The financial statements of Jean Coutu are presented in Appendix B following the financial statements for Shoppers Drug Mart in Appendix A.

Instructions

(a) Shoppers Drug Mart has a current asset called Prepaid Expenses and Deposits reported on its balance sheet, as does Jean Coutu (called Prepaid Expenses). Explain what this account likely represents and whether it would likely require adjusting entries at year end. If so, identify the type of adjusting entry (prepayment or accrual) that would most likely be required and the income statement account most likely involved.

(b) Shoppers Drug Mart has a current liability called Income Taxes Payable reported on its balance sheet, as does Jean Coutu. Explain what this account likely represents and whether it would likely require adjusting entries at year end. If so, identify the type of adjusting entry (prepayment or accrual) that would most likely be required and the income statement account most likely involved.