Terrific Tennis Balls: A Manufacturing Inventories Exercise

Name: Terrific Tennis Balls: A Manufacturing Inventories Exercise
SKU: W28158_P

Ian Dunn, Raphael Bender Bennett

Product #:W28158_P

Supplier:Ivey

Discipline:Accounting

Setting:Canada, 2021

Details:Exercise (PDF) • 7 pages • 2022-04-13

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The owner of a tennis ball manufacturer was reviewing the company's financial performance for its third fiscal year. The bookkeeper had already recorded the fiscal 2020 cash transactions, but may have done so incorrectly. The owner recorded the opening balances, cash receipts, and cash disbursements to calculate the unadjusted trial balances for fiscal 2020. She started with the bookkeeper’s unadjusted trial balances and planned to use the balance sheet and the list of cash receipts and disbursements, if necessary. She would have to figure out where the bookkeeper posted each entry, determine whether it required an adjustment, and adjust accordingly.

Learning Objectives

This exercise is best positioned at the end of an introductory course in financial accounting to review manufacturing inventories and the accrual basis of accounting. The exercise would also be well placed at the beginning of an intermediate financial accounting course as a refresher for students.

This exercise is designed for students to apply their knowledge of financial accounting with a specific focus on manufacturing inventory and the accrual basis of accounting. Upon completion of this exercise, students will be able to

identify cash versus non-cash transactions;
understand how cash receipts and disbursements are posted and determine whether this is appropriate under the accrual basis of accounting;
post simple adjusting and reclassification entries;
correctly classify costs as being product costs (related to inventories) or period costs (not related to inventories); and
articulate the flow of value from raw materials through to finished goods using financial accounting.