Ethics Challenge — BTN 4-3
1. There are several courses of action that Tamira could have taken. Two
possibilities follow:
a. She could have consulted with the president and told him that finalized financial
b. The estimation decision was not a bad choice in itself, but she should have informed the
2. Students may offer one of the above alternatives or another response
Communicating in Practice — BTN 4-4
TO: _____________________
FROM: _____________________
DATE: ______________________
SUBJECT: CLARIFICATIONS—OBJECTIVE OF THE CLOSING PROCESS
[Following is a sample of what the memorandum’s contents might include.]
When we speak of “closing the books” or the closing process we are not
Scoreboards are used to temporarily hold information that will allow us to
determine who won or lost in an athletic game or event. When the athletic
The revenue and expense accounts temporarily hold the information to
determine if the owner(s) won or lost in the game of business. Each fiscal
I hope this memo clarifies the objective of the closing process.
[Note: The memorandum need not discuss the income summary account since the assignment
requires explaining the concept, not the procedure.]
Taking It to the Net — BTN 4-5
1. The Motley Fool states that a benchmark of 1.5 is generally regarded as
sufficient to meet near-term operating needs.
2. One should always check a company’s current ratio (as well as any
3. A current ratio that is too high can suggest that a company is hoarding
Teamwork in Action — BTN 4-6
[Note: Each team member will be working on a different component of the solution and will
ultimately combine information and verify the final check figures using the accounting equation.]
1. Accounts and adjusted balances to be extended to Balance Sheet columns
Trial Balance Adjustments Balance Sheet
Account Title Debit Credit Debit Credit Debit Credit
Cash…………………………….$16,000 $16,000
Accounts receivable……… (d) 800 800
Teamwork in Action (Continued)
2. Adjusted revenue account balance
Trial Balance Adjustments
Income
Statement
Title Debit Credit Debit Credit Debit Credit
Investigation Fees
Earned……………………………… 33,000 (d) 800 33,800
Closing entry
Account Titles and Explanation Debit Credit
3. Adjusted balances of expense accounts
Title Trial Balance Adjustments
Income
Statement
Debit Credit Debit Credit Debit Credit
Rent Expense…………………15,000 15,000
Closing entry
Account Titles and Explanation Debit Credit
Income Summary……………………………………………………….. 28,200
Rent Expense……………………………………………….. 15,000
Teamwork in Action (Concluded)
4.
D. Noseworthy, Capital Income Summary
Third and Fourth closing entries
Account Titles and Explanation Debit Credit
Income Summary……………………………………………………….. 5,600
5. Proving the Accounting Equation
ASSETS = LIABILITIES + OWNER’S EQUITY
Entrepreneurial Decision — BTN 4-7
1. A classified balance sheet classifies liabilities into current and
non-current. The current liabilities are those that are due in the
2. To better understand the company’s operations, she must make sure
that all revenues earned in a particular accounting period are included
in that period’s income statement. In addition, she must match
3. Closing procedures will accomplish two objectives for the owner. First,
Hitting the Road — BTN 4-8
There is no formal solution to this field activity. The instructor may wish to
Global Decision — BTN 4-9
1. Current ratio (in millions KRW)
2. Analysis: Samsung’s current ratio improved (is better) for the current
year. This puts Samsung in a better liquidity position (meaning it is more
able to meet current obligations).