ACCOUNTING

11. Bay Limited uses the allowance method for its bad debts. As at 31st December 2011, the Allowance for Doubtful Debts account has a credit balance of $5,800 and the Accounts Receivable has a total balance of $400,000. The company has been told that customer Bill has been declared bankrupt and his debt of $3,000 is therefore uncollectable. What will the journal entry be to record the transaction relating to Bill?

A. Debit Accounts Receivable $8,800, Credit Allowance for Doubtful Debts $8,800.

B. Debit Allowance for Doubtful Debt $3,000, Credit Accounts Receivable $3,000.

C. Debit Bad Debts $3,000, Credit Allowance for Doubtful Debts $3,000

D. Debit Bad Debts $8,800, Credit Accounts Receivable $8,800.

12. A company budgeted unit sales of 51,000 units for January 2014 and 60,000 units for February 2014. The company has a policy of having an inventory of units on hand at the end of each month equal to 30% of next month’s budgeted unit sales. If there were 15,300 units of inventory on hand on 31 December 2013, how many units should be produced in January 2014 in order for the company to meet its goals?

A. 53,700 units.

B. 51,000 units.

C. 48,300 units.

D. 69,000 units.

13. The following information was taken from Smith Ltd’s cash budget for the month of July:

i. Beginning cash balance $ 90,000

ii. Cash receipts $ 57,000

iii. Cash disbursements $ 102,000

If the company has a policy of maintaining a minimum end of the month cash balance of $75,000, the amount the company would have to borrow is

A. $30,000.

B. $15,000.

C. $45,000.

D. $18,000.

14. The following credit sales are budgeted by Roswell Company:

i. January $34,000

ii. February 50,000

iii. March 70,000

iv. April 60,000

The company’s past experience indicates that 70% of the accounts receivable are collected in the month of sale, 20% in the month following the sale, and 8% in the second month following the sale. The anticipated cash inflow for the month of April is

A. $61,720.

B. $56,000.

C. $60,000.

D. $58,800.

15. A company sells a product which has a unit sales price of $5, unit variable cost of $3 and total fixed costs of $100,000. The number of units the company must sell to break even is

A. 50,000 units.

B. 20,000 units.

C. 200,000 units.

D. 33,333 units.

16. Fixed costs are $600,000 and the variable costs are 75% of the unit selling price. The break-even point in dollars is

A. $1,400,000.

B. $1,800,000.

C. $2,400,000

D. $800,000

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