Title: Reporting in Action 1
QA_Ori:
The revenue items from its income statement must be identified, and those
would be credited to Income Summary as step 1 in the closing entry process.
Title: Reporting in Action 2
QA_Ori:
The total expenses that would be debited to Income Summary as step 2 in the
closing entry process must be computed. Polaris’ total expenses for the year
ended December 31, 2011, are (in thousands):
Cost of sales $1,916,366
Selling and marketing 178,725
Title: Reporting in Action 3
QA_Ori:
The balance of Income Summary before it is closed as of December 31, 2011,
Title: Reporting in Action 4
QA_Ori:
From the cash flow statement, we see that Polaris paid $61,585 ($ in thousands)
in cash dividends.
Title: Reporting in Action 5
QA_Ori:
Solution depends on the financial statements accessed.
Title: Comparative Analysis 1
QA_Ori:
Polaris’s current ratios: ($ in thousands)
Arctic Cat’s current ratios: ($ in thousands)
QA_Edit:
Title: Comparative Analysis 2
QA_Ori:
In both years, Arctic Cat has the higher current ratio (2.65 vs 1.43 for the
Title: Comparative Analysis 3
QA_Ori:
Title: Comparative Analysis 4
QA_Ori:
Arctic Cat’s current ratio is above (better than) the industry average for both
Title: Ethics Challenge 1
QA_Ori:
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 president. Tamira probably should have used less optimistic
Title: Ethics Challenge 2
QA_Ori:
Students may offer one of the above alternatives or another response they may
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 talking
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 event is over, the
result of the game is permanently recorded elsewhere–probably in the team’s record
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 period should be
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.]
Title: Taking It to the Net 1
QA_Ori:
The Motley Fool states that a benchmark of 1.5 is generally regarded as
sufficient to meet near-term operating needs.
Title: Taking It to the Net 2
QA_Ori:
One should always check a company’s current ratio (as well as any other ratio)
against its main competitors in a given industry. Industries have their own norms
as far as what values of current ratios make sense and which do not.
Title: Taking It to the Net 3
QA_Ori:
A current ratio that is too high can suggest that a company is hoarding assets
instead of using them to effectively grow the business—this is an inefficient use
of resources that can potentially impair long-term returns.
Title: Teamwork in Action 1
QA_Ori:
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
Supplies…….………………….. 12,000 (c) 7,000 5,000
(Cash + AR + Supplies + Prepaid Ins. + Equipment – Accum. Depreciation)
Adjusted revenue account balance
Trial Balance Adjustments
Income
Statement
Title Debit Credit Debit Credit Debit Credit
Investigation Fees
Closing entry
Account Titles and Explanation Debit Credit
Investigation Fees Earned……….………..……………………………. 33,800
2. 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
4.
D. Noseworthy, Capital Income Summary
Third and Fourth closing entries
Account Titles and Explanation Debit Credit
To close Income Summary to Capital.
5. Proving the Accounting Equation
ASSETS = LIABILITIES + OWNER’S EQUITY
Title: Entrepreneurial Decision 1
QA_Ori:
A classified balance sheet classifies liabilities into current and non-current.
The current liabilities are those that are due in the short-term, and must be
Title: Entrepreneurial Decision 2
QA_Ori:
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 expenses to
revenues. Without closing entries, revenues and expenses would continue to
Title: Entrepreneurial Decision 3
QA_Ori:
Closing procedures will accomplish two objectives for Arynetta. First, the
Title: Hitting the road
QA_Ori:
There is no formal solution to this field activity. The instructor may wish to tally
students’ findings to show results across companies as to use of work sheets,
software preferences, and time it takes to prepare finalized annual financial
statements.
Title: Global Decision 1
QA_Ori:
Current ratio (in thousands Euro)
Title: Global Decision 2
QA_Ori:
Analysis: Piaggio’s current ratio declined (is worse) for the current year. This puts