Tech Virginia Pamplin College of Business
Intermediate Financial Accounting Quiz 1 Spring Semester 2011
Instructor: Lynn Almond
READ AND HEED: This quiz is due on or before class period on Friday, February 4, 2011.
This quiz will not be accepted after this time no exceptions, no excuses. If I do not have it
you will receive a zero. This is an open book quiz. It is ok to work with your classmates on this.
Name: _____________________________________
ID:
_____________________________________
Signature: __________________________________
Class Time:
_______________________
Please round all calculations to the nearest dollar.
1. Below is an unadjusted trial balance for Acme Machine Tool Company as of December
31, 2011.
Account Title
Debit
Credit
Cash
161,500
Accounts Receivable
45,000
Prepaid Insurance
4,500
Prepaid Rent
6,000
Inventory
26,000
Shop Supplies
12,000
Note Receivable
20,000
Equipment
20,000
Accumulated
5,500
Depreciation
Accounts Payable
42,000
Salaries Payable
0
Note Payable
80,000
Common Stock
100,000
Retained Earnings
0
Sales Revenue
651,500
Cost of Goods Sold
122,000
Salaries Expense
299,000
Rent Expense
66,000
Insurance Expense
49,500
Utilities Expense
42,000
Depreciation Expense
5,500
Totals
879,000
879,000
The Acme Machine Tool Company needs to prepare financial statements at the end of
December, 2011 for presentation to its bank. Acme Machine Tool began operation on
January 1, 2011 and is completing their first full year of operations.
You have just acquired Acme Machine Tool as a new client for your CPA firm. The owner
told you about the following events that have occurred:
a. Acme Machine Tool pays the rent for the entire year on January 1 of each year. The
rent is currently $72,000 per year.
b. Monthly depreciation on the equipment is $500. No depreciation has been recorded
for December.
c. Acme Machine Tool purchased a business insurance policy at the beginning of 2011
when they began business. The premium was $54,000. The insurance premium was
correctly recorded in the Prepaid Insurance account when it was purchased at the
beginning of 2011. No entry has been made to record the insurance expense for
December.
d. The owner just purchased a business insurance policy for the upcoming year. The
policy will begin on January 1, 2012 and ends on December 31, 2012. The premium
for the policy is $60,000. The owner wrote check a to the insurance company and
gave it to his broker on December 18, 2011. The owner has not recorded the check
payment in his accounting records yet because he does not want to recognize such a
huge expense at the end of his first year in business he is afraid it will hurt his
profits and make his business less desirable to the bank.
e. Acme Machine Tool has three employees. They are paid bi-weekly every other
Friday. The most recent paycheck was on Friday, December 23 for the pay period
ending December 17. The next payday will be on Friday, January 6, 2012. No entry
has been made to record the payroll expense for December 18 through December 31.
The pay due to the employees for this period is $12,458.
REQUIRED:
1. Prepare adjusting entries at December 31, 2011. Omit explanations.
Date
Account Description
Debit
Credit
2. Complete the worksheet below and prepare an adjusted trial balance as of December 31,
2011. Be sure to use proper headings.
Unadjusted Adjustment
Adjusted TB
TB
s
Account
Cash
Accounts Receivable
Debit
Credit
Debit
161,500
45,000
Prepaid Insurance
4,500
Prepaid Rent
6,000
Inventory
26,000
Shop Supplies
12,000
Note Receivable
20,000
Equipment
20,000
Accumulated
Depreciation
5,500
Accounts Payable
42,000
Salaries Payable
0
Note Payable
80,000
Common Stock
100,000
Retained Earnings
0
Sales Revenue
651,500
Cost of Goods Sold
122,000
Salaries Expense
299,000
Rent Expense
66,000
Insurance Expense
49,500
Utilities Expense
42,000
Depreciation Expense
Totals
5,500
879,000
879,000
Credit
Debit
Credit
Use this page for your Adjusted Trial Balance.
ACME MACHINE TOOL COMPANY
Adjusted Trial Balance
December 31, 2011
3. What is the total net effect on income (overstated or understated and how much) if the
adjusting entries are not made?
4. Prepare an income statement for the month ended December 31, 2011, and a balance
sheet as of December 31, 2011.
ACME MACHINE TOOL COMPANY
Income Statement
For the year ending December 31, 2011
ACME MACHINE TOOL COMPANY
Balance Sheet
As of December 31, 2011
5. Prepare the closing entries and a post-closing trial balance. Put the closing entries on this
page and put the Post-Closing Trial Balance on the next page.
Date
Account Description
Debit
Credit
ACME MACHINE TOOL COMPANY
Post-Closing Trial Balance
December 31, 2011