Commerce Final Exam: Question Booklet
Sauder School of Business
Commerce 293
FINAL EXAMINATION - QUESTION BOOKLET
TIME:
Question 1
150 minutes TOTAL MARKS:
Accounts Receivable
140
(11 marks, suggested time 11 minutes)
In 2004, Holly opened a business selling imported woman’s accessories to fashion boutiques.
The following transactions relating to sales and accounts receivable occurred in 2005:
January 1st, 2005 Accounts Receivable balance
January 1st, 2005 Allowance for Doubtful Accounts balance
Sales (all on account)
Cash collected on accounts receivable (net of sales discounts taken)
Accounts receivable written off as not collectible
$ 50,000
$ 5,000 cr.
$ 360,000
$ 290,000
$ 4,000
Holly received a letter from a customer whose $12,000 account she had written off last year.
The customer promised that she would pay in January 2006.
The company decided to use the balance sheet approach to estimate the required balance for the Allowance for doubtful accounts. After much research, the company decided to use the industry average of 10% of accounts receivable to determine the amount which would be sufficient to provide for uncollectible accounts.
Required
Prepare all of the necessary entries to record credit sales, collections, write-offs, reinstatements and bad debts expense for the year ended December 31, 2005. Show your calculations. (12
Marks) 4,000
Accounts receivable
4,000
Question 2 Shareholders’ Equity
(27 marks, suggested time 27 minutes)
Stellbert Inc. (“Stellbert”) had the following shareholders’ equity account balances on January 1,
2005:
Common shares, 1,000,000 shares authorized, 70,000 shares issued
$700,000
Preferred shares, $3 cumulative,
100,000 shares authorized, 5,000 shares issued
$50,000
Retained earnings
$300,000
All of the Common shares had been issued at one public offering in 2002. The last dividends declared for the common and preferred shares were for the year ended December 31st, 2003.
The following
Commerce 293
FINAL EXAMINATION - QUESTION BOOKLET
TIME:
Question 1
150 minutes TOTAL MARKS:
Accounts Receivable
140
(11 marks, suggested time 11 minutes)
In 2004, Holly opened a business selling imported woman’s accessories to fashion boutiques.
The following transactions relating to sales and accounts receivable occurred in 2005:
January 1st, 2005 Accounts Receivable balance
January 1st, 2005 Allowance for Doubtful Accounts balance
Sales (all on account)
Cash collected on accounts receivable (net of sales discounts taken)
Accounts receivable written off as not collectible
$ 50,000
$ 5,000 cr.
$ 360,000
$ 290,000
$ 4,000
Holly received a letter from a customer whose $12,000 account she had written off last year.
The customer promised that she would pay in January 2006.
The company decided to use the balance sheet approach to estimate the required balance for the Allowance for doubtful accounts. After much research, the company decided to use the industry average of 10% of accounts receivable to determine the amount which would be sufficient to provide for uncollectible accounts.
Required
Prepare all of the necessary entries to record credit sales, collections, write-offs, reinstatements and bad debts expense for the year ended December 31, 2005. Show your calculations. (12
Marks) 4,000
Accounts receivable
4,000
Question 2 Shareholders’ Equity
(27 marks, suggested time 27 minutes)
Stellbert Inc. (“Stellbert”) had the following shareholders’ equity account balances on January 1,
2005:
Common shares, 1,000,000 shares authorized, 70,000 shares issued
$700,000
Preferred shares, $3 cumulative,
100,000 shares authorized, 5,000 shares issued
$50,000
Retained earnings
$300,000
All of the Common shares had been issued at one public offering in 2002. The last dividends declared for the common and preferred shares were for the year ended December 31st, 2003.
The following