ACCT1501 practice paper

ACCT1501 Practice Exam Questions & Solutions

2011S1

QUESTION 1 ACCOUNTS RECEIVABLES
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On 1st July, 2007, one of SSS’s customers, BBB, went bankrupt. BBB owes
SSS $2,500 and there is no hope for recovering this amount.
On 1st October, SSS collected $85,000 from outstanding accounts. SSS
Company’s financial year ends on 31st December.
During 2007, SSS sold goods for cash for $22,000, and on credit $80,000.
On 1st January 2007, SSS Ltd. has a debit balance of $30,000 in Accounts
Receivable and a credit balance of $ 4,500 in the Allowance for Doubtful
Debts.

Required:
Part A
(i) If bad debts for 2007 are estimated to be 2% of credit sales, prepare the adjusting entry on the 31st December to record bad debts expense.
Debit
Credit
Bad debts expense

$1,600
[2%*$80,000]

Allowance for doubtful debts

1,600

(ii) Calculate the net accounts receivable after the adjusting entry.

Accounts receivable: $30,000+$80,000-$85,000-$2,500=$22,500
Allowance for doubtful debts: $4,500+$1,600-$2,500=$3,600
Net accounts receivable= $22,500-$3,600=$18,900

Part B
(i) If uncollectible accounts are estimated to be $3,200 from aging receivables, prepare the adjusting entry on the 31st December to record bad debts expense.
Debit
Bad debts expense

Credit

$1,200 [$4,5002,500+X=3,200]

Allowance of doubtful debts

$1,200

(ii) Calculate the net accounts receivable after the adjusting entry.
Accounts receivable: $30,000+$80,000-$85,000-$2,500=$22,500
Allowance for doubtful debts: $3,200
Net accounts receivable= $22,500-$3,200=$19,300

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ACCT1501 Practice Exam Questions & Solutions

QUESTION 2 (12 Marks)

2011S1

Inventory

The following information is taken from the accounting records of Eden Ltd for the year ended 31 December 2010. Eden Ltd uses a perpetual inventory control system.

Jan 1
Mar 10
Jun 25
Aug 30
Oct 5
Nov 26
Dec 31

Inventory
Purchases
Sales
Purchases
Sales
Purchases
Sales

Units