DOC

# Intermediate Accounting 7e Practice Exam solution Chapters 6-9

By Herbert Phillips,2015-01-08 21:18
25 views 0
Intermediate Accounting 7e Practice Exam solution Chapters 6-9

Practice Exam Chapters 6-9

Solutions

Problem I

1.

* \$2,600 ? 11.25508 = \$231 = required monthly payments

* Present value of an ordinary annuity of \$1: n=12, i=1% (from Table 4)

2.

Choose the alternative with the highest present value.

Alternative 1:

PV = \$200,000

Alternative 2:

* PV = PVAD = \$24,000 x 8.10782 = \$194,588

* Present value of an annuity due of \$1: n=10, i=5% (from Table 6)

Alternative 3:

* PVA = \$28,000 x 7.72173 = \$216,208

* Present value of an ordinary annuity of \$1: n=10, i=5% (from Table 4)

* PV = \$216,208 x .82270 = \$177,875

* Present value of \$1: n=4, i=5% (from Table 2)

Mary should choose alternative 1.

Problem II

1. \$12,000 + 15,000 17,000 = \$10,000 in write offs

2. CGS = 6.0 x \$200,000 = \$1,200,000

Sales equals \$1,200,000/.50 = \$2,400,000

\$2,400,000/10 = \$240,000 = average receivables

Therefore, since beginning receivables are \$180,000, ending

receivables must be \$300,000

\$180,000 + 2,400,000 10,000 (write offs) 300,000 (ending balance)

= \$2,270,000 (cash collections)

3. \$180,000 + 3,000,000 10,000 (write offs) 400,000 (ending balance)

= \$2,770,000 (cash collections)

Problem III

1. \$186 million higher (given)

2. \$186 111 = \$75 million decrease in cost of goods sold.

\$75 million x (1 - .30) = \$52.5 million

Net income would be \$52.5 million higher

3. Retained earnings would be higher by \$186 x (1 - .30) = \$130.2

million

Problem IV

1. Cost Retail

Inventory, beginning 28,900 40,000

Purchases 86,200 111,800

Purchase returns (1,500) (1,800)

Markups ______ 15,000

113,600 165,000

113,600

--------- = 69% = cost-to-retail % (rounded)

165,000

Markdowns (4,000)

161,000

Less:

net sales (116,000)

Ending inventory at retail 45,000

X .69

Ending inventory at cost 31,050

2.

\$44,100 ;1.05 = \$42,000

Beginning \$28,900

Layer \$2,000 x 1.05 x .80 1,680

30,580

Report this document

For any questions or suggestions please email
cust-service@docsford.com