Ref. Debit Credit Debit Credit
31 1,870
2 J17 270 1,600
Ref. Debit Credit Debit Credit
31 1,700
9 J17 1,200 500
Ref. Debit Credit Debit Credit
Ref. Debit Credit Debit Credit
31 1,040
2014
Jan.
Date
Balance
Post.
Item
Balance
Account No. 141Equipment
1, 2, and 4.
2014
Jan.
Post.
Account No. 115
Item
Feb.
2014
Account No. 111
Balance
Item
Cash
P10. Transaction Analysis, General Journal, Ledger Accounts, and Trial Balance (Continued)
Supplies
Feb.
Balance
Account No. 113
Post.
2014
Post.
Item
Accounts Receivable
Jan.
Date
Balance
Date
Date
Balance
Balance
2-35
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Ref. Debit Credit Debit Credit
Ref. Debit Credit Debit Credit
Ref. Debit Credit Debit Credit
31 1,640
4 J17 85 1,725
Ref. Debit Credit Debit Credit
Ref. Debit Credit Debit Credit
Ref. Debit Credit Debit Credit
3 J17 650 650
Feb.
2014
J. Ziden, Capital Account No. 311
Balance
Balance
Post.
Date Item
2014
ItemDate
2014
Account No. 313J. Ziden, Withdrawals
Post.
Date Item
Balance
Account No. 411
Post.
Service Revenue
Accounts Payable
Item
P10. Transaction Analysis, General Journal, Ledger Accounts, and Trial Balance (Continued)
Account No. 143
Item
Balance
Post.
Buses
Balance
Item
Notes Payable
Date
Date
2014
2014
2014
Balance
Post.
Post.
Account No. 211
Account No. 212
Date
Balance
Feb.
Jan.
2-36
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Ref. Debit Credit Debit Credit
Ref. Debit Credit Debit Credit
Ref. Debit Credit Debit Credit
Ref. Debit Credit Debit Credit
2014
Date
Date
Item
Post.
Wages Expense
Post.
Account No. 514
Balance
Item
Utilities Expense
Balance
2014
Balance
2014
P10. Transaction Analysis, General Journal, Ledger Accounts, and Trial Balance (Continued)
Account No. 511Rent Expense
Post.
Date Item
Date
Account No. 513
Balance
Gas and Oil Expense Account No. 512
Item
Post.
2014
2-37
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
5.
1,940
700
85
6.
Mount Prospect Nursery School Company
Trial Balance
February 28, 2014
The main business issue that arises from this situation is that the company may
Cash
Accounts Receivable
Supplies
P10. Transaction Analysis, General Journal, Ledger Accounts, and Trial Balance (Continued)
Revenues were earned on February 3 ($650) and February 10 ($700) for a total of
$1,350. Cash was received on account on February 9 from last month ($1,200) and
2-38
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
xxx
xxx
C1. Conceptual Understanding: Valuation and Classification of Business Transactions
Cases
Memorandum
Date: Today’s date
To: Owners
From: Student’s name
Re: Accounting Policy for Delivery Trucks
You have asked me to record our newly purchased delivery trucks at current market value.
However, to do this will not be in accord with the cost principle. This principle holds that
Delivery Trucks
Cash
The entry to record the purchase should be made as follows:
Note that the delivery trucks are an asset on our balance sheet because they will benefit
situation applies to the companies. The SEC does not want them to overstate revenues
C2. Conceptual Understanding: Recording of Rebates
This case raises classification issues. Rebates, as the SEC says, should not be classified
as revenues. They should be classified as a reduction of costs and expenses. Think of it
2-39
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1. Cash and Due from Banks
Loans to Customers
Securities Available for Sale
Deposits by Customers
(b) 2,000 (a)
1.
2.
CVS’s notes to the financial statements state that “Inventory is stated at
CVS’s notes to the financial statements state that “Advertising costs are
C5. Annual Report Case: Recognition, Valuation, and Classification
2.
Asset
Asset
Asset
Liability
Financial statements are prepared on the accrual basis, which will differ from cash flows.
In this case, it appears that the company is making sales on credit, which increases ac-
C4. Interpreting Financial Statements: Cash Flows
Deposits by Customers
2,000
Securities Available for Sale
C3. Interpreting Financial Statements: Interpreting a Bank’s Financial Statements
Cash and Due from Banks
2-40
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
C6. Comparison Analysis: Revenue Recognition
CVS’s revenues are $107,100 million. Southwest’s revenues are $15,658 million.
The way in which these companies earn revenue is quite different. CVS sells mainly to
retail customers who pay directly for prescriptions or CVS bills the insurance company
Note to Instructor: Answers will vary depending on the company selected by the students.
But Shah undoubtedly was taking advantage of the company’s accounting policy. In some
ness in which substantial returns are usual—publishing, for example—it is appropriate
(possibly shipping, insurance, handling, or even damage).
to estimate returns in the financial statements.
C7. Ethical Dilemma: Recognition Point and Ethical Considerations
In a normal sale, which this appears to be, title passes when the sale is made. So the
transaction was recorded properly as a sale when shipment was made on December 31.
Opinions will vary about the ethics of Shah’s action. Most students will argue that his be-
havior was not ethical. Others may insist that the action fell within the company’s rules
C8: Continuing Case: Annual Report Project
2-41
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.