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Intermediate Accounting 7e Practice Exam solution Chapters 6-9

By Herbert Phillips,2015-01-08 21:18
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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

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