11A_problem_set_2_2013.doc - Management 11A Summer 2013...

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Management 11A Summer 2013 Rich Armstrong Problem Set #2 Due Date: Tuesday, July 9 in class. Total Points: 150 Chapter 4 1) E 4-2 (8 points) Identify accounting assumptions, principles, and constraints . (SO 1 ), K These are the assumptions, principles, and constraints discussed in this and previous chapters. 1. Economic entity assumption. 2. Expense recognition principle. 3. Monetary unit assumption. 4. Periodicity assumption. 5. Cost principle. 6. Materiality constraint. 7. Full disclosure principle. 8. Going concern assumption. 9. Revenue recognition principle. 10. Cost constraint. Instructions Identify by number the accounting assumption, principle, or constraint that describes each situation below. Do not use a number more than once. a. Is the rationale for why plant assets are not reported at liquidation value. (Do not use the cost principle.) 8. Going concern assumption. b. Indicates that personal and business record-keeping should be separately maintained. 1. Economic entity assumption. c. Ensures that all relevant financial information is reported. 7. Full disclosure principle. d. Assumes that the dollar is the “measuring stick” used to report on financial performance. 3. Monetary unit assumption. e. Requires that accounting standards be followed for all significant items. 6. Materiality constraint. f. Separates financial information into time periods for reporting purposes.
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4. Periodicity assumption. g. Requires recognition of expenses in the same period as related revenues. 2. Expense recognition principle. h. Indicates that fair value changes subsequent to purchase are not recorded in the accounts. 5. Cost principle.
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2) E 4-8 (12 points) Identify types of adjustments and accounts before adjustment . (SO 3 , 4 , 5 ), AN Peng Company accumulates the following adjustment data at December 31. a. Service Revenue earned but unbilled totals $600. b. Store supplies of $160 are on hand. Supplies account shows $1,900 balance. c. Utility expenses of $275 are unpaid. d. Service revenue of $490 collected in advance has been earned. e. Salaries of $620 are unpaid. f. Prepaid insurance totaling $400 has expired. Instructions For each item, indicate (1) the type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense) and (2) the status of the accounts before adjustment (overstated or understated). a) 1) Type of Adjustment: Accrued Revenues 2) The Status of Accounts Before Adjustment: Assets Understated Revenues Understated b) 1) Type of Adjustment: Prepaid Expenses 2) The Status of Accounts Before Adjustment: Assets Overstated Expenses Understated c) 1) Type of Adjustment: Accrued Expenses 2) The Status of Accounts Before Adjustment: Expenses Understated Liabilities Understated d) 1) Type of Adjustment: Unearned Revenues 2) The Status of Accounts Before Adjustment: Liabilities Overstated Revenues Understated e) 1) Type of Adjustment: Accrued Expenses 2) The Status of Accounts Before Adjustment: Expenses Understated Liabilities Understated f) 1) Type of Adjustment: Prepaid Expenses 2) The Status of Accounts Before Adjustment: Assets Overstated Expenses Understated
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3) E 4-11 (14 points)
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