Fall 2011 - term test #2.doc - solutions(2)

Ne ne ne 3 merchandise costing 3000 was returned

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Unformatted text preview: was included in the inventory on December 31, 2010. It was shipped FOB shipping point December 28, 2010. NE NE NE 3. Merchandise costing $3,000 was returned by a customer January 2, 2011. The merchandise was in good condition and the customer was given full credit of $5,000. $5,000 was deducted from inventory December 31, 2010. Understated $5,000 Understated $5,000 Understated $5,000 4. Merchandise was returned to a supplier for credit December 28, 2010. Credit of $7,000 was received January 2, 2011. No adjustment was made until the credit was received. Overstated $7,000 Overstated $7,000 Overstated $7,000 Part E (25 marks) A. (8 marks) MARKS B. (2 marks) C. (5 Marks) (5 Marks) d) (5 marks) • • • reasonable conclusion at least two relevant ratios (including current ratio) used the figures from your analysis Part F (4 marks) (i) Violation of relevance (timely) (1 mark) (ii) Violation of consistency (qualitative characteristic) (1 mark) (iii) Following materiality (1 mark) (iv) Following matching (1 mark) Part G (4marks) a) $4,000: Feb. 28 Canyon billed customers for $4,000 for services performed in February. Collection is not expected until March. (1 mark) b) $6, 000: (3 marks) Feb. 5 Canyon paid $1,000 to its landlord for February rent => 1,000. Feb 15 Canyon paid a total of $3,000 for 3 months of automobile insurance. The coverage on the insurance policy included the months of February, March, and April. => 1,000 Feb 27 Canyon received the bill for the utilities for the month of February, and recorded $4,000 in accounts payable on that date. The bill will not be paid until March. 4,000...
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