FinancialAccounting-OP_YioY6nY-59

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PB15. 4.4 Prepare an adjusted trial balance from the following account information, considering the
adjustment data provided (assume accounts have normal balances). Building and Equipment were recently
purchased, so there is neither depreciation expense nor accumulated depreciation.
Adjustments needed:
• Physical count of supplies inventory remaining at end of period, $3,300
• Customer fees collected in advance (payments were recorded as Fees Earned), $18,500
PB16. 4.4 Prepare an adjusted trial balance from the following account information, and also considering
the adjustment data provided (assume accounts have normal balances).
Adjustments needed:
• Accrued interest revenue on investments at period end, $2,200
• Insurance still unexpired at end of the period, $12,000
PB17. 4.5 Using the following Company X information, prepare a Retained Earnings Statement:
• Retained earnings balance January 1, 2019, $121,500
• Net income for year 2019, $145,800
• Dividends declared and paid for year 2019, $53,000
Chapter 4 The Adjustment Process 281
PB18. 4.5 From the following Company Z adjusted trial balance, prepare simple financial statements, as
follows:
A. Income Statement
B. Retained Earnings Statement
C. Balance Sheet
Thought Provokers
TP1. 4.1 Assume you are the controller of a large corporation, and the chief executive officer (CEO) has
requested that you explain to them why the net income that you are reporting for the year is so low, when the
CEO knows for a fact that the cash accounts are much higher at the end of the year than they were at the
beginning of the year. Write a memo to the CEO to offer some possible explanations for the disparity between
financial statement net income and the change in cash during the year.
TP2. 4.2 Search 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 end-of-period Balance Sheet for the most recent annual report, in search of
accruals and deferrals.
• List the name and account balance of at least four accounts that represent accruals or deferrals—these
could be accrued revenues, accrued expenses, deferred (unearned) revenues, or deferred (prepaid)
expenses.
• Provide the web link to the company’s Form 10-K, to allow accurate verification of your answers.
282 Chapter 4 The Adjustment Process
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
TP3. 4.3 Search the web for instances of possible impropriety relating to earnings management. This could
be news reports, Securities and Exchange Commission violation reports, fraud charges, or any other source of
alleged financial statement judgement lapse.
• Write down the name and industry type of the company you are discussing.
• Describe the purported indiscretion, and how it relates to mis-reporting earnings or shady accounting.
• Estimate the impact of the potential misrepresented amount.
• Note: You do not have to have proof that a compromise occurred, but you do need to have a source of
your reporting of the potential trouble.
• Provide the web link to the information you found, to allow accurate verification of your answers.
TP4. 4.4 Assume you are employed as the chief financial officer of a corporation and are responsible for
preparation of the financial statements, including the adjusting process and preparation of the adjusted trial
balance. The company is facing a slow year, and after your adjusting entries, the financial statements are
accurately reflecting that fact. However, as you are discussing the matter with your boss, the chief executive
officer (CEO), he suggests that you have the power to make further adjustments to the statements, and that
you should use that power to “adjust” the profits and equity into a stronger position, so that investor
confidence in the company’s prospects will be restored.
Write a short memo to the CEO, stating your intentions about what you can and/or will do to make the
financial statements more appealing. Be specific about any planned adjustments that could be made,
assuming that normal period-end adjustments have already been reflected accurately in the financial
statements that you prepared.
TP5. 4.5 Search the SEC 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.
• Reconstruct an adjusted trial balance for the company, from the information presented in the three
specified financial statements.
• Provide the web link to the company’s Form 10-K, to allow accurate verification of your answers.
Chapter 4 The Adjustment Process 283
284 Chapter 4 The Adjustment Process
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter Outline
5.1 Describe and Prepare Closing Entries for a Business
5.2 Prepare a Post-Closing Trial Balance
5.3 Apply the Results from the Adjusted Trial Balance to Compute Current Ratio and Working Capital
Balance, and Explain How These Measures Represent Liquidity
5.4 Appendix: Complete a Comprehensive Accounting Cycle for a Business
Why It Matters
As we learned in Analyzing and Recording Transactions and The Adjustment Process, Mark Summers has
started his own dry-cleaning business called Supreme Cleaners. Mark had a busy first month of operations,
including purchasing equipment and supplies, paying his employees, and providing dry-cleaning services to
customers. Because Mark had established a sound accounting system to keep track of his daily transactions,
he was able to prepare complete and accurate financial statements showing his company’s progress and
financial position.
In order to move forward, Mark needs to review how financial data from his first month of operations
transitions into his second month of operations. It is important for Mark to make a smooth transition so he
can compare the financials from month to month, and continue on the right path toward growth. It will also
assure his investors and lenders that the company is operating as expected. So what does he need to do to
prepare for next month?
Figure 5.1 Mark reviews the financial data from Supreme Cleaners. (credit left: modification of “Numbers and
Finance” by “reynermedia”/Flickr, CC BY 2.0; credit right: modification of “Dry cleaned clothes (Unsplash)” by
“m0851”/Wikimedia Commons, CC0)
5
Completing the Accounting Cycle
	Chapter 4. The Adjustment Process
	Thought Provokers
	Chapter 5. Completing the Accounting Cycle
	Table of Contents
	Why It Matters*