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3 Agree with Cecere? Agree with Seda? Best Concept a. Explanation: b. Explanation: c. Explanation: d. Explanation:
4 Question 2 (15 marks) Anna Heatherway is a famous actress who primarily appears in feature films and commercials. Her new accountant has come to you, an aspiring accounting student, for help with her accounts for the year-end of 2015. Ignore income tax. REQUIRED: Please help Anna’s new accountant prepare the adjusting/correcting entrieson December 31, 2015. Round to the nearest half-month. No explanation is necessary. The following is the information provided in the ledger accounts at the end of 2015 before adjustments: Movies Revenue $8,800,000 Book Revenue 1,500,000 Assistant Salaries Expense 200,000 Depreciation of Beverly Hills Mansion 120,000 Depreciation of Pink Ferrari 30,000 Lawsuit Gain on Suing Paparazzi 40,000 Advertising Expense 15,000 Transportation Expense 110,000 Interest Income 98,000 Rental Revenue 60,000 Other Operating Expense 180,000 Additional information: 1.Anna has started shooting a new movie, “Internship 2”, for $5 million on October 15, 2015. She is expected to finish shooting this movie on March 15, 2016. She received an upfront payment of $2 million on October 15, 2015 and the remainder after she finishes shooting the movie. Her accountant appropriately recorded the upfront payment on October 15, 2015 but no entryhas been recorded at the year-end. 2.Anna’s pink Ferrari had an original cost of $150,000 with useful life of five years and no residual value. She has been using straight-line deprecation method since she bought the car at the beginning of 2014. Given her recent unpopularity with the press, some crazy fans have vandalized her automobile at the beginning of the current year and the revised total useful life has been reduced to four years. The current reported depreciation expense has not reflected this change because the new accountant does not know how to account for this new situation. 3.Because of her negative reputation in recent years, Anna took a chance to turn this into a business opportunity by writing a book titled “I am beautiful and smart and I won an Oscar so why do people hate me?” She released the book on June 30, 2015 with an initial order of 40,000 books at a cost of $10/book. She re-ordered for another shipment of 30,000 books at the same unit cost on September 15, 2015. The book is sold at a retail price of $30/book. The accountant has been using the periodic inventory system with the use of the “purchase” account to keep track of the purchase of inventory throughout the year. No journal entryfor cost of goods sold has been recorded at the year-end. 4.

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