Management Development, Inc. |
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Beginner |
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Available.
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$9.00
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Management Development, Inc. (MDI) was a small consulting company that conducted workshops and conferences designed to further the state of the art of management in the corporate sector. It also published a newsletter several times a year describing its activities and containing several short essays on management techniques.
MDI had been in existence for over a decade. Its balance sheet as of December 31, 2001 is shown in Exhibit 1. During 2002, the following events occurred:
- Members were billed a total of $130,000 for their annual membership fees.
- The accounts receivable that were due at the end of 2001 were collected during 2002.
- The accrued salaries and wages that were owed at the end of 2001 were paid in 2002.
- Members paid a total of $120,000; therefore, as of December 31, 2002, $10,000 in fees were still owed.
- Salaries and wages totaling $90,000 were earned by employees. Of this amount, $82,500 had been paid in cash. Payday was the first Friday of each month, however. Therefore as of December 2002, $7,500 in salaries and wages for the month of December, although earned, had not yet been paid. Payment would not be made until January 2003.
- Depreciation in 2001 had totaled $5,500. This amount was expected to continue in 2002.
- In addition, a new microcomputer was purchased in early January 2002 for a total cost, delivered and installed of $8,000, which was paid in cash. It was expected to have a useful life of 5 years, at the end of which it could be sold for $1,000.
- Administrative and general expenses of $18,000 were incurred and paid during the year.
- Purchases of inventory (mainly publications but also office supplies) totaling $12,000 were made in cash during the year. At the end of the year, a physical inventory count showed that the inventory totaled $4,500.
- MDI was in a 40 percent tax bracket. . . .
Assignment
- Set up T accounts (including those for the income statement) and make the appropriate entries to them.
- Perform the closing process.
- Prepare a balance sheet as of December 31, 2002, and an income statement for 2002.
- What is your assessment of the financial condition of the MDI? What additional information would you like to have?
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