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Question(s) / Instruction(s):

*Pr. 3-113—Accrual basis. Grier & Associates maintains its records on the cash basis. You have been engaged to convert its cash basis income statement to the accrual basis. The cash basis income statement, along with additional information, follows:

Grier & Associates Income Statement (Cash Basis) For the Year Ended December 31, 2007

Cash receipts from customers $450,000 Cash payments: Wages $150,000 Taxes 65,000 Insurance 40,000 Interest 25,000 280,000 Net income $170,000

Additional information: Balances at 12/31 2007 2006 Accounts receivable $50,000 $30,000 Wages payable 10,000 20,000 Taxes payable 14,000 19,000 Prepaid insurance 8,000 4,000 Accumulated depreciation 90,000 75,000 Interest payable 3,000 9,000

No plant assets were sold during 2007.

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