P118 DQ10

Refer to adidas' 2014 consolidated statement of financial position in Appendix A. Identify one asset
account that requires adjustment before annual financial statements can be prepared. What could be the
effect on the consolidaed income statement if this asset account were not adjusted?

Account receivable. If adjustment isn't made, we will be understating the assets and equity value. The
net profit value will be affected as well
 Identify one asset
ed. What could be the
t adjusted?

d equity value. The

P122 E3-5
Determine the missing amount in each of these four separate situations a through d
a b c d
Supplies available-prior year-end (W) 300 1,600 1,360 1,375
Supplies purchased during the current year (X) 2,100 5,400 10,080 6,000
Supplies available-current year-end (Y) 750 5,700 1,840 800
Supplies expense for the current year (Z) 1,650 1,300 9,600 6,575

Equation: Z=W+X-Y
P130 P3-3B
Following in the unadjusted trial balance for Alcorn Institute as at December 31, 2015, which intially
financial position accounts and performs adjuesting entries annually. The Institute provides one-on
and offers extension training to groups in off-site locations. Shown after the trial balance are items

ALCORN INSTITUTE
Unadjusted Trial Balance
December 31,2015
Account Title Debit Cash
Cash 50,000
Account receivable 0
Teaching supplies 60,000
Prepaid insurance 18,000
Prepaid rent 2,600
Professional library 10,000
Accumulated depreciation-Professional library 1,500
Equipment 30,000
Accumulated depreciation-Equipment 16,000
Accounts payable 12,200
Salaries payable 0
Unearned training fees 27,600
Share capital 30,000
Retained earnings 23,500
Dividends 5,000
Tuition fees earned 105,000
Training fees earned 62,000
Depreciation expense- Professional library 0
Depreciation expense- Equipment 0
Salaries expense 43,200
Insurance expense 0
Rent expense 28,600
Teaching supplies expense 0
Advertising expense 18,000
Utilities 12,400
Totals 277,800 277,800

1 Prepaid T-accounts (representing the led

Cash
50,000
50,000

Accounts receivable
 0

Teaching supplies
60,000
60,000

Prepaid insurance
18,000
18,000

Preparid rent
2,600
2,600

Professional library
10,000
10,000

2 Prepare the necessary adjusting journal e

Assume that adjusting entires are made o

3
Update balances in the T-accounts for th

a. An analysis of the Institute's insurance po

expired
Prepaid Insurance
6,400
6,400

b. An inventory count shows that teaching s

end 2015 supplies
Teaching
60,000 57,500
2,500

c. Annual depreciation on the equipment is

Accumulated depreciation-Equipment
16,000
4,000
20,000

d. Annual depreciation on the professional

Accumulated depreciation-Professional library
1,500
2,000
3,500
 e. On November 1, the Institute agreed to d
immediately) for client. The contract calls
the first two months' fees in advance. Wh
Training Fees account was credited. The l
collected in 2016

Unearned training fees

9,200 27,600
18,400

f. On October 15,the Institute agreed to tea

immediately) to an individual for $2,200
class. The class started on October 15, bu
accruals are applied to the nearest half-m
half month accruals
Accounts receivable
5,500
5,500

g. The Institute's only employee is paid wee

salaries have accrued at the rate of $180
Salaries payable
540
540

h. The balance in the Prepaid Rent account

Prepaid rent
2,600 2,600
0

ALCORN INSTITUTE
Adjusted Trial Balance
December 31,2015
Account Title Debit Cash
Cash 50,000
Account receivable 5,500
Teaching supplies 2,500
Prepaid insurance 11,600
Prepaid rent 0
Professional library 10,000
Accumulated depreciation-Professional library 3,500
Equipment 30,000
Accumulated depreciation-Equipment 20,000
Accounts payable 12,200
Salaries payable 540
Unearned training fees 18,400
Share capital 30,000
Retained earnings 23,500
Dividends 5,000
Tuition fees earned 110,500
Training fees earned 71,200
Depreciation expense- Professional library 2,000
Depreciation expense- Equipment 4,000
Salaries expense 43,740
Insurance expense 6,400
Rent expense 31,200
Teaching supplies expense 57,500
Advertising expense 18,000
Utilities 12,400
Totals 289,840 289,840

4 Prepare the company's income statemen

year 2015, and prepare its statement of fi

Alcorn Institute
Income Statement
For Month Ended December 31,2015
Revenues:
Tution fees earned 110,500
Training fees earned 71,200
Total revenues 181,700

Expenses:
Depreciation expense- Professional library 2,000
Depreciation expense- Equipment 4,000
Salaries expense 43,740
Insurance expense 6,400
Rent expense 31,200
Teaching supplies expense 57,500
Advertising expense 18,000
Utilities 12,400
Total expense 175,240

Net profit 6,460

 Alcorn Institute
Statement of Changes in Equity
For Month Ended December 31,2015
Retained Total
Share Capital earnings Equity
Balance at December 1 30,000 23,500 53,500
Net profit 6,460 6,460
Less: Dividends 5,000 5,000
Balance at December 31 30,000 24,960 54,960

