ACC 200 EXAM 2 UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Question:
1. 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
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?
Answer:
Contract Liability - TV Screen. 1500
Sales Revenue - TV Screen. 1500
,Question:
2. 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?
Answer:
Price of just TV: 1800
Price of just warranty: 600
Combo Price: 2000
= 0.75
2000 * 0.75 = 1500
= 0.25
2000 * 0.25 = 500
Cash 2000
Contract Liability - TV Screen 1500
Contract Liability - Warranty 500
, Question:
3. During Year 1, Kylie Department Store had total sales of
$3,000,000, of which 60% were on credit. During the year,
$1,000,000 cash was collected on credit sales. The
beginning balance in Accounts Receivable (on January 1
of Year 1) was $165,000. The beginning balance in the
Allowance for Bad Debts (on January 1 of Year 1) was
$20,000. The amount of accounts written off as
uncollectible during the year was $27,000.
Management has performed an aging analysis on its
Accounts Receivable. The end result of this aging analysis
is that the balance in the Allowance for Bad Debts as of
the end of Year 1 should be $50,000. - What is Kylie's NET
Accounts Receivable balance as of the end of the year,
after recording the Allowance for Bad Debts?
Answer:
Net Accounts Receivable = Accounts Receivable - Allowance at end
Allowance at end = 50,000
Accounts Receivable
Begin. balance 165,000 (positive)
New credit sales 1,800,000 (positive)
Cash Collections 1,000,000 (negative)
Write-offs 27,000 (negative)
^^^^^^These 4 affect accounts receivable^^^^^^^^^^^^^
End. Balance = 938,000
-----------------------------------------------
Allowance for Bad Debts
Beginning allowance 20,000
Estimated Bad Debt Expense 57,000
Write-offs 27,000
Ending balance 50,000
Net Accounts Receivable = 938,000 - 50,000 = 888,000
CORRECT ANSWERS
Question:
1. 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
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?
Answer:
Contract Liability - TV Screen. 1500
Sales Revenue - TV Screen. 1500
,Question:
2. 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?
Answer:
Price of just TV: 1800
Price of just warranty: 600
Combo Price: 2000
= 0.75
2000 * 0.75 = 1500
= 0.25
2000 * 0.25 = 500
Cash 2000
Contract Liability - TV Screen 1500
Contract Liability - Warranty 500
, Question:
3. During Year 1, Kylie Department Store had total sales of
$3,000,000, of which 60% were on credit. During the year,
$1,000,000 cash was collected on credit sales. The
beginning balance in Accounts Receivable (on January 1
of Year 1) was $165,000. The beginning balance in the
Allowance for Bad Debts (on January 1 of Year 1) was
$20,000. The amount of accounts written off as
uncollectible during the year was $27,000.
Management has performed an aging analysis on its
Accounts Receivable. The end result of this aging analysis
is that the balance in the Allowance for Bad Debts as of
the end of Year 1 should be $50,000. - What is Kylie's NET
Accounts Receivable balance as of the end of the year,
after recording the Allowance for Bad Debts?
Answer:
Net Accounts Receivable = Accounts Receivable - Allowance at end
Allowance at end = 50,000
Accounts Receivable
Begin. balance 165,000 (positive)
New credit sales 1,800,000 (positive)
Cash Collections 1,000,000 (negative)
Write-offs 27,000 (negative)
^^^^^^These 4 affect accounts receivable^^^^^^^^^^^^^
End. Balance = 938,000
-----------------------------------------------
Allowance for Bad Debts
Beginning allowance 20,000
Estimated Bad Debt Expense 57,000
Write-offs 27,000
Ending balance 50,000
Net Accounts Receivable = 938,000 - 50,000 = 888,000
