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Intermediate Accounting question It is November 1, 2010, the first business day of the month, and you have just been hired as the accountant for ABC...

Intermediate Accounting question
Intermediate Accounting question It is November 1, 2010, the first business day of the month, and you have just been hired as the accountant for ABC Corporation, which operates with monthly accounting periods. For simplicity, ignore all tax considerations (include income tax) and assume that ABC Corporation sells one product. All of the company’s accounting work has been completed through the end of October, 2010. ABC’s Corporation’s year end is November 30. The post-closing trial balance at October 31, 2010 follows. ABC Corporation Post-Closing Trial Balance October 31, 2010 Debit Credit Accounts receivable (note 1) 147,700 Accouts payable (note 2) 466,500 Accumulated amortization, store equipment 19,261 Allowance for doubtful accounts 26,586 Cash 1,661,891.50 Common shares (note 3) 41,500 Interest receivable (note 4) 131.50 Merchandise inventory (note 5) 1,200,000 Notes receivable (note 4) 52,500 Prepaid insurance 24,500 Retained earnings 2,539,826 Store equipment (note 7) 24,950 Utilities payable 18,000 TOTALS 3,111,673 3,111,673 Note 1: See the Accounts Receivable Subledger below for details regarding customer balances. Note 2: See the Accounts Payable Subledger below for details regarding creditor balances. Note 3: There are an unlimited number of shares authorized with 20,000 shares issued and outstanding as at October 31, 2010. Note 4: This is a 6% note due October 15, 2015 with interest collectible on the 15 th of each month. Refer to the collection schedule below for the note details. Values in schedule have been rounded for convenience. Note 5: See the Merchandise Inventory Subledger below for details of inventory holdings. Note 6: The balance in Prepaid Insurance represents payment for 6 months starting November1, 2010. Note 7: See the Capital Asset Subledger below for detailed information. You have determined that ABC Corporation uses the moving weighted average cost flow assumption under a perpetual system to account for merchandise inventory and that the terms of all credit sales are 2/10, n/30. Merchandise sells for $209 per unit. The following table are 23 source documents from November. Inter-Office Memo 93: November 1, 2010 From: Carter Stark
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To: Office Assistant SUBJECT: Cash Disbursement Please write cheque #2791 to Stake Technology Inc. in payment of the November rent, $5400. Charge 40% of the rent to “Rent expense, selling space” and the balance to “Rent expense, office space”. Thanks Carter Stark Invoice 7516 ABC Corporation November 3, 2010 Credit terms: 2/10, n/30 Customer: Allarco Inc. Rep: N/A PO No: Verbal Quantity: 1600 Description: Merchandise Inventory Unit Price: $209 Sub total: $334,400 Freight: $0 Total: $334,400 Receipt 1023 ABC Corporation November 5, 2010 Customer: XYZ Corp. Rep: N/A PO No: Verbal Quantity: 1 Description: Store equipment (NOTE: All of the store equipment owned by ABC Corporation was sold to XYZ Corporation) Unit price: $5950 Sub total: $5950 Paid: $5950 Balance Due: $0 Inter-Office Memo 94 November 7, 2010 From: Carter Stark To: Office Assistant SUBJECT: Cash Disbursement Please write cheque #2792 to Callaho Inc. in payment of the October 19, 2010 purchase. Thanks, Carter Stark Deposit Slip (November 9) ABC Corporation November 9, 2010 Account No: 139 CUSTOMER: Allarco Inc Cash
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