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Serial Problem, SP 3 (Continued)
Accounts Receivable Acct. No. 106
Date Explanation PR Debit Credit Balance
Oct. 6 4,800 4,800
12 1,400 6,200
15 4,800 1,400
Computer Supplies Acct. No. 126
Date Explanation PR Debit Credit Balance
Oct. 3 1,420 1,420
Prepaid Insurance Acct. No. 128
Date Explanation PR Debit Credit Balance
Prepaid Rent Acct. No. 131
Date Explanation PR Debit Credit Balance
Office Equipment Acct. No. 163
Date Explanation PR Debit Credit Balance
Accumulated Depreciation—Office Equipment Acct. No. 164
Date Explanation PR Debit Credit Balance
Serial Problem, SP 3 (Continued)
Computer Equipment Acct. No. 167
Date Explanation PR Debit Credit Balance
Accumulated Depreciation—Computer Equipment Acct. No. 168
Date Explanation PR Debit Credit Balance
Accounts Payable Acct. No. 201
Date Explanation PR Debit Credit Balance
Wages Payable Acct. No. 210
Date Explanation PR Debit Credit Balance
Unearned Computer Services Revenue Acct. No. 236
Date Explanation PR Debit Credit Balance
S. Rey, Capital Acct. No. 301
Date Explanation PR Debit Credit Balance
S. Rey, Withdrawals Acct. No. 302
Date Explanation PR Debit Credit Balance
Oct. 31 3,600 3,600
Serial Problem, SP 3 (Continued)
Computer Services Revenue Acct. No. 403
Date Explanation PR Debit Credit Balance
Oct. 6 4,800 4,800
12 1,400 6,200
Depreciation Expense—Office Equipment Acct. No. 612
Date Explanation PR Debit Credit Balance
Depreciation Expense—Computer Equipment Acct. No. 613
Date Explanation PR Debit Credit Balance
Wages Expense Acct. No. 623
Date Explanation PR Debit Credit Balance
Oct. 31 875 875
Insurance Expense Acct. No. 637
Date Explanation PR Debit Credit Balance
Serial Problem, SP 3 (Concluded)
Rent Expense Acct. No. 640
Date Explanation PR Debit Credit Balance
Computer Supplies Expense Acct. No. 652
Date Explanation PR Debit Credit Balance
Advertising Expense Acct. No. 655
Date Explanation PR Debit Credit Balance
Mileage Expense Acct. No. 676
Date Explanation PR Debit Credit Balance
Nov. 1 320 320
Miscellaneous Expense Acct. No. 677
Date Explanation PR Debit Credit Balance
Repairs Expense—Computer Acct. No. 684
Date Explanation PR Debit Credit Balance
Reporting in Action — BTN 3-1
1. The revenue recognition principle requires that revenue be recorded
2. Apple provides information on revenue recognition in its Note 1 titled
“Summary of Significant Accounting Policies.” It reports that “The
Company recognizes revenue when persuasive evidence of an
3. For fiscal year-end September 28, 2013, the profit margin is ($ millions):
For fiscal year-end September 29, 2012, the profit margin is ($ millions):
4. Solution depends on the financial statements accessed.
Comparative Analysis — BTN 3-2
($ in millions)
1. Apple
Google
2. Apple and Google have a comparable profit margin in the current year,
but Apple is more successful on the basis of profit margin in the prior
Ethics Challenge — BTN 3-3
1. GAAP requires that annual deprecation be accumulated in a
contra-asset account, called Accumulated Depreciation. While property,
2. One strength of Smith’s method would be the ease of preparing the
balance sheet. The property, plant, and equipment balance in the
3. While both approaches would lead to the same total assets on the
Communicating in Practice — BTN 3-4
This communication activity has no set solution. A class discussion of the
ratios can be conducted with emphasis on (1) return and profitability by
industries and (2) a contrast of debt financing between industries.
Taking It to the Net — BTN 3-5
1. The Gap’s main brands (stores) are The Gap, Old Navy, and Banana
Republic. It also has Piperlime and Athleta brands.
2. The Gap’s fiscal year-end is January 28, 2012. It appears that The Gap’s
3. Net sales for the year ended January 28, 2012, are $14,549 million.
Teamwork in Action — BTN 3-6
Note that there is no specific solution to this activity. Still, the presentation
of each expert team should reflect the following summary points:
Before Adjusting
Balance Sheet Income Statement
Type Account Account Adjusting Entry
Cr. Revenue
Accrued expenses Liability understated Expense understated Dr. Expense
Cr. Liability
Accrued revenues Asset understated Revenue understated Dr. Asset
Cr. Revenue
* For depreciation, one would Credit the Accumulated Depreciation contra account.
Some implementation notes: This activity allows all students to be actively
involved in the learning process. Encourage students to take the opportunity
Entrepreneurial Decision — BTN 3-7
1. a.To record the collection of cash from sale of the gift certificate in
advance of delivery of merchandise to the customer:
b. To record the delivery of merchandise to the customer when he/she
uses the gift certificate:
2. Carrying less inventory would allow the company to save the costs of
keeping and maintaining that added inventory; such as warehousing
3. If the company carries additional inventory, it can potentially sell more
merchandise and increase its profits. This might further fuel increased
Hitting the Road — BTN 3-8
There is no formal solution to this field activity. The instructor may wish to
tally students’ findings to see what companies were selected, who
Global Decision — BTN 3-9
1. Samsung (KRW in millions)
Current year, profit margin = ₩30,474,764/ ₩228,692,667= 13.3%
Apple (in millions)
2. Apple is slightly more successful on the basis of profit margin in the
current year relative to Google. However, both Apple and Google are
1 Korean won, Apple earned an average of 21.7 cents on each dollar₩
