The Walt Disney Company is engaged in the financing, production, and distribution of motion pictures and television programming. In Disney’s 2008 annual report, the balance sheet contained an asset called “film and television costs.” Film and television costs, which consist of the cost associated with producing films and television programs less the amount expensed, were $5,394,000,000. The estimated amount of film and television costs expensed (amortized) during the next year were $3,500,000,000. The amount estimated to be spent for new film productions was $2,900,000,000.

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 productions during 2010 (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 during 2009. Show the balance of the Film and Television Costs account at the end of the next year.

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.