Interpreting Financial Reports: Analysis of an Asset Account
C4. the Walt Disney Company is engaged in the financing, production, and distribu- tion of motion pictures and television programming. In Disney’s 2011 annual report, the balance sheet contains an asset called “film and television costs.” Film and television costs, which consist of the costs associated with producing films and television programs less the amount expensed, were $4,357 million. The notes reveal that the amount of film and television costs expensed (amortized) during the year was $3,521 million. The amount spent for new film productions was $3,184 million.10
1. ConCept ▶ What are film and television costs, and why would they be classified as an asset?
2. Prepare T accounts to record the amount the company spent on new film and televi- sion production during the year (assume all expenditures are paid for in cash).
3. Prepare an adjusting entry in T account form to record the expense for film and tel- evision productions.
4. ConCept ▶ Suggest a method by which The Walt Disney Company might have determined the amount of the expense in 3 in accordance with the accrual accounting.