The Walt Disney Company is engaged in the financing, production, and distribution of motion pictures and television programming. In Disney’s 2004 annual report, the balance sheet contains an asset called “film and television costs.” Film and television costs, which consist of the costs associated with producing films and television programs less the amount expensed, were

$5,938,000,000. The notes reveal that the amount of film and television costs expensed (amortized) during the year was $2,364,000,000. The amount spent for new film productions was $2,824,000,000.10 1. What are film and television costs, and why would they be classified as an asset?

2. Prepare an entry in T account form to record the amount the company spent on new film and television production during the year (assume all expenditures are paid for in cash).

3. Prepare an adjusting entry in T account form to record the expense for film and television productions.

4. Suggest a method by which The Walt Disney Company might have determined the amount of the expense in 3 in accordance with the matching rule.

Decision Analysis Using Excel Adjusting Entries, Divided Performance Evaluation, and Dividend Policy