Case Studies -- Financial Accounting

Case Study #1: The Accounting Cycle

Lyryx was created to provide students and instructors with high quality
assessment material, with content closely aligned to the text and critical thinking
as a learning objective.

The project was based on the well-established pedagogical premise that

students need to do homework to learn the material, and must be tested by
quizzes and other examinations to assess whether they did learn that material.

The functionality of the system is based on key principles of learning1:

1. High challenge, low threat
2. Immediate feedback
3. Rich environment
4. Opportunity for mastery

In addition to assignments in the form of Labs and Quizzes, Lyryx has created two
“Case Studies” as part of its Financial Accounting products, providing an
opportunity for an in-depth examination of a subject.

They are extended assignments involving a relatively complex scenario.

Successful completion is based on a comprehensive understanding of the
corresponding material and obtained by successfully completing several parts.
They can be used for course projects or even as part of examinations.

You will find in this document a short description of the first case study covering
the accounting cycle. The second case study relates to merchandising and is
described in a separate document.

All the best to you and your students,

Claude Laflamme, President

(403) 999-7524

1
See Tilly Jensen “Enhancing the critical thinking skills of first year business students”, May 2008.

#205, 301 -14 t h Street NW  Cal gar y, Albert a  Canada T2N 2A1
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Case Study #1: The Accounting Cycle

Case Study #1 consists of 8 parts, covering the monthly accounting cycle of a
consulting company. The information from each part is carried over to the next,
creating a large comprehensive-type question. Students must achieve 90% or
higher on each part in order to continue to the next part, though the parts can
be run as many times as necessary to achieve this.

The content covers the first five chapters of the textbook “Fundamental
Accounting Principles" by K. D. Larson and T. Jensen. It is available as an item
under Chapter 5 of the corresponding Lyryx product "Lyryx Interactive Financial
Accounting". It is also available in the corresponding Lyryx products "Lyryx
Assessment Financial Accounting" and in the standalone product "Lyryx
Accounting Cycle Review" also based on that text.

It is estimated that a typical student can complete this Case Study in

approximately six hours.

Each Case Study is randomly generated so no two students will get the same
version. The following examples will show one of these randomizations.

The Accounting Cycle case study begins with a description.

Linda Champion owns a small computer consulting business

called Elite Consulting. The company is organized as a sole
proprietorship and provides consulting services, computer
system installations, and custom program development. Elite
Consulting showed the following alphabetized post-closing trial

balance at November 30, 2009.

Note:
 Amortization on the building is $250 per month.
 Elite Consulting pays its employees $550 per day for each
work day (Monday-Friday) in the month.
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The 8 parts are as follows:

1) (75 marks) Journalize various transactions (20 in total) that occur during the
month. These transactions are presented in the form of source documents
(invoices, receipts, memos, etc.) that the student must analyze and extract
relevant info from. They include common activities such as: investments, paying
expenses, purchasing equipment, earning revenue, etc.
The students must analyze each of the source documents presented and
prepare journal entries using this information only.

A sample completed student work is as follows:

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2) (20 marks) Post journal entries from part 1 to ledgers and answer a few multiple
choice analysis questions pertaining to the entries posted to the ledgers. (Posting
of journal entries to ledgers is done automatically, similar to how an accounting
software package would post automatically.)

From the posting of journal entries, some typical questions in this part are as
follows:

a) In account #668:
o the $60 debit came from page G4 in the general journal.
o the $60 debit came from page G4 in the general ledger.
o the balance is $170 on December 31.
o $60 was posted from the general ledger on December 31.
o both (i) and (iii) are correct.
o both (ii) and (iv) are correct.
o all of (i), (ii) and (iii) are correct.
o all of (ii), (iii) and (iv) are correct.
o none of the above.

b) In account #174, the balance of $2,500 is the:

o cash balance in Accumulated amortization, building.
o ending balance in Accumulated amortization, building on November 30,
2009.
o total amortization recorded to date on the asset.
o amount posted from the general journal.
o beginning balance in Accumulated amortization, building.
o both (ii) and (iii) are correct.
o all of (i), (iii) and (iv) are correct.
o all of (i), (iii) and (v) are correct.
o all of (ii), (iii) and (v) are correct.

c) Posting is the process of:

o Transferring information from the general ledger to the general journal.
o Taking information in the journal and grouping it by account in the ledger.
o Summarizing information journalized in the ledger by account.
o None of the above.

d) What is the next step in the accounting cycle?

o Prepare financial statements
o Prepare a post-closing trial balance
o Prepare closing entries
o Prepare an adjusted trial balance
o Prepare an unadjusted trial balance
o Analyze and journalize transactions
o Prepare adjusting entries
o This is the last step
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3) (15 marks) Prepare an Unadjusted Trial Balance.

A sample completed student work is as follows:

4) (25 marks) Prepare adjusting entries related to amortization, salaries accrued,

revenue paid in advance and prepaid expenses. (adjusting entries are
automatically posted to ledgers for the student after this part.)
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5) (20 marks) Prepare an Adjusted Trial Balance.

A sample completed student work is as follows:
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6) (65 marks) Prepare Financial Statements (Income Statement, Balance Sheet

and Statement of Owners Equity).
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7) (15 marks) Prepare closing entries. (closing entries automatically posted to

ledgers for the student after this part.)

8) (15 marks) Prepare a Post-closing trial balance.

This is the last step of the “Accounting Cycle” Case Study.