Question 2 - Short Answer Questions (21 marks) (38 minutes) a. b. C. d. e. f. On December 31, 20x2, prior to making any adjusting entries, Mangione Co. had the following balances in its general ledger: i. Prepare the adjusting journal entry to record bad debt expense for the year ended December 31, 20x2 under the following two assumptions: The company estimates bad debts will equal of 1% of credit sales. The company estimates that bad debts will equal to 4% of accounts receivable. (4 marks) ii. Sales revenue (7% were for cash sales) Accounts receivable Allowance for doubtful accounts At December 31, 20x3 Adair Ltd. had 600,000 shares outstanding that had been issued for $3.75 per share. In 20x4 the company made the following transactions: on May 2, 150,000 shares are issued at $7.20 $4,700,000 cr. 397,000 dr. 2,300 dr. on July 16, 80,000 shares are repurchased and cancelled at $5.00 on December 15, a $0.40 per share dividend is declares Required - Prepare the journal entries for the 20x4 transactions. (4 marks) Romero Company's net accounts receivable were $500,000 at December 31, 20x8 and $550,000 at December 31, 20x9. Net cash sales for 20x9 were $325,000. The accounts receivable turnover for 20x9 was 7.0. What were Romero's total net sales for 20x9? (3 marks) On March 15, 20x4, we purchase 20,000 shares of the Beegie Company for $180,000 and classify these as FVTOCI. On December 31, 20x4, our fiscal year- end, the fair value of the shares is $12 per share. Prepare the journal entries for the above transactions (3 marks) During the current year, you signed a 3 year contract to deliver services for a total amount of $600,000. At the end of the year, you incurred $120,000 of expenditures on the contract and estimate you will incur an additional $360,000 to the end of the contract. How much revenues and profit will you realize on this contract in the current year? (2 marks) An entity sells two products: A and B. Product A sells for $400 and Product B sells for $600. If the two products are purchased together, the price for both is $900. Product A is delivered immediately when the customer makes the payment. Product B needs to be ordered and will be delivered to the customer in two months time. The customer pays the whole $900 up front. Apply steps 4 and 5 of the revenue recognition process to the above transaction. In step 5, write the journal entry the entity would make on the date of sale and the journal entry the entity would make when Product B is delivered to the customer. (5 marks) (

a. On December 31, 2012, prior to making any adfusting entries, Manpione Co had the following balances in its encral ledper: Prepare the adjusting journal entry to recend bad debt expense for the year conded December 31, 202 under the following two asiumptions: i. The company estimates bad debts will ecal Yh of 1% of crodit sales. ii. The company estimates that bud debs will equal to at: of acoounts receivable. (4 marks) b. At Decenber 31, 20x3 Adair Lad had 600,000 shares outstanding that had been issued for $3.75 per share. In 20x4 the company made the following transactions: - on May 2, 150,000 shares are issued at 57.20 - on July 16,80,000 shares are repuechaned and cancelled at $5,00 - on December 15, a 50.40 per share dividend is declares Required - Prepare the joarnal entries for the 20x4 transactions. (4 marlos) c. Romero Company's net accounts receivable wese 5\$00,000 at Desember 31, 20ns and \$590,000 at December 31, 20k9. Net cach sales for 20x9 were \$325,000. The accounts feccivable tamever for 209 was 7.0. What were Remero's total net sales for 20x9? (3 marks) d. On March 15, 20x4, we purchase 20,000 shares of the Becgie Coenpuny for $180,000 and classify these as FVTOC1. On December 31, 20h4, eer fiscal yearend, the fair value of the dhares is 512 per thare. Prepare the journal entries for the above transactions (3 marks) c. During the current year, you signed a 3 year coetract to deliver services fot a fotal amount of $600,900. Ar the end of the year, you incurred 5120,000 of expenditures on the contract and estimate you will incur an adfitional swe0,000 to the end of the contract. How much tevenues and profin will yoe realies ee this coetract in the current year? (2 marks) 9 f. An entity sells fwo products; A and B. Product A sells for 5400 and Product B sells for $600. If the two products are purchused together, the price for boch is $900 Product A is delivered immediately when the cudomer malies the pryment. Product B needs to be crderod and will be delivered to the castomer in two months time. The customer pays the whole 5900 op front. Apply steps 4 and 5 of the revenue recognition process to the above transaction. In step 5, write the journal eatry the entity woald nake oe the date of sale and the journal entry the entity would make when Prodoct B is delivered to be customer