Alcorn Institute
Statement of Financial Position
For Month Ended December 31,2015
Assets
Cash 50,000
Account receivables 5,500
Teachin supplies 2,500
Prepaid insurance 11,600
Professional library 10,000
Accumulated depreciation-Professional library 3,500 6,500
Equipment 30,000
Accumulated depreciation-Equipment 20,000 10,000
Total assets 86,100

Liabilities and Equity

Accounts payable 12,200
Salaries payable 540
Unearned training fees 18,400
Total Liabilities 31,140

Share capital 30,000

Retained earnings 24,960
Total Equity 54,960
Total liabilities and equity 86,100
mber 31, 2015, which intially records prepaid expenses and unearned revenues in statement of
he Institute provides one-on-one training to individuals who pay tuition directly to the business
r the trial balance are items a through h that require adjusting entries as at December 31,2015.

counts (representing the ledger) with balances from the unadjusted trial balance.

ccumulated depreciation-Professional library Share capital Salaries expense

1,500 30,000 43,200
1,500 30,000 43,200

Equipment Retained earnings Rent expense

 30,000 23,500 28,600
30,000 23,500 28,600

Accumulated depreciation-Equipment Dividends Advertisement expense

16,000 5,000 18,000
16,000 5,000 18,000

Accounts payable Tuition fees earned Utilities expense

12,200 105,000 12,400
12,200 105,000 12,400

Salaries payable Training fees earned Insurance expense

0 62,000 0
62,000 Teaching supplies expense
Unearned training fees 0
27,600 Depreciation expense-Professional library
Depreciation expense-Equipment
27,600 0 0

necessary adjusting journal entries for items a through h,and post them to the T-accounts.
adjusting entires are made only at year-end

nces in the T-accounts for the adjusting entries and prepare an adjusted trial balance

f the Institute's insurance policies shows that $6,400 of coverage has General Journal Entries
Insurance Expense Date
6,400 December. 31
6,400

count shows that teaching supplies costing $2,500 are available at year-
Teaching Supplies Expense 31
57,500
57,500

eciation on the equipment is $4,000 31

depreciation-Equipment Depreciation expense-Equipment
16,000 4,000
4,000 4,000
20,000 31

eciation on the professional library is $2,000

eciation-Professional library Depreciation expense-Professional library
1,500 2,000 31
2,000 2,000
3,500
 r 1, the Institute agreed to do a special four-month course (starting 31
for client. The contract calls for a $4,600 monthly fee, and the client paid
months' fees in advance. When the cash was received, the Unearned
account was credited. The last two month's fees will be recored when
2016
31
Training fees earned
62,000
9,200
71,200 31

15,the Institute agreed to teach a four-month class (beginning

to an individual for $2,200 tuition per month payable at the end of the
ss started on October 15, but no payment has yet been received. (Alcorn's
applied to the nearest half-month; for example, October recognises one-
ccruals
Tuition fees earned
105,000
5,500
10,500

's only employee is paid weekly. As at the end of the year, three days'
accrued at the rate of $180 per day
Salaries expense
43,200
540
43,740

in the Prepaid Rent account reprents rent for December

Rent expense
28,600
2,600
31,200
company's income statement and statement of changes in equity for the
nd prepare its statement of financial position as at December 31,2015
eral Journal Entries
Account Titles and Explanation Debit Credit
Insurance Expense 6,400
Prepaid Insurance 6,400
Record part of the Insurance coverae has expired

Teaching Supplies Expense 57,500

Teaching supplies 57,500
Record the use of teaching supplies

Depreciation expense-Equipment 4,000

Accumulated depreciation-Equipment 4,000
Record yearly equipment depreciation

Depreciation expense-Professional library 2,000

Accumulated depreication-Professional library 2,000
Record yearly professional library depreciation

Unearned training fees 9,200

Training fees earned 9,200
Record earned training fees that was collected in advance
Account receivable 5,500
Tuition fees earned 5,500
Record earned tuition fees that has yet to be collected

Salaries expense 540

Salaries payable 540
Record three days' accrued salary

Rent expense 2,600

Prepaid rent 2,600
Record the used of the prepaid rent for the month of December
Key figures for recent two years of both adidas and Puma are as follows

adidas (EUR millions) Puma (EUR millions)

Key Figures Current Year Prior Year Current Year Prior Year
Net profit 490 787 64.1 5.3
Net sales 14,534 14,203 2,972.00 2,985.30

1 Compute profit margins for (a) adidas and (b) Puma for the two years of
data shown. Round the precents to one decimal place each

Profit Net profit

Equation: =
Margin Net sales

a) Net profit for adidas= 3.4 Current

5.5 Prior

b) Net profit for puma= 2.2 Current

0.2 Prior

2 Which company is more successful on the basis of profit margin? Explain

Comparing the profit margin of the current year for both companies,
adidas is more successful than Puma since its profit margin is at 3.4%
which is higher than Puma which is at 2.2%

Comparing the change in profit margin for both companies over the 2
years, Puma is more successful than adidas since Puma profit margin
raise by 2% while adidas profit margin dropped by 2.1%. Puma probably
did some changes to the company marketing strategy which sees itself
earning more than it did in the previous year.