Great Adventures, Inc.
Trial Balance
July 31, 2015
Accounts Debit Credit
Cash $ 9,000
Prepaid Insurance 4,800
Supplies 1,800
Equipment 12,000
Additional Perspective P2-1 (continued)
Requirement 2
Additional Perspective 2-1 (concluded)
Requirement 3
Cash (1) 10,000
(2) 10,000
(8) 2,000
(9) 2,300
Prepaid Insurance
(3) 4,8004,800
Supplies (5)
1,8001,800
Unearned
Revenue4,000
Common
Stock10,000 (1)
Service
Revenue2,000 (8)
Legal Fees Expense
Advertising
Requirement 1
The company is getting smaller by asset size but sales are growing. The company may
Requirement 2
Profitability is increasing.
Requirement 3
Based on the statement of stockholders’ equity, American Eagle issued a small amount
Requirement 4
The terms “debit” and “credit” are not shown in the balance sheet. Asset accounts,
such as cash, merchandise inventory, accounts receivable, and property and equipment,
Requirement 5
The terms “debit” and “credit” are not shown in the income statement. Expense
Requirement 1
Additional Perspective 2-2
Additional Perspective 2-3
The company is getting smaller by asset size but sales are growing. The company may
Requirement 2
Net income has increased more than the percentage of sales increase so expenses have
Requirement 3
Based on the statement of stockholders’ equity, The Buckle did issue a small amount
Requirement 4
The terms “debit” and “credit” are not shown in the balance sheet. Asset accounts,
such as cash, inventory, accounts receivable, and property and equipment, increase
Requirement 5
The terms “debit” and “credit” are not shown in the income statement. Expense
Additional Perspective 2-4
American Eagle has a higher decline in terms of total assets, but greater growth in net
sales and net income. One reason for American Eagle’s could relate to the products
Additional Perspective 2-5
What is the issue?
Larry should understand that if he reports the additional $75,000 of revenue, the
Who are the parties affected?
Robert, the company’s president, benefits from false reporting by maintaining the
company’s profitable appearance. The incentives could be income bonus plans, a
What factors should Larry consider in making his decision?
As the accountant, Larry should understand that his responsibilities are to accurately
record and report the company’s activities. Larry must be aware that Robert may have
Additional Perspective 2-6
(Note to instructor: Answers are based on items in Apple’s September 29, 2012 annual
Requirement 1
Accounts receivable = $10,930. The accounts receivable account represents the
Requirement 2
Accounts payable = $21,175. The accounts payable account represents the amount
owed by the company to its suppliers.
Requirement 3
Accrued expenses could include income taxes payable, salaries payable, interest
Requirement 4
Common stock = $16,422. The common stock account represents capital contributed
Requirement 5
Requirement 6
Requirement 7
Expenses include cost of sales; research and development; selling, general, and
Requirement 8
Yes, the company’s revenues exceed expenses. The difference is net income ($41,733)
Additional Perspective 2-7
For transaction (a):
Step 1. Analyze customer invoice.
Step 2. Determine assets increase and stockholders’ equity increases (and
Step 3. Increase assets with a debit and increase revenues with a credit.
Step 4. Accounts Receivable 500
For transaction (b):
Step 1. Analyze employee paycheck.
Step 2. Determine assets decrease and stockholders’ equity decreases (and
Step 3. Decrease assets with a credit and increase expenses with a debit.
Step 4. Salaries Expense 1,200
For transaction (c):
Step 1. Analyze purchase receipt for equipment.
Step 2. Determine one asset increases and another asset decreases.
Step 3. Increase assets with a debit and decrease assets with a credit.
Step 4. Equipment 2,700
Step 5. All transactions are posted to the general ledger accounts.
Step 6. A trial balance is prepared using the balance of each general ledger account.