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Dec. 31 250
Accumulated Depreciation: Office Equip. 250
31 600
Prepaid Rent 600
31 3,000
Agency Fees Earned 3,000
PROBLEM 5.6B
TOUCHTONE TALENT AGENCY
70 Minutes, Strong
December 31, Current Year
To record depreciation of office equipment in December.
(4)
To record revenue accrued at the end of
To record prepaid rent expired in December.
Fees Receivable
Rent Expense
(5)
December.
TOUCHTONE TALENT AGENCY
Depreciation Expense: Office Equipment
General Journal
(1)
(2)
a.
1.
Computations for each of the adjusting journal entries:
$15,000 (office equipment per trial balance)/60 months = $250 per month.
PROBLEM 5.6B
TOUCHTONE TALENT AGENCY (continued)
(continued)
14,950$
38,300
600
250
530
15,000
12,250$
PROBLEM 5.6B
TOUCHTONE TALENT AGENCY (continued)
Unexpired insurance policies
Office supplies
TOUCHTONE TALENT AGENCY
December 31, Current Year
Adjusted Trial Balance
Fees receivable
a. (cont'd.)
Office equipment
Cash
Prepaid rent
Accumulated depreciation: office equipment
b.
52,000$
480$
1,500
10,800$
Agency fees earned
Income Statement
Telephone expense
PROBLEM 5.6B
TOUCHTONE TALENT AGENCY (continued)
Revenues:
TOUCHTONE TALENT AGENCY
For the Year Ended December 31, Current Year
Expenses:
Office supply expense
Retained earnings (1/1/Current Year)
TOUCHTONE TALENT AGENCY
For the Year Ended December 31, Current Year
Statement of Retained Earnings
b. (cont'd.)
Assets
14,950$
38,300
1,500$
6,000
3,900
Income taxes payable
Note payable (Due 3/1/Next Year)
Liabilities
PROBLEM 5.6B
TOUCHTONE TALENT AGENCY
Accounts payable
TOUCHTONE TALENT AGENCY (continued)
Fees receivable
Balance Sheet
Cash
December 31, Current Year
c.
Dec. 31 52,000
Income Summary 52,000
31 9,075
Retained Earnings 9,075
PROBLEM 5.6B
TOUCHTONE TALENT AGENCY
December 31, Current Year
(1)
General Journal
TOUCHTONE TALENT AGENCY (continued)
Agency Fees Earned
To close Agency Fees Earned.
(2)
Retained Earnings account ($52,000 -$42,925 =
Income Summary
(3)
To close all expense accounts.
To transfer net income earned in Current Yr. to the
$9,075).
(4)
d.
14,950$
38,300
600
3,900
5,500
1,360
45
e.
12,250$
Salaries payable
Accumulated depr.: office equipment (12/31/Current Yr.)
Interest payable
Fees receivable
PROBLEM 5.6B
TOUCHTONE TALENT AGENCY (continued)
TOUCHTONE TALENT AGENCY
December 31, Current Year
After-Closing Trial Balance
Cash
Prepaid rent
Unearned agency payable
Income taxes payable
f.
6,700$
1,200 (at $600/mo.)
5,500$
g.
1,300$
500
PROBLEM 5.6B
TOUCHTONE TALENT AGENCY (concluded)
Rent expense incurred in Current Year
Total rent expense incurred in January through October
Less: Total rent expense for November and December
through December (at $125 per month)
Less: Total insurance expense for September
Insurance expense incurred in Current Year
50 Minutes, Strong
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Balance sheet accounts:
Cash 20,000 20,000 20,000
Unearned admission revenue
(YMCA) 1,000
(5)
500 500 500
Income taxes payable 4,740 (8) 4,200 8,940 8,940
Capital stock 40,000 40,000 40,000
Retained earnings 46,610 46,610 46,610
Dividends 15,000 15,000 15,000
Interest payable (4) 1,500 1,500 1,500
Concessions revenue receivable
(6)
2,250 2,250 2,250
Salaries payable (7) 1,700 1,700 1,700
Income statement accounts:
Admissions revenue 305,200 (5) 500 305,700 305,700
Concessions revenue 14,350 (6) 2,250 16,600 16,600
Trial Balance
Adjustments *
Adjusted Trial Balance
WORKSHEET
For the Month Ended August 31, Current Year
CAMPUS THEATER
Income Statement
Balance Sheet
PROBLEM 5.7B
CAMPUS THEATER
15 Minutes, Medium
7.9%
c.
PROBLEM 5.8B
THE GAP, INC.
a.
$1.3 billion ÷ $16.4 billion =
Net income percentage: Net Income/Total Revenue
The company was profitable, given its net income of $1.3 billion. Its net income
percentage and its return on equity are both excellent, indicating that the company is
25 Minutes, Strong
a.
b.
c.
d.
e.
Normally, pending litigation should be disclosed in notes to the financial statements. But a
SOLUTIONS TO CRITICAL THINKING CASES
ADEQUATE DISCLOSURE
CASE 5.1
Mandella Construction Co. should disclose the accounting method that it is using in the
Generally accepted accounting principles do not require disclosure of changes in
The fact that one of the company’s two processing plants will be out of service for at least
No disclosure is required under generally accepted accounting principles, because any
Group assignment:
No time estimate
a.
•
b.
•
c.
An accountant has access to much information about a company's business
affect a CPA's objectivity.
During the interview (part b), the accountant probably described the ethical concept of
Accountants, like doctors, develop greater proficiency through specialization. By
Arguments for an accountant serving clients who are direct competitors include:
The principal argument against an accountant serving clients who are direct competitors is:
CASE 5.2
We do not provide comprehensive solutions for group problems. It is the nature of these problems
that solutions should reflect the collective experiences of the group. But the following observations
may be useful in stimulating class discussion:
WORKING FOR THE COMPETITION
ETHICS, FRAUD & CORPORATE GOVERNANCE
5 Minutes, Easy
The purpose of the personal certification process is to make CEOs and CFOs more accountable
and personally responsible for the contents in the annual reports issued by their companies.
CASE 5.3
CEOs AND CFOs
CERTIFICATIONS BY
15 Minutes, Easy
CASE 5.4
Other Income/(Loss)
Share-Based Employee Compensation
ANNUAL REPORT DISCLOSURES
Listed below are the headings of the major disclosure items presented in Ford’s most recent financial statement footnotes.
Students are to discuss the general nature and content of the various topics. The advanced nature of some of these topics goes
beyond the scope of an introductory course.
Fair Value Measurements
Accumulated Other Comprehensive Income/(Loss)
Summary of Significant Accounting Policies
New Accounting Standards
INTERNET
