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Part 6
SUCCESS SYSTEMS
Balance Sheet
December 31, 2013
Assets
Cash
$58,16
0
Accounts receivable 5,668
Computer supplies 580
Liabilities
Accounts payable $1,100
Equity
A. Lopez, Capital 90,148
$93,24
General Ledger
Cash Acct. No. 101
Date Explanation PR Debit Credit Balance
Oct. 1 55,000 55,000
2 3,300 51,700
5 2,220 49,480
8 1,420 48,060
Accounts Receivable Acct. No. 106
Date Explanation PR Debit Credit Balance
Oct. 6 4,800 4,800
12 1,400 6,200
15 4,800 1,400
Computer Supplies Acct. No. 126
Date Explanation PR Debit Credit Balance
Oct. 3 1,420 1,420
Prepaid Insurance Acct. No. 128
Date Explanation PR Debit Credit Balance
Prepaid Rent Acct. No. 131
Date Explanation PR Debit Credit Balance
Office Equipment Acct. No. 163
Date Explanation PR Debit Credit Balance
Accumulated Depreciation—Office Equipment Acct. No. 164
Date Explanation PR Debit Credit Balance
Computer Services Revenue Acct. No. 403
Date Explanation PR Debit Credit Balance
Oct. 6 4,800 4,800
12 1,400 6,200
Depreciation Expense—Office Equipment Acct. No. 612
Date Explanation PR Debit Credit Balance
Depreciation Expense—Computer Equipment Acct. No. 613
Date Explanation PR Debit Credit Balance
Wages Expense Acct. No. 623
Date Explanation PR Debit Credit Balance
Oct. 31 875 875
Insurance Expense Acct. No. 637
Date Explanation PR Debit Credit Balance
Rent Expense Acct. No. 640
Date Explanation PR Debit Credit Balance
Computer Supplies Expense Acct. No. 652
Date Explanation PR Debit Credit Balance
Advertising Expense Acct. No. 655
Date Explanation PR Debit Credit Balance
Mileage Expense Acct. No. 676
Date Explanation PR Debit Credit Balance
Nov. 1 320 320
Miscellaneous Expense Acct. No. 677
Date Explanation PR Debit Credit Balance
Repairs Expense—Computer Acct. No. 684
Date Explanation PR Debit Credit Balance
Title: Reporting in Action 1
QA_Ori:
The revenue recognition principle requires that revenue be recorded when
Title: Reporting in Action 2
QA_Ori:
Polaris provides information on revenue recognition in its Note 1 titled
“Organization and Significant Accounting Policies.” They report that
Title: Reporting in Action 3
QA_Ori:
For year-end December 31, 2010, the profit margin is ($ thousands):
For year-end December 31, 2011, the profit margin is ($ thousands):
Title: Reporting in Action 4
QA_Ori:
Solution depends on the financial statements accessed.
Title: Comparative Analysis 1
QA_Ori:
($ in thousands)
Polaris
Arctic Cat
Title: Comparative Analysis 2
QA_Ori:
Polaris is more successful on the basis of profit margin in both the current and
Title: Ethics Challenge 1
QA_Ori:
GAAP requires that annual deprecation be accumulated in a contra-asset
account, called Accumulated Depreciation. While property, plant, and
Title: Ethics Challenge 2
QA_Ori:
One strength of Smith’s method would be the ease of preparing the balance
sheet. The property, plant, and equipment balance in the adjusted trial
Title: Ethics Challenge 3
QA_Ori:
While both approaches would lead to the same total assets on the balance
Title: Taking It to the Net 1
QA_Ori:
Title: Taking It to the Net 2
QA_Ori:
The Gap’s fiscal year-end is January 28, 2012. It appears that The Gap’s
Title: Taking It to the Net 3
QA_Ori:
Title: Taking It to the Net 4
QA_Ori:
Title: Taking It to the Net 5
QA_Ori:
Title: Taking It to the Net 6
QA_Ori:
The company probably chose a fiscal year-end as the end of January or early
Title: Teamwork in Action
QA_Ori:
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
Prepaid expenses Asset overstated
Expense
understated Dr. Expense
Cr. Asset*
* For depreciation, one would Credit the Accumulated Depreciation contra
account.
Encourage the better students to serve as experts on unearned revenues. The
Title: Entrepreneurial Decision 1
QA_Ori:
b. To record the delivery of merchandise to the customer when he/she uses
the gift certificate:
Title: Entrepreneurial Decision 2
QA_Ori:
Carrying less inventory would allows ash&dans to save the costs of carrying
Title: Entrepreneurial Decision 3
QA_Ori:
If it carries additional inventory, ash&dans can potentially sell more
merchandise and increase its profits. This might further fuel increased sales
Title: Hitting the Road
QA_Ori:
There is no formal solution to this field activity. The instructor may wish to tally
Title: Global Decision 1
QA_Ori:
Piaggio’s Note 2.2 (Accounting Policies — Recognition of revenues) reports that:
“According to IFRS, sales of goods are recognised when the goods are
dispatched and the company has transferred the significant risks and benefits
Title: Global Decision 2
QA_Ori:
(Euro in thousands)
Instructor note: Some students might erroneously use total net income
including that attributed to noncontrolling interests. The reason is because the
concept of noncontrolling interests is difficult to understand at the introductory
level; in this case, the answer follows:
QA_Edit:
Title: Quick Study 3-18
QA_Ori:
a. Step 1: Salaries Payable equals $0
b. Step 1: Interest Payable equals $0
Step 2: Interest Payable should equal $250 (not yet recorded)
c. Step 1: Interest Payable equals $0
