Practice Midterm Quiz 11b Flashcards
On September 1 of Year 1, Ashlyn Company sold a plasma TV screen and TWO-year warranty to a customer for a joint price of $2,000. Ashlyn collected all of the cash up front on September 1, the contract-signing date. The two-year warranty period begins on the date that Ashyln Company delivers the plasma TV screen to the customer. Ashlyn Company has generated the following information regarding sales of this type.
• Cost of plasma TV screen, $1,200
• Sales price of plasma TV screen if sold separately, $1,800
• Sales price of TWO-year warranty if sold separately, $600
- Which ONE of the following is included in the journal entry Ashlyn Company makes to record the receipt of the $2,000 cash on September 1 of Year 1?
a. CREDIT to Contract Liability-TV Screen for $2,000
b. CREDIT to Contract Liability-TV Screen for $1,800
c. CREDIT to Contract Liability-TV Screen for $1,500
d. CREDIT to Contract Liability-TV Screen for $1,400
e. CREDIT to Sales Revenue-TV Screen for $2,000
f. CREDIT to Sales Revenue-TV Screen for $1,800
g. CREDIT to Sales Revenue-TV Screen for $1,500
h. CREDIT to Sales Revenue-TV Screen for $1,400
31.
Solution = C
Cash 2,000
Contract Liability – TV Screen 1,500
Contract Liability – Warranty 500
TV Screen: ($1,800 / ($1,800 + $600) = 0.75
$2,000 × 0.74 = $1,500
Warranty: ($600 / ($1,800 + $600) = 0.25
$2,000 × 0.25 = $500
On September 1 of Year 1, Ashlyn Company sold a plasma TV screen and TWO-year warranty to a customer for a joint price of $2,000. Ashlyn collected all of the cash up front on September 1, the contract-signing date. The two-year warranty period begins on the date that Ashyln Company delivers the plasma TV screen to the customer. Ashlyn Company has generated the following information regarding sales of this type.
• Cost of plasma TV screen, $1,200
• Sales price of plasma TV screen if sold separately, $1,800
• Sales price of TWO-year warranty if sold separately, $600
32. Ashlyn Company delivered the plasma TV screen to the customer on October 1 of Year 1. Which ONE of the following is included in the journal entry Ashlyn Company makes to record the delivery of the plasma TV screen?
a. DEBIT to Contract Liability-TV Screen for $2,000
b. DEBIT to Contract Liability-TV Screen for $1,500
c. DEBIT to Contract Liability-TV Screen for $1,400
d. DEBIT to Sales Revenue – TV Screen for $2,000
e. DEBIT to Sales Revenue – TV Screen for $1,500
f. DEBIT to Sales Revenue – TV Screen for $1,400
32.
Solution = B
Contract Liability – TV Screen 1,500
Sales Revenue – TV Screen 1,500
On September 1 of Year 1, Ashlyn Company sold a plasma TV screen and TWO-year warranty to a customer for a joint price of $2,000. Ashlyn collected all of the cash up front on September 1, the contract-signing date. The two-year warranty period begins on the date that Ashyln Company delivers the plasma TV screen to the customer. Ashlyn Company has generated the following information regarding sales of this type.
• Cost of plasma TV screen, $1,200
• Sales price of plasma TV screen if sold separately, $1,800
• Sales price of TWO-year warranty if sold separately, $600
33. Ashlyn Company delivered the plasma TV screen to the customer on October 1 of Year 1 which starts the two-year warranty period. Which ONE of the following is included in the ADJUSTING ENTRY that Ashlyn Company should make with respect to the warranty as of December 31 of Year 1? Assume that no adjustments are made before December 31.
a. DEBIT to Contract Liability-Warranty for $20.83
b. DEBIT to Contract Liability-Warranty for $50.00
c. DEBIT to Contract Liability-Warranty for $62.50
d. DEBIT to Warranty Revenue for $20.83
e. DEBIT to Warranty Revenue for $50.00
f. DEBIT to Warranty Revenue for $62.50
33.
Solution = C
$500 / 24 months = $20.83333333 per month
$20.8333333 × 3 months = $62.50
Contract Liability – Warranty 62.50 Warranty Revenue 62.50
On September 1 of Year 1, Ashlyn Company sold a plasma TV screen and TWO-year warranty to a customer for a joint price of $2,000. Ashlyn collected all of the cash up front on September 1, the contract-signing date. The two-year warranty period begins on the date that Ashyln Company delivers the plasma TV screen to the customer. Ashlyn Company has generated the following information regarding sales of this type.
• Cost of plasma TV screen, $1,200
• Sales price of plasma TV screen if sold separately, $1,800
• Sales price of TWO-year warranty if sold separately, $600
34. Ashlyn Company delivered the plasma TV screen to the customer on October 1 of Year 1 which starts the two-year warranty period. What is the TOTAL amount of revenue, both TV screen sales revenue and warranty revenue, that Ashlyn Company should recognize from this transaction during year 1?
a. $2,000.00
b. $1,500.00
c. $1,333.33
d. $1,562.50
e. $1,437.50
f. $1,395.83
34.
