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customers owed abc 45 000 at the beginning of 2013 and 55 000 at the end of 2013 678254

ACCT 3331 Name _________________________________ Quiz 1 – Chapters 1, 2, and 3 (10 pts.) DUE: September 11, 2014 Section ________________________________ 1. Listed below are several terms and phrases associated with the FASB’s conceptual framework. Pair each item from List A with the item from List B that is most appropriately associated with it. List A List B 1. Relevance a. Important for making inter firm comparisons 2. Timeliness b. Applying the same accounting practices over time 3. Faithful Representation c. Information is available when investors need it 4. Materiality d. Pertinent to the decision at hand 5. Comparability e. Implies consensus among different measurers 6. Neutrality f. The absence of bias 7. Consistency g. The financial statements do not contain material mistakes 8. Verifiability h. Agreement between a measure and the phenomenon it purports to represent 9. Free from error i. Concerns the relative size of an item and its effects on decisions 2. ABC Company uses cash basis accounting for its records. During 2013, ABC collected $400,000 from its customers, made payments of $300,000 to its suppliers for inventory (e.g., Purchases), and paid $140,000 for operating costs. ABC wants to prepare accrual basis financial statements. In gathering information for the accrualbasis financial statements, ABC discovered the following: ? Customers owed ABC $45,000 at the beginning of 2013 and $55,000 at the end of 2013. ? ABC owed suppliers $20,000 at the beginning of 2013 and $28,000 at the end of the 2013. ? ABC’s beginning inventory was $40,000 and its ending inventory was $44,000. What should ABC’s Gross Profit be on the accrual basis? $______________________________ 3. At the end of 2013, ABC did NOT make the adjusting entries indicated below. Indicate the effect of the error on 2013 Net Income, Assets, Liabilities, and Owner’s Equity (on December 31, 2013). Use O for overstate, U for understate, and NE for no effect. Assume each error is independent of the others. (You do not need to specify the dollar effect of the error.) Error Net Income Assets Liabilities Owner’s Equity Entry to adjust supplies expense for the year. The company charges the cost of supplies purchased throughout the year to a nominal account. Entry to record depreciation of equipment. Entry to record interest revenue on a short term Note Receivable, with all interest and principle received in four months. Entry to record the expired portion of a two year life insurance policy paid for on July 1, 2013, and charged to a permanent account. Entry to record accrued salaries and wages earned by employees at fiscal year end. 4. Comet Graphics Company was organized on January 1, 2013. The trial balance before adjustment at December 31, 2014 contained the following account balances: Debits Credits Cash $9,500 Accounts Receivable 14,000 Supplies 2,700 Prepaid Insurance 1,800 Equipment 45,000 Accounts Payable 9,000 Notes Payable 17,000 Common Stock 15,000 Retained Earnings (Beginning) 12,000 Dividend 2,000 Graphic Fees Revenue 52,100 Consulting Fees Revenue 5,000 Salaries Expense 30,000 Advertising Expense 1,900 Rent Expense 1,500 Utilities Expense 1,700 $110,100 $110,100 Analysis reveals the following additional data: 1. The $2,700 balance in Supplies represents supplies purchased in January. At December 31, there was $1,500 of supplies on hand. 2. The note payable was issued on September 1. It is a 12%, 6 month note, with principle and interest due at maturity. 3. The balance in Prepaid Insurance is the premium on a one year policy, dated March 1, 2014. 4. Consulting Fees are credited to revenue when received. At December 31, consulting fees of $1,000 contracted for January 2015 have yet to be performed. All other consulting projects have been finished. [Hint: Have they recognized revenue at the correct time?] 5. The equipment was purchased on January 1, 2014. It has a 10 year useful life and no salvage value. The company uses the straight line depreciation method. Required: Determine Ending Retained Earnings at December 31, 2014 (after adjusting entries and closing) $ ____________________


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