FinancialAccounting-OP_YioY6nY-75

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PB13. 5.3 Using the following Balance Sheet summary information, calculate for the two years presented:
A. working capital
B. current ratio
PB14. 5.3 Using the following Balance Sheet summary information, calculate for the two years presented:
A. working capital
B. current ratio
PB15. 5.3 Using the following account balances, calculate for the two years presented:
A. working capital
B. current ratio
PB16. 5.4 From the following Company S adjusted trial balance, prepare the following:
A. Income Statement
B. Retained Earnings Statement
C. Balance Sheet (simple—unclassified)
D. Closing journal entries
E. Post-Closing Trial Balance
Chapter 5 Completing the Accounting Cycle 361
Thought Provokers
TP1. 5.1 Assume 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.
TP2. 5.1 Search 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:
A. 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?
B. 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.
TP3. 5.1 Assume 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:
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.
362 Chapter 5 Completing the Accounting Cycle
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
TP4. 5.2 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 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.
TP5. 5.3 Search 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.
Chapter 5 Completing the Accounting Cycle 363
364 Chapter 5 Completing the Accounting Cycle
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter Outline
6.1 Compare and Contrast Merchandising versus Service Activities and Transactions
6.2 Compare and Contrast Perpetual versus Periodic Inventory Systems
6.3 Analyze and Record Transactions for Merchandise Purchases Using the Perpetual Inventory System
6.4 Analyze and Record Transactions for the Sale of Merchandise Using the Perpetual Inventory System
6.5 Discuss and Record Transactions Applying the Two Commonly Used Freight-In Methods
6.6 Describe and Prepare Multi-Step and Simple Income Statements for Merchandising Companies
6.7 Appendix: Analyze and Record Transactions for Merchandise Purchases and Sales Using the Periodic
Inventory System
Why It Matters
Jason and his brother James own a small business called J&J Games, specializing in the sale of video games and
accessories. They purchase their merchandise from a Marcus Electronics manufacturer and sell directly to
consumers.
When J&J Games (J&J) purchases merchandise from Marcus, they establish a contract detailing purchase costs,
payment terms, and shipping charges. It is important to establish this contract so that J&J and Marcus
understand the inventory responsibilities of each party. J&J Games typically does not pay with cash
immediately and is given an option for delayed payment with the possibility of a discount for early payment.
The delayed payment helps continue the strong relationship between the two parties, but the option for early
Figure 6.1 J&J Games. Proper recognition of merchandising transactions gives management a clear inventory
picture to make informed business decisions. (credit: modification of “Video game retail store, consumerism at
its finest” by Bas de Reuver/Flickr, CC BY 2.0)
6
Merchandising Transactions
	Chapter 5. Completing the Accounting Cycle
	Thought Provokers
	Chapter 6. Merchandising Transactions
	Table of Contents
	Why It Matters*