Ethics Challenge — BTN 3-3
1. GAAP requires that annual deprecation be accumulated in a contra–
asset account, called Accumulated Depreciation. While property, plant,
2. One strength of Smith’s method would be the ease of preparing the
balance sheet. The property, plant, and equipment balance in the
3. While both approaches would lead to the same total assets on the
Communicating in Practice — BTN 3-4
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 book. If the scoreboard was not cleared before
the start of a new game, the scores from the second game would be combined
with scores from the first game. As a result, the scoreboard would reflect data
account. A win, or net income, increases retained earnings and a loss, or net
loss, decreases it.
Taking It to the Net — BTN 3-5
1. The Gap’s main brands (stores) are The Gap, Old Navy, and Banana
2. The Gap’s fiscal year–end is January 28, 2012. It appears that The Gap’s
February.
3. Net sales for the year ended January 28, 2012, are $14,549 million.
Teamwork in Action — BTN 3-6
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*
Cr. Revenue
* For depreciation, one would Credit the Accumulated Depreciation contra account.
Some implementation notes: This activity allows all students to be actively
involved in the learning process. Encourage students to take the opportunity
Entrepreneurial Decision — BTN 3-7
1. a. To record the collection of cash from sale of the gift certificate in
advance of delivery of merchandise to the customer:
2. Carrying less inventory would allow the company to save the costs of
keeping and maintaining that added inventory; such as warehousing
3. If the company carries additional inventory, it can potentially sell more
merchandise and increase its profits. This might further fuel increased
sales as additional customers might be attracted to its products. On
Hitting the Road — BTN 3-8
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.
Global Decision — BTN 3-9
1. Samsung (KRW in millions)
Current year, profit margin = ₩30,474,764/ ₩228,692,667= 13.3%
2. Apple is slightly more successful on the basis of profit margin in the
current year relative to Google. However, both Apple and Google are