Can I please get the solutions to this ?

American Physical and Social Programs for Children, Inc.

Required

In addition to the requirements following each paragraph of information below you need to:

1.Discuss the company's selection of June 30 as its fiscal year-end and the apparent implications of such a decision. For example, do corporations have required year-ends?

Question 1 is a very difficult question to answer. That does not mean you do not have to answer it. Instead, you need to use all of your resources. One of those resources is Mr. Clifton. If you get stuck on this question do not hesitate to come see me. However, I expect you to have at least tried to answer it, otherwise you won't know what questions to ask when you come to me for assistance.

2.Be prepared to give the definition of an asset and a liability and the appropriate citation to support that definition. No, your intermediate textbook is not an appropriate source!

3.Any place where research is required you must be prepared to supply an authoritative source and demonstrate that you understand what the source says. Quoting verbatim sources without being able to explain what they mean is not sufficient.

4.Complete the worksheet provided (Exhibit 1) by inputting the necessary journal entries to put the financial statements on the accrual basis. Feel free to change the financial statements however you want. BUT REMEMBER, the balance sheet MUST balance and the income statement MUST articulate with the balance sheet. I will be checking these when you send them in next Tuesday.

Harvey Acker and Jane Clemens, child psychologists, have started and are operating American Physical and Social Programs for Children, Inc, a sport-oriented school-year and summer camp program for children. The program was started 1 year ago and has four operating locations. With assistance from their bookkeeper, Harvey and Jane have prepared a balance sheet as of June 30, 20X2 and an income statement for the year then ended, on a modified cash basis. (Exhibit 1)

Harvey and Jane have decided to seek the advice of an accountant and revealed the following about their operation:

1.The school-year programs run from mid-September to mid-June for 10-week periods and most customers prepay for each 10-week period. As of June 30, 20X2, customers owed $28,800, of which a $4,000 allowance would be adequate to cover uncollected accounts.

oJournal Entries are required to accrue the accounts receivable and bad debt expense. (These entries have been made for you in the spreadsheet template as an example of what to do in the spreadsheet.)

oNo Research is Required

2.The corporation borrowed $100,000 at 12% from a local bank with interest and principal payments due monthly for five years.

oNo Journal Entry Required

oResearch the required disclosures for Notes Payables

3.The agreement further provided for an additional payment of $80,000 due on July 1, 20X3, and that as consideration for such payment, Fun Time Properties and/or its shareholders would not compete in a similar business for five years within a distance of 200 miles of any American operating location.

Harvey and Jane believe that they made a fantastic deal with Fun Time Programs. It is their opinion that Fun Time mismanaged their business affairs and then sold out to them for practically nothing. They have been able to use basically the same programs and expand on them, enabling the company to be profitable immediately. They anticipate that the business will be very profitable for many years, and that the major money maker is from the operation of summer camps.

oJournal Entry may be required

Research to determine if you have an asset or not.

If you do have an asset, what kind of asset is it?

oIs it possible that it is goodwill?

oHow is goodwill treated according to GAAP?

If you don't have an asset, what do you do with the cost (the debit portion of the entry)?

Determine the value of the asset

It is NOT $80,000.

Record the journal entry if necessary

4.The organization costs to incorporate were $15,120 and were primarily for legal services.

oJournal Entry may be required

Research to determine if you have an asset or not.

Record the journal entry if necessary

5.The summer camp program runs from the last week of June through the last week of August. Each camper pays in advance. Camp deposits started coming in about the beginning of March and as of June 30, 20X2, camp receipts collected in advance but not earned totaled $224,000.

oJournal Entry is required to adjust for the Unearned Revenue

6.All operating facilities are leased. Summer camp programs are operated on local college campuses. The summer rents are 20% of the gross camp receipts and become due and payable to the lessor the month following the month that the facilities are actually used. Camp revenues collected and earned the last several days of June 20X2 totaled $85,400.

oJournal Entry is required to accrue the payable.

7.The combined federal and state income tax rate is 30% and the company has made no estimated tax payments as of year-end.

oJournal entry is required to accrue the income tax.

8.Program supplies on hand as of June 30, 20X2, total $17,700.

oJournal Entry may be required

Research to determine if you have an asset or not.

Record the journal entry if necessary

9.The only significant unpaid liabilities as of June 30, 20X2 are salaries of $16,000, employee payroll taxes of $3,500, and utilities of $2,000.

oJournal entries are required to accrue the above liabilities.

oNo research is required

10.Advertising costs paid during the year were incurred to gain market recognition, and normal advertising costs are expected to be approximately $30,000 per year.

oResearch whether advertising costs should be expensed or capitalized.

oCompare R&D costs to advertising costs. How are R&D costs treated according to GAAP? Why are they treated that way? Find a citation to support your reasoning.

oRecord a journal entry if necessary

11.American is presently being sued for gross negligence due to injuries sustained by a child while participating in a gymnastics program. It is the opinion of American's legal counsel that the case will be settled out of court at a cost of anywhere between $10,000 to $50,000 to the company. Harvey and Jane are worried about the unfavorable publicity that the suit could bring and would like to settle the matter as quickly as possible.

oResearch is required to determine what to do with this information, if anything.

oRecord a journal entry if necessary

oIf necessary, write up any notes to the financial statements that would pertain to this particular issue.