UV7006
Jul. 29, 2015
Colorado & Utah Canyons Tour Company
Teaching Note
Summary
Ron Hopkins has just completed the first year of owning and operating his outdoor adventure tour
company, Colorado & Utah Canyons Tour Company (CUCTC). Like many entrepreneurs, he was drawn to the
venture by the nature of the business and its activities, and as such, he has only a vague sense of its financial
success by the end of the first year. His friend, Chris Norris, has agreed to use Hopkins’s unsophisticated and
loosely organized financial files to craft a balance sheet and an income statement for CUCTC’s first year of
operations. The information contained in those files is presented in the case, and students are cast in the role
of Norris.
Teaching Objectives and Possible Uses of the Case
This introductory financial accounting and reporting case has several learning objectives, including but not
limited to:
Introducing students to and providing them with practice opportunities related to the process of
depicting business events in accounting journal entries.
Familiarizing students with some of the basic terminology and underlying principles and purposes of
financial reporting.
Looking beyond completed business events in order to more comprehensively capture the information
needed for crafting a set of financial statements.
Experiencing the task and the success of building a set of financial statements from a collection of raw
financial files.
The case is suitable for any degree or nondegree program course in which an introduction to the basics of
financial accounting and reporting is needed. The case presumes either an associated reading (e.g., a textbook
chapter) assignment on the basic accounting process as background information or a preparatory presentation
by the instructor on that process. With either of those minimal preparations, the case should be successfully
doable by students and, depending on the breadth of learning objectives embraced by an instructor for this
case, provide a rich array of classroom discussion opportunities for either a single class (90 minutes in length)
or two shorter successive classes.
, Page 2 UV7006
Proposed Assignment Questions
Three appropriate assignment questions are presented at the end of the case. Instructors should feel free
to refine those as needed for their particular circumstances.
Analysis
1. Using the information presented in case Exhibit 1, prepare the appropriate journal entries. Note that for a specific event
that recurs several times during the year, one accounting journal entry for its total amount for that should be made.
The journal entries prompted by the information contained in case Exhibit 1 are shown in Table 1:
Table 1. Journal entries.
Case-Coded
Account Label/Description Debit Credit
Event #
Cash (A)1 $60,000 (inc)
1
Stock (OE) $60,000 (inc)
Equipment (A) $22,000
2
Cash (A) $22,000
Prepaid insurance (A) $9,000 (inc)
3
Cash (A) $9,000 (dec)
Retained earnings (insurance expense)(OE) $6,000 (dec)
Prepaid insurance (A) $6,000 (dec)
Retained earnings (legal expense)(OE)2 $2,000 (dec)
4
Cash (A) $2,000 (dec)
Vehicles (eight snowmobiles)(A) $50,000 (inc)
5 Cash (A) $20,000 (dec)
Note payable (L) $30,000 (inc)
Retained earnings (interest expense)(OE) $1,1003 (dec)
Cash (A) [from direct bank withdrawals] $1,100 (dec)
Retained earnings (contract labor expense)(OE) $52,000 (dec)
6
Cash (A) $52,000 (dec)
Cash (A) $165,600 (inc)
7 Retained earnings (revenue)(OE) $162,000 (inc)
Unearned revenue (L) $ 3,600 (inc)
1 (A) is used to designate an asset account, (L) is used to designate a liability account, and (OE) is used to designate an owners’ equity account. The
(inc) and (dec) notations are a Darden School of Business convention to explicitly signal an increase or a decrease to the (A), (L), or (OE) balance sheet
accounts.
2 At Darden, we record all revenues and expenses directly to retained earnings in order to highlight for students not just the earnings impact of such
events but also the balance sheet owners’ equity effect.
3 At a 4% annual interest rate on a $30,000 loan, the yearly interest charge is $1,200. Therefore, since the loan was originated on the first of February,
11 months of interest is $1,100.
Jul. 29, 2015
Colorado & Utah Canyons Tour Company
Teaching Note
Summary
Ron Hopkins has just completed the first year of owning and operating his outdoor adventure tour
company, Colorado & Utah Canyons Tour Company (CUCTC). Like many entrepreneurs, he was drawn to the
venture by the nature of the business and its activities, and as such, he has only a vague sense of its financial
success by the end of the first year. His friend, Chris Norris, has agreed to use Hopkins’s unsophisticated and
loosely organized financial files to craft a balance sheet and an income statement for CUCTC’s first year of
operations. The information contained in those files is presented in the case, and students are cast in the role
of Norris.
Teaching Objectives and Possible Uses of the Case
This introductory financial accounting and reporting case has several learning objectives, including but not
limited to:
Introducing students to and providing them with practice opportunities related to the process of
depicting business events in accounting journal entries.
Familiarizing students with some of the basic terminology and underlying principles and purposes of
financial reporting.
Looking beyond completed business events in order to more comprehensively capture the information
needed for crafting a set of financial statements.
Experiencing the task and the success of building a set of financial statements from a collection of raw
financial files.
The case is suitable for any degree or nondegree program course in which an introduction to the basics of
financial accounting and reporting is needed. The case presumes either an associated reading (e.g., a textbook
chapter) assignment on the basic accounting process as background information or a preparatory presentation
by the instructor on that process. With either of those minimal preparations, the case should be successfully
doable by students and, depending on the breadth of learning objectives embraced by an instructor for this
case, provide a rich array of classroom discussion opportunities for either a single class (90 minutes in length)
or two shorter successive classes.
, Page 2 UV7006
Proposed Assignment Questions
Three appropriate assignment questions are presented at the end of the case. Instructors should feel free
to refine those as needed for their particular circumstances.
Analysis
1. Using the information presented in case Exhibit 1, prepare the appropriate journal entries. Note that for a specific event
that recurs several times during the year, one accounting journal entry for its total amount for that should be made.
The journal entries prompted by the information contained in case Exhibit 1 are shown in Table 1:
Table 1. Journal entries.
Case-Coded
Account Label/Description Debit Credit
Event #
Cash (A)1 $60,000 (inc)
1
Stock (OE) $60,000 (inc)
Equipment (A) $22,000
2
Cash (A) $22,000
Prepaid insurance (A) $9,000 (inc)
3
Cash (A) $9,000 (dec)
Retained earnings (insurance expense)(OE) $6,000 (dec)
Prepaid insurance (A) $6,000 (dec)
Retained earnings (legal expense)(OE)2 $2,000 (dec)
4
Cash (A) $2,000 (dec)
Vehicles (eight snowmobiles)(A) $50,000 (inc)
5 Cash (A) $20,000 (dec)
Note payable (L) $30,000 (inc)
Retained earnings (interest expense)(OE) $1,1003 (dec)
Cash (A) [from direct bank withdrawals] $1,100 (dec)
Retained earnings (contract labor expense)(OE) $52,000 (dec)
6
Cash (A) $52,000 (dec)
Cash (A) $165,600 (inc)
7 Retained earnings (revenue)(OE) $162,000 (inc)
Unearned revenue (L) $ 3,600 (inc)
1 (A) is used to designate an asset account, (L) is used to designate a liability account, and (OE) is used to designate an owners’ equity account. The
(inc) and (dec) notations are a Darden School of Business convention to explicitly signal an increase or a decrease to the (A), (L), or (OE) balance sheet
accounts.
2 At Darden, we record all revenues and expenses directly to retained earnings in order to highlight for students not just the earnings impact of such
events but also the balance sheet owners’ equity effect.
3 At a 4% annual interest rate on a $30,000 loan, the yearly interest charge is $1,200. Therefore, since the loan was originated on the first of February,
11 months of interest is $1,100.
