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Working Accounting Problems Example PowerPoint PPT Presentation

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Working Accounting Problems Example. Go to Accounting Toolbox for Success Print the Martin Corp. problem Refer to it as you view this module. R O W E R. R equirements. O rganize. W ork. E valuate. R eview. Requirements. Prepare journal entries

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Working Accounting Problems Example

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Working Accounting Problems Example

  • Go to Accounting Toolbox for Success

  • Print the Martin Corp. problem

  • Refer to it as you view this module


  • Requirements

  • Organize

  • Work

  • Evaluate

  • Review


  • Prepare journal entries

  • for the purchase of the equipment on 12/1/X0

  • (b) for any necessary adjustments on 4/30/X1

  • Round all computations to the nearest dollar


Cost and Matching Principles

JE for Asset Acquisition

  • Computations:

    • Interest

    • Straight Line Depreciation

Adjusting Entries


(2) How does this appear

on the 4/30/X1 Balance Sheet and

on the Income Statement

for the year ended 4/30/X1?


Balance Sheet Accounts

Balance Sheet Presentation

Income Statement Accounts

Income Statement Presentation


  • Assume that the accountant

  • does not make the adjusting entry

  • for the accrual of interest.

  • How does this error

  • impact the financial statements?


Matching Principle

Effects of errors on the Balance Sheet

Effects of errors on the Income Statement



Accounting Period: 5/1/X0 – 4/30/X1

Cost of Equipment: $100,000

Purchase Date: 12/1/X0

Paid $20,000

Signed Note: $80,000, 1yr, 8% interest



Straight Line Depreciation

5 year estimated life

No salvage value at the end of 5 years


Watch for facts that are not needed

$125,000 recent selling price

Cost Principle – record at amount paid

Tax method of depreciation

Work with the financial method


Action Plan

Paper and pencil, calculator

Work one requirement at a time

Label your work, save your work,

finish the assignment and be neat

Work – Requirement (1) (a)

Work – Requirement (1) (b)

$100,000/5 yrs = $20,000 depreciation per yr

$20,000 X 5/12 ≈$8,333

Round to the nearest dollar

Work – Requirement (1) (b)

$80,000 X .08 X 5/12 ≈ $2,667

Round to the nearest dollar

Work – Requirement (2)

Martin Corporation

Balance Sheet

April 30, X1


Property, Plant and Equipment


Less Accumulated Depreciation (8,333)

$ 91,667

Book Value or Carrying Value

Work – Requirement (2)

Martin Corporation

Balance Sheet

April 30, X1

Current Liabilities

Interest Payable $2,667

Notes Payable $80,000

Work – Requirement (2)

Martin Corporation

Income Statement

For the Year Ended April 30, X1


Depreciation $8,333

Interest 2,667

Work – Requirement (3)

Net Income is too high because $2,667 of

Interest Expense was not recorded

Current Liabilities are too low because $2,667 of Interest Payable was not recorded

Net Income is overstated by $2,667 Current Liabilities are understated by $2,667


Determine how to receive feedback

Make corrections

I am ready for the next chapter and the exam

Ask for clarification

Learn from your mistakes


Can you improve?


Do you understand?


Are you ready for

the next assignment?


Working Accounting Problems

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