Part 2
QA_Ori:
COLO COMPANY
Work Sheet for Month Ended May 31, 2013
Unadjusted Trial
Balance Adjustments
Income
Statement
Balance Sheet or
State-ment of Owner’s
Equity
Account Debit Credit Debit Credit Debit Credit Debit Credit
Cash 135,911 135,911
Accounts receivable 18,200 18,200
Merchandise inventory 189,519 189,519
Office supplies 793 (c) 289 504
Store supplies 3,301 (b) 669 2,632
GENERAL LEDGER
Cash Acct. No. 101
Date Explanation PR Debit Credit Balance
Apr. 30 Balance 50,247
Accounts Receivable Acct. No. 106
Date Explanation PR Debit Credit Balance
Apr. 30 Balance 4,725
Merchandise Inventory Acct. No. 119
Date Explanation PR Debit Credit Balance
Apr. 30 Balance 220,080
May 3 G2 798 219,282
Office Supplies Acct. No. 124
Date Explanation PR Debit Credit Balance
Apr. 30 Balance 430
Store Supplies Acct. No. 125
Date Explanation PR Debit Credit Balance
Apr. 30 Balance 2,447
Prepaid Insurance Acct. No. 128
Date Explanation PR Debit Credit Balance
Apr. 30 Balance 3,318
May 31 G2 553 2,765
Office Equipment Acct. No. 163
Date Explanation PR Debit Credit Balance
Apr. 30 Balance 22,470
May 10 P2 4,074 26,544
12 G2 854 25,690
Accumulated Depreciation–Office Equipment Acct. No. 164
Date Explanation PR Debit Credit Balance
Store Equipment Acct. No. 165
Date Explanation PR Debit Credit Balance
Apr. 30 Balance 38,920
Accumulated Depreciation–Store Equipment Acct. No. 166
Date Explanation PR Debit Credit Balance
Accounts Payable Acct. No. 201
Date Explanation PR Debit Credit Balance
Apr. 30 Balance 7,098
May 3 G2 798 6,300
Jenny Colo, Capital Acct. No. 301
Date Explanation PR Debit Credit Balance
Jenny Colo, Withdrawals Acct. No. 302
Date Explanation PR Debit Credit Balance
May 29 D2 7,000 7,000
31 G2 7,000 0
Sales Acct. No. 413
Date Explanation PR Debit Credit Balance
Sales Returns and Allowances Acct. No. 414
Date Explanation PR Debit Credit Balance
May 2 G2 175 175
31 G2 175 0
Sales Discounts Acct. No. 415
Date Explanation PR Debit Credit Balance
May 31 R2 350 350
31 G2 350 0
Cost of Goods Sold Acct. No. 502
Date Explanation PR Debit Credit Balance
Depreciation Expense—Office Equipment Acct. No. 612
Date Explanation PR Debit Credit Balance
May 31 G2 329 329
31 G2 329 0
Depreciation Expense—Store Equipment Acct. No. 613
Date Explanation PR Debit Credit Balance
Office Salaries Expense Acct. No. 620
Date Explanation PR Debit Credit Balance
Sales Salaries Expense Acct. No. 621
Date Explanation PR Debit Credit Balance
Insurance Expense Acct. No. 637
Date Explanation PR Debit Credit Balance
May 31 G2 553 553
31 G2 553 0
Rent Expense, Office Space Acct. No. 641
Date Explanation PR Debit Credit Balance
May 1 D2 742 742
31 G2 742 0
Rent Expense, Selling Space Acct. No. 642
Date Explanation PR Debit Credit Balance
May 1 D2 2,968 2,968
31 G2 2,968 0
Office Supplies Expense Acct. No. 650
Date Explanation PR Debit Credit Balance
May 31 G2 289 289
31 G2 289 0
Store Supplies Expense Acct. No. 651
Date Explanation PR Debit Credit Balance
Utilities Expense Acct. No. 690
Date Explanation PR Debit Credit Balance
Income Summary Acct. No. 901
Date Explanation PR Debit Credit Balance
ACCOUNTS RECEIVABLE LEDGER
Crane Corp.
Date Explanation PR Debit Credit Balance
May 26 S2 14,210 14,210
Hensel Company
Date Explanation PR Debit Credit Balance
Knox, Inc.
Date Explanation PR Debit Credit Balance
Lee Services
Date Explanation PR Debit Credit Balance
May 22 S2 6,850 6,850
30 R2 6,850 0
ACCOUNTS PAYABLE LEDGER
Fink Corp.
Date Explanation PR Debit Credit Balance
Garcia, Inc.
Date Explanation PR Debit Credit Balance
Gear Supply Co.
