Glencoe Accounting

Unit 6: Additional Accounting Topics

WebQuest Internet Project

Legislating a New Path for Accounting

TEACHER NOTES

In this project, students will report on the services of public accounting firms and how the Sarbanes-Oxley Act has impacted the operation of these companies. Since many public accounting firms are organized as partnerships, they will include information on the limited liability partnership and its advantages. Students will become more familiar with ways in which corporate ethics and investor confidence have changed since the legislation was passed.

The Guidance section of this WebQuest project contains questions that would be applicable for a whole-class discussion and for generating interdisciplinary connections. If you prefer, have each student research only one of the questions and add the information he or she finds to the final presentation of their WebQuest.

Several Web sites are included in the project to help students complete the WebQuest project. Encourage students to find additional sites and to share those sites with other students.

ANSWERS

  • In the absence of a defined plan in the partnership agreement, the law provides that net income or net loss be split equally. In this case, $43,000 is distributed to each partner’s capital account.
  • The sale of furniture at a loss would have affected Cash in Bank, Accumulated Depreciation—Furniture, the partners’ Capital accounts, and Equipment.
  • A code of ethics is intended to create a set of expectations regarding ethical behavior. Creation of such a code brings ethics to the forefront of company operations, financial reporting, and employee behavior.
  • CPAs should demonstrate a position of independence from an audit client. A financial investment in the client or serving as an officer of that company would violate the principle of independence.

CHAPTER ANSWERS

Chapter 27

  • Partners may elect to divide profits or losses in any way they see fit. It is best to include this determination in the partnership agreement. Partners might choose to split profits or losses equally, on a fractional share basis, or based on capital investments.

Chapter 28

  • Debit Cash in Bank for $22,000; Debit Partner A, Capital for $2,000; Debit Partner B, Capital for $2,000; Credit Merchandise Inventory for $26,000

Chapter 29

  • Integrity requires that accountants choose what is right and just over what is wrong. A spirit of ethical conduct must be upheld when dealing with issues that feel questionable.
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