Essay on Darden Case Study

869 Words Aug 5th, 2010 4 Pages
a. To prepare accrual-based financial statements, a company must adjust its accounts. This is accomplished with periodic adjustments (also known as adjusting journal entries or accounting adjustments). For each account below, explain the types of transactions or events that necessitate periodic adjustments to the account for the typical company.

i. “Inventories, net.” – If a company purchases products to be resold, there is an adjustment on the balance sheet to reflect this net inventory.

ii. “Receivables, net.” – If a company sells a product on credit, they do not receive cash, and thus although in increase in retained earnings occurs, and increase
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Write a journal entry to record the cash inflow or outflow in 2007. Assume that the company recorded a single (summary) journal entry. i. “Purchases of land, buildings and equipment.” PPE assets are purchased, leading to a negative adjustment in Cash assets and a positive adjustment to liabilities. Liabilities 345.20 Cash 345.20 ii. “Dividends paid.” Assume that Darden recorded dividends as “payable” when they were declared. Dividend payment would decrease earned capital. Thus flow would be shown as this: DIV 65.70 Cash 65.70 iii. “Purchase of treasury stock.” – To purchase treasury stock, cash assets must be used. Thus, cash is reduced by 371.20, which is transferred to assets. Assets 371.2 Cash 371.2 iv. “Repayment of long-term debt.” – To repay long-term, debt cash assets must be used. Thus, cash is reduced by 153.3 and liabilities is increased by 153.3 Liabilities 153.3 Cash 153.3

f. Assume that the following is an excerpt from Darden’s unadjusted trial balance at May 27, 2007. The debits and credits indicated are the totals in each account before any accounting adjustments have been made for the year end. Prepare any required accounting adjustments for the year ending May 27, 2007. | Unadjusted | Adjustments | Adjusted | Account Title | Debit | Credit | Debit | Credit | Debit | Credit | Receivables, net | 48.5 |

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