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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 l.jpg

Working Accounting Problems Example

  • Go to Accounting Toolbox for Success

  • Print the Martin Corp. problem

  • Refer to it as you view this module


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R O W E R

  • Requirements

  • Organize

  • Work

  • Evaluate

  • Review


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Requirements

  • 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


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Requirements

Cost and Matching Principles

JE for Asset Acquisition

  • Computations:

    • Interest

    • Straight Line Depreciation

Adjusting Entries


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Requirements

(2) How does this appear

on the 4/30/X1 Balance Sheet and

on the Income Statement

for the year ended 4/30/X1?


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Requirements

Balance Sheet Accounts

Balance Sheet Presentation

Income Statement Accounts

Income Statement Presentation


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Requirements

  • Assume that the accountant

  • does not make the adjusting entry

  • for the accrual of interest.

  • How does this error

  • impact the financial statements?


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Requirements

Matching Principle

Effects of errors on the Balance Sheet

Effects of errors on the Income Statement


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Organize

Facts

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


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Organize

Facts

Straight Line Depreciation

5 year estimated life

No salvage value at the end of 5 years


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Organize

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


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Organize

Action Plan

Paper and pencil, calculator

Work one requirement at a time

Label your work, save your work,

finish the assignment and be neat


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Work – Requirement (1) (a)


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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


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Work – Requirement (1) (b)

$80,000 X .08 X 5/12 ≈ $2,667

Round to the nearest dollar


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Work – Requirement (2)

Martin Corporation

Balance Sheet

April 30, X1

Assets

Property, Plant and Equipment

Equipment$100,000

Less Accumulated Depreciation (8,333)

$ 91,667

Book Value or Carrying Value


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Work – Requirement (2)

Martin Corporation

Balance Sheet

April 30, X1

Current Liabilities

Interest Payable $2,667

Notes Payable $80,000


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Work – Requirement (2)

Martin Corporation

Income Statement

For the Year Ended April 30, X1

Expenses

Depreciation $8,333

Interest 2,667


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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


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Evaluate

Determine how to receive feedback

Make corrections

I am ready for the next chapter and the exam

Ask for clarification

Learn from your mistakes


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Review

Can you improve?

Process

Do you understand?

Results

Are you ready for

the next assignment?

Foundation


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Working Accounting Problems

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  • Efficiency

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