Serial Problem, SP 3 (Continued)
Computer Equipment
Acct. No. 167
Date
Explanation
PR
Debit
Credit
Balance
Oct.
1
20,000
Date
Explanation
PR
Debit
Credit
Balance
Dec.
31
Acct. No. 201
Date
Explanation
PR
Debit
Credit
Balance
Oct.
Dec.
15
20,000
Wages Payable
Acct. No. 210
Date
Explanation
PR
Debit
Credit
Balance
Dec.
31
500
500
Unearned Computer Services Revenue
Acct. No. 236
Date
Explanation
PR
Debit
Credit
Balance
Dec.
14
Date
Explanation
PR
Debit
Credit
Balance
Oct.
Date
Explanation
PR
Debit
Credit
Balance
Dec.
Closing
31
Closing
7,100
Dividends
Acct. No. 319
Date
Explanation
PR
Debit
Credit
Balance
31
Nov.
30
Dec.
31
31
Closing
Serial Problem, SP 3 (Continued)
Computer Services Revenue
Acct. No. 403
Date
Explanation
PR
Debit
Credit
Balance
Oct.
6
4,800
4,800
12
1,400
6,200
28
5,208
Nov.
2
4,633
8
5,668
24
3,950
Dec.
20
5,625
31
Closing
Depreciation Expense—Office Equipment
Acct. No. 612
Date
Explanation
PR
Debit
Credit
Balance
Dec.
31
400
400
31
Closing
Depreciation Expense—Computer Equipment
Acct. No. 613
Date
Explanation
PR
Debit
Credit
Balance
Dec.
31
1,250
31
Closing
1,250
Wages Expense
Acct. No. 623
Date
Explanation
PR
Debit
Credit
Balance
Oct.
31
875
875
Nov.
30
1,750
2,625
Dec.
10
750
31
500
31
Closing
3,875
Insurance Expense
Acct. No. 637
Date
Explanation
PR
Debit
Credit
Balance
Dec.
31
555
555
31
Closing
Acct. No. 640
Date
Explanation
PR
Debit
Credit
Balance
Dec.
31
2,475
31
Closing
2,475
Serial Problem, SP 3 (Concluded)
Computer Supplies Expense
Acct. No. 652
Date
Explanation
PR
Debit
Credit
Balance
Dec.
31
3,065
3,065
31
Closing
3,065
0
Acct. No. 655
Date
Explanation
PR
Debit
Credit
Balance
20
1,728
1,728
Dec.
1,025
2,753
31
Closing
2,753
0
Acct. No. 676
Date
Explanation
PR
Debit
Credit
Balance
Nov.
28
Dec.
29
31
Closing
0
Miscellaneous Expense
Acct. No. 677
Date
Explanation
PR
Debit
Credit
Balance
Nov.
22
Dec.
31
Closing
0
Repairs Expense—Computer
Acct. No. 684
Date
Explanation
PR
Debit
Credit
Balance
17
Dec.
1,305
31
Closing
1,305
0
Income Summary
Acct. No. 901
Date
Explanation
PR
Debit
Credit
Balance
Dec.
31
Closing
31
Closing
31
Closing
0
Reporting in Action — BTN 3-1
1. The revenue recognition principle requires that revenue be recorded when
2. Apple provides information on revenue recognition in its Note 1 titled
“Summary of Significant Accounting Policies.” It reports that “The
3. For fiscal year-end September 27, 2014, the profit margin is ($ millions):
4. The revenue items from its income statement must be identified, and those
5. The total expenses that would be debited to Income Summary as step 2 in
the closing entry process must be computed. Apple’s total expenses for
6. The balance of Income Summary before it is closed as of its fiscal year-
Comparative Analysis — BTN 3-2
($ in millions)
1. Apple
2. Apple and Google have a comparable profit margin in the current year, but
3. Apple’s current ratios: ($ in millions)
Current year …………………………... $68,531 / $63,448 = 1.08
4. In both years, Google has the higher current ratio (4.80 vs 1.08 for the
increased from 4.58 to 4.80.
6. Google’s current ratio is above (better than) the industry average for both
years, and Apple’s is below (worse than) the industry average for both
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
TO: _____________________
FROM: _____________________
DATE: ______________________
SUBJECT: CLARIFICATIONS—OBJECTIVE OF THE CLOSING PROCESS
[Following is a sample of what the memorandum’s contents might include.]
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
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 31, 2015. It appears that The Gap’s
6. The company probably chose a fiscal year-end as the end of January or
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*
Some implementation notes: This activity allows all students to be actively
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
3. If the company carries additional inventory, it can potentially sell more
merchandise and increase its profits. This might further fuel increased
Hitting the Road — BTN 3-8
There is no formal solution to this field activity. The instructor may wish to
Global Decision — BTN 3-9
1. Samsung (KRW in millions)
2. Google is slightly more successful on the basis of profit margin in the
current year relative to Apple. However, Apple and Google are both