1. Working Accounting Problems Example Go to Accounting Toolbox for Success Print the Martin Corp. problem Refer to it as you view this module

2. R O W E R R equirements O rganize W ork E valuate R eview

3. Requirements (1) Prepare journal entries (a)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 (1) Prepare journal entries (a)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

4. Requirements Cost and Matching Principles JE for Asset Acquisition Adjusting Entries Computations: Interest Straight Line Depreciation

5. 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? (2) How does this appear on the 4/30/X1 Balance Sheet and on the Income Statement for the year ended 4/30/X1?

6. Requirements Balance Sheet Accounts Balance Sheet Presentation Income Statement Accounts Income Statement Presentation

7. Requirements (3)Assume that the accountant does not make the adjusting entry for the accrual of interest. How does this error impact the financial statements? (3)Assume that the accountant does not make the adjusting entry for the accrual of interest. How does this error impact the financial statements?

8. Requirements Matching Principle Effects of errors on the Balance Sheet Effects of errors on the Income Statement

9. O rganize Facts Accounting Period: 5/1/X0 – 4/30/X1 Cost of Equipment: $100,000 Signed Note: $80,000, 1yr, 8% interest Purchase Date: 12/1/X0Paid $20,000

10. O rganize Facts No salvage value at the end of 5 years Straight Line Depreciation 5 year estimated life

11. Organize Watch for facts that are not needed $125,000 recent selling price Tax method of depreciation Cost Principle – record at amount paid Work with the financial method

12. 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

13. W ork – Requirement (1) (a)

14. W ork – Requirement (1) (b) $100,000/5 yrs = $20,000 depreciation per yr $20,000 X 5/12 $8,333 Round to the nearest dollar

15. W ork – Requirement (1) (b) $80,000 X.08 X 5/12 $2,667 Round to the nearest dollar

16. W ork – Requirement (2) Martin Corporation Balance Sheet April 30, X1 Assets Property, Plant and Equipment Assets Property, Plant and Equipment Equipment$100,000 Less Accumulated Depreciation (8,333) $ 91,667 Book Value or Carrying Value

17. W ork – Requirement (2) Martin Corporation Balance Sheet April 30, X1 Current Liabilities Interest Payable $2,667 Notes Payable $80,000

18. W ork – Requirement (2) Martin Corporation Income Statement For the Year Ended April 30, X1 Expenses Depreciation $8,333 Interest 2,667

19. W ork – Requirement (3) Net Income is too high because $2,667 of Interest Expense was not recorded Net Income is overstated by $2,667 Current Liabilities are understated by $2,667 Current Liabilities are too low because $2,667 of Interest Payable was not recorded

20. Evaluate Determine how to receive feedback Make corrections Learn from your mistakes Ask for clarification I am ready for the next chapter and the exam

21. Review Process Results Foundation Can you improve? Are you ready for the next assignment? Do you understand?

22. Working Accounting Problems You now have tools to help with: Efficiency Effectiveness