Days Past Due 61 -90 Days Past Due 91 – 120 Days Past Due Over 120 Days Past Due
Sub Total $654,000 $320,400 $137,340 $78.480 $52,320 $45,748 $19,620
Estimated % uncollectible 3% 7% 18% 26% 47% 72%

The following customers were not include in the above Aging Schedule

Customer A Invoice Due Date 11/14/2013 Invoice amount $2,500

Customer B Invoice Due Date 9/09/2013 Invoice Amount $3,700

Customer C Invoice Due Date 01/21/2017 Invoice Amount $4,200

The current balance in the Allowance for Doubtful Account is $27,450 credit.

Required:

1. Finish the aging schedule with the remaining information.

2. Prepare the journal entry to update the Allowance for Doubtful Accounts

3. Based on your aging schedule determine the dollar amount that will be reported on the balance sheet for net receivables.

4. Your boss told you that the estimated % that were used in the aging schedule for Estimated Uncollectible Percentages should be reduced in half (each % reduced by half). How will that change affect the income statement and balance sheet?

(Total Points for the Problem 25)

#4. Assume that on Jan 18, 2017, your Customer Late Pay declared bankruptcy. The customer owes the company $5,800.

a. Prepare the journal entry to write of the balance for Customer Late Pay

b. Explain how the journal entry affect the income statement

(Total Points for the Problem 10)