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Principles of Accounting, Volume 1: Financial Accounting

Thought Provokers

Principles of Accounting, Volume 1: Financial AccountingThought Provokers
TP 1.

LO 5.1Assume you are the controller of a large corporation, and the chief executive officer (CEO) has requested that you refrain from posting closing entries at 20X1 year-end, with the intention of combining the two years’ profits in year 20X2, in an effort to make that year’s profits appear stronger.

Write a memo to the CEO, to offer your response to the request to skip the closing entries for year 20X1.

TP 2.

LO 5.1Search the Securities and Exchange Commission website (https://www.sec.gov/edgar/searchedgar/companysearch.html) and locate the latest Form 10-K for a company you would like to analyze. Submit a short memo:

  • State the name and ticker symbol of the company you have chosen.
  • Review the company’s end-of-period Balance Sheet, Income Statement, and Statement of Retained Earnings.
  • Use the information in these financial statements to answer these questions:
    1. If the company had used the income summary account for its closing entries, how much would the company have credited the Income Summary account in the first closing entry?
    2. How much would the company have debited the Income Summary account in the second closing entry?

Provide the web link to the company’s Form 10-K, to allow accurate verification of your answers.

TP 3.

LO 5.1Assume you are a senior accountant and have been assigned the responsibility for making the entries to close the books for the year. You have prepared the following four entries and presented them to your boss, the chief financial officer of the company, along with the company CEO, in the weekly staff meeting:

Debit Service revenue and credit Income summary 522,000. Debit Income summary for 463,520 and credit Promotional expenses 48,520, Salaries expense 375,500, and Travel expenses 39,500. Debit Income summary and credit Retained Earnings 58,480. Debit Retained earnings and credit Dividends 28,000.

As the CEO was reviewing your work, he asked the question, “What do these entries mean? Can we learn anything about the company from reviewing them?”

Provide an explanation to give to the CEO about what the entries reveal about the company’s operations this year.

TP 4.

LO 5.2Search the US Securities and Exchange Commission website (https://www.sec.gov/edgar/searchedgar/companysearch.html) and locate the latest Form 10-K for a company you would like to analyze. Submit a short memo:

  • State the name and ticker symbol of the company you have chosen.
  • Review the company’s Balance Sheets.
  • Reconstruct a Post-Closing Trial Balance for the company from the information presented in the financial statements.

Provide the web link to the company’s Form 10-K, to allow accurate verification of your answers.

TP 5.

LO 5.3Search the Securities and Exchange Commission website (https://www.sec.gov/edgar/searchedgar/companysearch.html) and locate the latest Form 10-K for a company you would like to analyze. Submit a short memo:

  • State the name and ticker symbol of the company you have chosen.
  • Review the company’s end-of-period Balance Sheet for the most recent annual report.
  • List the amount of Current Assets and Current Liabilities for the currently reported year, and for the previous year. Use these amounts to calculate the company’s (A) working capital and (B) current ratio.

Provide the web link to the company’s Form 10-K, to allow accurate verification of your answers.

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