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APPENDIX A Earnings, Comprehensive Earnings and Retained Earnings TOOTSIE ROLL INDUSTRIES, INC.
Comparative Analysis Problem: Tootsie Roll vs. Hershey FoodsThe financial statements of Hershey Foods are presented in Appendix B, following the financial statements for Tootsie Roll in Appendix A. InstructionsIdentify two accounts on Hershey Foods' balance sheet that provide evidence that Hershey uses accrual accounting. In each case, identify the income statement account that would be affected by the adjustment process. Identify two accounts on Tootsie Roll's balance sheet that provide evidence that Tootsie Roll uses accrual accounting (different from the two you listed for Hershey). In each case, identify the income statement account that would be affected by the adjustment process. Interpreting Financial StatementsLaser Recording Systems, founded in 1981, produces disks for use in the home market. The following is an excerpt from Laser Recording Systems' financial statements (all dollars in thousands). Laser Recording Systems Management Discussion Accrued liabilities increased to $1,642 at January 31, from $138 at the end of the previous fiscal year. Compensation and related accruals increased $195 due primarily to increases in accruals for severance, vacation, commissions, and relocation expenses. Accrued professional services increased by $137 primarily as a result of legal expenses related to several outstanding contractual disputes. Other expenses increased $35, of which $18 was for interest payable. InstructionsCan you tell from the discussion whether Laser Recording Systems has prepaid its legal expenses and is now making an adjustment to the asset account Prepaid Legal Expenses, or whether the company is handling the legal expense via an accrued expense adjustment? Identify each of the adjustments Laser Recording Systems is discussing as one of the four types of possible adjustments discussed in the chapter. How is net income ultimately affected by each of the adjustments? What journal entry did Laser Recording make to record the accrued interest?