Date Explanation PR Debit Credit Balance
Peyton Products
Date Explanation PR Debit Credit Balance
Apr. 29 P2 7,098 7,098
May 3 G2 798 6,300
8 D2 6,300 0
25 P2 3,080 3,080
Part 3
COLO COMPANY
Income Statement
For Month Ended May 31, 2013
Revenue
General and administrative expenses
Depreciation expense—Office equipment 329
Office salaries expense 6,300
Insurance expense 553
Rent expense—Office space 742
Office supplies expense 289
Utilities expense 1,283
Total general and administrative expenses 9,496
Total operating expenses 24,340
Net income $ 31,647
COLO COMPANY
Statement of Owner’s Equity
For Month Ended May 31, 2013
COLO COMPANY
Balance Sheet
May 31, 2013
Assets
Current assets
Cash $135,911
Accounts receivable 18,200
Merchandise inventory 189,519
Part 4
COLO COMPANY
Post-Closing Trial Balance
May 31, 2013
Cash $135,911
Accounts receivable 18,200
Merchandise inventory 189,519
Office supplies 504
Store supplies 2,632
COLO COMPANY
Schedule of Accounts Receivable
May 31, 2013
COLO COMPANY
Schedule of Accounts Payable
May 31, 2013
Title: Comparative Analysis 1.
Polaris – Current Year Revenue/Segment Assets
Domestic segment: $1,864,099 / [($957,497 + $873,183)/2] = 203.7%
International segment: $792,850 / [($270,527 + $188,464)/2] = 345.5%
Polaris – One Year Prior Revenue/Segment Assets
Arctic Cat – Current Year Revenue/Segment Assets
Arctic Cat – One Year Prior Revenue/Segment Assets
Title: Comparative Analysis 2.
QA_Ori:Polaris’s domestic revenue as a percent of its domestic assets is markedly higher than of Arctic Cat’s for
both years for the domestic segment. However, for the international segment, Arctic Cat’s revenue as a percent of
Ethics Challenge — BTN 7-3
Title: Ethics Challenge 1.
QA_Ori:Independence in fact means that the auditor maintains an objective point of view of the client.
Title: Ethics Challenge 2.
QA_Ori:While auditors are hired by their clients to perform audits, auditors have a responsibility to the
Title: Ethics Challenge 3.
QA_Ori:Since Erica Gray is a sole practitioner it is questionable whether she can consult on the client’s
accounting system and then remain objective in subsequent years when she performs the audit of the company.
(Note to instructors: The Sarbanes-Oxley Act specifically prohibits auditors from providing financial information
and system designs for their SEC audit clients. This was codified by the SEC [Final Ruling 68].)
Title: Communicating in Practice
QA_Ori:The memo should recommend the use of special journals and subsidiary ledgers. It should explain the
time-saving aspect of journalizing in labeled columns and also the posting of column totals representing the impact
of groups of like transactions. The memo should discuss the timely information provided by subsidiary ledgers
regarding customer and creditor balances. A discussion of the uses of a schedule for verifying the accuracy of
subsidiary ledgers should also be included.
Title: Taking It to the Net
(See Dell’s Note 14 – Segment Information)
1. Large Enterprise; Public; Small and Medium Business; and Consumer.
2. The Large Enterprise segment reports $1,854 million of operating income and the Large Enterprise segment
3. Dell’s Operating Income and Total Assets by Segment
($ millions)
Operating
Income 2012
Total Assets 2012 : Total
Assets 2011
Segment Return on
Assets
Large Enterprise $ 1,854 $3,108 : $2,934 61.4%
4. The six product groups reported by Dell include: Desktop PCs, Mobility, Software and peripherals, Servers
and networking, Enhanced services, and Storage.
($ millions) 2012 Fiscal Year
Mobility $19,104 30.8%
Desktop PCs 14,144 22.8
Dell earned more—in both dollars and returns—from its Mobility group; its Desktop PCs was second in both
categories.
Title: Teamwork in Action
For check figures in the implementation of this activity see the solution to Problem 7-3A or 7-3B.
Title: Entrepreneurial Decision
1. The following special journals are likely to be used:
Sales journal to record credit sales
Cash receipts journal to record all cash receipts
Purchases journal to record credit purchases
Cash disbursements journal to record all cash payments
General journal to record all transactions not in special journals
The company also is likely to use the following subsidiary ledgers:
Accounts receivable subsidiary ledger to track amounts owed by individual customers
Accounts payable ledger to track amounts owed to individual vendors
Inventory ledger to keep track of all different inventory items (including inventory ready to sell, inventory in the
process of being completed, and materials to be used in the production of inventory)
2.
Year
One Year
Hence
Two Years
Hence
Three Years
Hence
Four Years
Hence
Five Years
Hence
Sales $100.0 mil 120.0 mil $138.0 mil $172.5 mil $207.0 mil
If sales follow the growth projected, the company will have more than doubled the current $100 mil in
annual sales to $207 mil annually.
Title: Global Decision
KTM has the following reported segments:
Europe
North America
Others
KTM discloses dollar amounts for the following line items:
Profit and Loss Information
Net sales
External net sales
EBIT
Balance sheet information
Assets
Liabilities
Investments
Depreciation
Yes. On most financial measures reported, the Europe segment appears to dominate KTM’s other segments.