*PROBLEM 3.11 (Continued)
(b) COOKE NV
Statement of Financial Position
September 30, 2019
Assets
Noncurrent assets
Property, plant, and equipment
Land ……………………………………………………….
€80,000
Equipment ……………………………………………………….
Current assets
Supplies ……………………………………………………….
Prepaid insurance ……………………………………………………….
Cash ……………………………………………………….
Total current assets …………………………..
Equity and Liabilities
Equity
Share capital-ordinary ………………………………………………….
€108,700
Retained earnings (€1,000 + €33,500 – €14,000) ……………
Liabilities
20,500
129,200
Mortgage payable (50,000 – 10,000) …………………………..
40,000
Current liabilities
Accounts payable ……………………………………………………….
Current maturity of long-term debt …………………………..
Interest payable ……………………………………………………..
Property taxes payable…………………………..
Unearned service revenue …………………………..
Total current liabilities …………………………..
Total liabilities ……………………………………………………
*PROBLEM 3.11 (Continued)
(c)
Sep. 30
Insurance Expense ……………………………………………………….
28,000
Prepaid Insurance …………………………..
28,000
30
Supplies Expense …………………………..…………………………..
14,400
Supplies ……………………………………………………….
14,400
Depreciation Expense …………………………..
5,800
Equipment ……………………………………………………….
5,800
30
Unearned Service Revenue …………………………..
2,000
Service Revenue ……………………………………………………….
2,000
30
Property Tax Expense …………………………..
3,000
Property Taxes Payable …………………………..
3,000
30
Interest Expense …………………………..…………………………..
6,000
Interest Payable ……………………………………………………….
6,000
(d)
Sep. 30
Service Revenue ……………………………………………………….
280,500
Income Summary …………………………..
280,500
30
Income Summary ……………………………………………………….
247,000
Salaries and Wages Expense …………………………..
109,000
Maintenance and Repairs Expense …………………………..
30,500
Insurance Expense …………………………..
28,000
Property Tax Expense …………………………..
21,000
Supplies Expense …………………………..
14,400
Utilities Expense ……………………………………………………….
16,900
Interest Expense ……………………………………………………….
12,000
Advertising Expense …………………………..
9,400
Depreciation Expense …………………………..
5,800
*PROBLEM 3.11 (Continued)
Income Summary ……………………………………………………….
Retained Earnings …………………………..
Retained Earnings ……………………………………………………….
Dividends ……………………………………………………….
(e) COOKE NV
Post-Closing Trial Balance
September 30, 2019
Debit
Credit
Cash ……………………………………………………….
€ 37,400
Supplies ……………………………………………………….
4,200
Prepaid Insurance ……………………………………………………
3,900
Land ……………………………………………………….
80,000
Equipment ……………………………………………………….
120,000
Accumulated Depreciation—Equipment …………………….
Accounts Payable …………………………………………………….
Unearned Service Revenue…………………………..
Interest Payable ……………………………………………………….
Property Taxes Payable …………………………..
Mortgage Payable …………………………………………………….
Share Capital-Ordinary …………………………..
Retained Earnings…………………………..
FINANCIAL REPORTING PROBLEM
(a) April 2, 2016 total assets: £8,476.4 million.
March 28, 2015 total assets: £8,196.1 million.
(e) An adjusting entry for deferrals is necessary when the receipt/
disbursement precedes the recognition in the financial statements.
Accounts such as property, plant, and equipment and depreciation
expense on property, plant, and equipment, for example, is a classic
adjusting entry related to a deferral.
COMPARATIVE ANALYSIS CASE
(a) adidas percentage increase is computed as follows:
Total assets (December 31, 2015) ……………………………………………..
€ 13,343
Total assets (December 31, 2014) ……………………………………………..
(€12,417)
Total assets (December 31, 2015) ……………………………………………..
Total assets (December 31, 2014) ……………………………………………..
(b) adidas has a loss from discontinued operators, net of tax of €46
million. Puma did not have any discontinued operators. Since
discontinued operations are considered to be nonrecurring, they
should be excluded before comparing results between the two
companies.
FINANCIAL STATEMENT ANALYSIS CASE
ACCOUNTING ANALYSIS, AND PRINCIPLES
ACCOUNTING
1. Depreciation Expense …………………………………………….. 9,500
Accumulated Depreciation—Equipment ……………. 9,500
£9,500 = (£192,000 – £40,000) ÷ 16
4. Advertising Expense ………………………………………………. 2,500
Prepaid Advertising …………………………………………. 2,500
ANALYSIS
Income before
Adjustments
Adjustments
Income after
Adjustments
Service revenue
£360,000
£10,000
£370,000
Depreciation expense
(9,500)
(9,500)
Net income
£272,320
£258,570
ACCOUNTING ANALYSIS PRICIPLES (Continued)
PRINCIPLES
The tradeoffs are between the timeliness of the reports, which contributes
to relevance, and verifiability, the lack of which detracts from faithful
RESEARCH CASE
(a) Assets
53 The future economic benefit embodied in an asset is the potential to
contribute, directly or indirectly, to the flow of cash and cash
equivalents to the entity. The potential may be a productive one that is
55 The future economic benefits embodied in an asset may flow to the
entity in a number of ways. For example, an asset may be:
a. used singly or in combination with other assets in the production of
(b) Liabilities
60 An essential characteristic of a liability is that the entity has a
present obligation. An obligation is a duty or responsibility to act or
perform in a certain way. Obligations may be legally enforceable as a
consequence of a binding contract or statutory requirement. This is
RESEARCH CASE (Continued)
61 A distinction needs to be drawn between a present obligation and a
future commitment. A decision by the management of an entity to
acquire assets in the future does not, of itself, give rise to a present
62 The settlement of a present obligation usually involves the entity
giving up resources embodying economic benefits in order to satisfy
the claim of the other party. Settlement of a present obligation may occur
in a number of ways, for example, by:
a. payment of cash;
(c) Accrual basis
22 In order to meet their objectives, financial statements are prepared on
the accrual basis of accounting. Under this basis, the effects of
transactions and other events are recognised when they occur (and not
GAAP Concepts and Application
GAAP 3.1
No, all international companies are not subject to the same internal control
GAAP 3.2
There is concern that the cost of complying with the higher internal control
provisions is making U.S. markets less competitive as a place to list
GAAP 3.3
As with accounting standards, there are differences in auditing standards
across international jurisdictions. In the U.S., auditors of public companies
are regulated by the Public Company Accounting Oversight Board