Solution = D
$1,500 + $62.50 = $1,562.50
See the solutions for Question 20 and Question 21.
20. Solution = A. See MyEducator Topic 4 and associated Practice Problems (and solutions).
Sales Revenue 1,000 Rent Revenue 100 Retained Earnings 1,100 Retained Earnings 1,470 Cost of Goods Sold 1,250 Insurance Expense 220 Retained Earnings 60 Dividends 60
Balance sheet accounts are not closed.
- Vaststrom Company had the following data for the year.Accounts receivable, beginning of year $150,000
Allowance for bad debts, beginning of year 30,000
Cash collected from credit customers 830,000
Credit sales for the year 868,000
Accounts receivable, end of year 180,000
Allowance for bad debts, end of year 53,000What was Vaststrom Company’s BAD DEBT EXPENSE for the year?
a. $8,000
b. $38,000
c. $30,000
d. $31,000
e. $23,000
f. $15,000
g. $45,000
h. $77,000
35.
Solution = D
Accounts Receivable ---------------------------------------- Beginning Balance 150,000 | 830,000 Cash collections New credit sales 868,000 | ?? Subtract Write-Offs ---------------------------------------- Ending Balance 180,000 |
The amount of the write offs must have been $8,000.
This amount is subtracted from both Accounts Receivable and from the Allowance for Bad Debts.
Allowance for Bad Debts ---------------------------------------- | 30,000 Beginning Balance Subtract Write-Offs 8,000 | ??? Add Estimated New Bad Debts ---------------------------------------- | 53,000 Ending Balance Bad Debt Expense must be $31,000.
Vaststrom Company had the following data for the year.
Accounts receivable, beginning of year $150,000 Allowance for bad debts, beginning of year 30,000 Cash collected from credit customers 830,000 Credit sales for the year 868,000 Accounts receivable, end of year 180,000 Allowance for bad debts, end of year 53,000 36. Refer to the data in Question 35.
Given these data, which ONE of the following statements is true with respect to the creditworthiness of the credit customers of Vaststrom Company?
a. The average creditworthiness of the credit customers DECLINED during the year.
b. The average creditworthiness of the credit customers IMPROVED during the year.
c. The average creditworthiness of the credit customers STAYED THE SAME during the year.
d. These data do not allow us to draw ANY conclusions about the average creditworthiness of the Vaststrom Company credit customers.
36.
Solution = A
Beginning: $30,000 / $150,000 = 20.0%
Ending: $53,000 / $180,000 = 29.4%
- Queeg Company uses the percentage of sales method of computing bad debt expense. The following data are from Year 1.
- Beginning Allowance for Bad Debts = $400,000
- Write-offs during the year = $480,000
- Bad debt expense for the year = $520,000
Maryk & Greenwald, the auditors of Queeg’s financial statements, compiled an aged accounts receivable analysis of Queeg’s accounts at the end of Year 1. This analysis has led Maryk & Greenwald to estimate that, of the accounts receivable Queeg has as of the end of Year 1, $270,000 will ultimately prove to be uncollectible. Given their analysis, Maryk & Greenwald, the auditors, think that Queeg should make an adjustment to its Year 1 financial statements. — Which ONE of the following should be included in the adjusting journal entry that Maryk & Greenwald should suggest?
a. CREDIT to Bad Debt Expense for $250,000
b. CREDIT to Allowance for Bad Debts for $250,000
c. CREDIT to Accounts Receivable for $250,000
d. CREDIT to Bad Debt Expense for $170,000
e. CREDIT to Allowance for Bad Debts for $170,000
f. CREDIT to Accounts Receivable for $170,000
37.
Solution = D
Allowance for Bad Debts -- Queeg ---------------------------------------- | 400,000 Beginning Balance Subtract Write-Offs 480,000 | 520,000 Add Estimated New Bad Debts ---------------------------------------- | ????? Ending Balance
According to the estimates of Queeg, the ending balance in the Allowance account should be $440,000.
Allowance for Bad Debts – Maryk & Greenwald ---------------------------------------- | 400,000 Beginning Balance Subtract Write-Offs 480,000 | ????? Add Estimated New Bad Debts ---------------------------------------- | 270,000 Ending Balance
According to the estimates of Maryk & Greenwald, the Bad Debt Expense for the year should be $350,000.
The auditors, Maryk & Greenwald, believe that both Bad Debt Expense and the ending Allowance for Bad Debts should be reduced by $170,000 ($440,000 - $270,000). The required adjusting entry is as follows.
Allowance for Bad Debts 170,000 Bad Debt Expense 170,000
