Chapter 3

ADJUSTING ACCOUNTS AND

PREPARING FINANCIAL STATEMENTS..

PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
Winston Kwok, Ph.D., CA

Copyright © 2015 by McGraw-Hill Education (Asia). All rights reserved

 3-2

ADJUSTING THE ACCOUNTS

CONTENTS
 Concept of accruals and prepayment

 Assets vs. Expenses

 Adjusted trial balance and preparation of

Financial Statements based on service business

 Correction entries, reversing entries and closing

entries.
 RELATIONSHIP OF ASSETS – EXPENSES/INCOME - 3-3
LIABILITIES

Amount paid in Expenses Incurred

Advance before BUT NOT yet paid
expense is incurred

Assets Expense/Income Liabilities

(Statement of Financial (Income Statement) (Statement of Financial
Position) Position)

Paid in Insurance Expense Insurance Payable / Accrued Incurred but

Advance Prepaid Insurance Insurance unpaid
Paid in Salaries (Wages) Expense Salaries Payable / Accrued Incurred but
Advance Prepaid Salaries (Wages) Salaries
unpaid

Paid in Rent Expense Incurred but

Advance Prepaid Rent Rent Payable / Accrued Rent unpaid
Paid in Supplies Expense Incurred but
Advance
Supplies Supplies Payable unpaid
Paid in Utilities Expense Utilities Payable Incurred but
Prepaid Utilities unpaid
Advance Unearned Revenue /
Accrued Revenue (Fee Income) Revenue / Income
Revenue Received in
Earned but
Income
advance
(not yet
record,

Amount received
Revenue is earned but before revenue is
NOT yet received earned
 3-4

C1
THE ACCOUNTING PERIOD
 3-5

ACCRUAL BASIS VERSUS CASH BASIS

C2

Accrual Basis Cash Basis

Revenues are Revenues are
recognized when recognized when cash
earned and is received and
Expenses are Expenses are recorded
recognized when when cash is paid.
incurred.
Non-GAAP
 3-6

ACCRUAL BASIS VERSUS CASH BASIS

C2
FastForward paid $2,400 for a 24-month insurance
Example: policy beginning December 1, 2011.

2015.

Insurance Expenese 2015

Jan Feb Mar Apr

May Jun Jul Aug

Sep Oct Nov Dec

$2,400

On the cash basis, the entire $2,400 would be

recognized as insurance expense in 2015. No insurance
expense from this policy would be recognized in 2016 or
2017, periods covered by the policy.
 3-7

C2
ACCRUAL BASIS VERSUS CASH BASIS
On the accrual basis, $100 Insurance Expenese 2015
Jan Feb Mar Apr
of insurance expense is
recognized in 2015, $1,200 May Jun Jul Aug
in 2016, and $1,100 in
Sep Oct Nov Dec
2017. The expense is $100
matched with the periods
benefited by the insurance
coverage.
Year-end Year-end Year-end
Year 2015 2016 2017
Month ……… Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Insurance Expenese 2016 Insurance Expenese 2017

Jan Feb Mar Apr Jan Feb Mar Apr
$100 $100 $100 $100 $100 $100 $100 $100
May Jun Jul Aug May Jun Jul Aug
$100 $100 $100 $100 $100 $100 $100 $100
Sep Oct Nov Dec Sep Oct Nov Dec
$100 $100 $100 $100 $100 $100 $100 -
 3-8

ACCRUAL BASIS (MATCHING PRINCIPLE) 8

FastForward paid $2,400 for a 24-month insurance
Example: policy beginning December 1, 2011.

2015
Year-end Year-end Year-end
Year 2015 2016 2017
Month ……… Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

$100 $1,200 $1,100

$2,400

The accrual basis dictates that revenues be recognized

when earned and expenses be recognized when
incurred.

Expense Recognition or Matching Principle

A company must record its expenses incurred to
generate the revenue reported.
 3-9

C2 RECOGNIZING REVENUES & EXPENSES

Revenue Recognition Principle

We
We have
have delivered
delivered the
the
product to our customer,
so I think we should record
the
the revenue
revenue earned.
earned.

Revenues are
recognized (i.e.
Recorded) when
earned
 3 - 10

C2 RECOGNIZING REVENUES & EXPENSES

Revenue Recognition Principle

Matching Principle Now that we have

Summary recognized the revenue,
of Expenses
let’s see what expenses
Rent $1,000
we incurred to
Gasoline 500
Advertising 2,000 generate that revenue.
Salaries 3,000
Utilities 450
and . . . . ....
Expenses are
recognized when
incurred.
 3 - 11
ADJUSTING ACCOUNTS
C3
Expense Recognition or Matching Principle
Revenue Recognition Principle
A company must record its expenses incurred to
Recognize revenue when it is earned
generate the revenue reported.

An adjusting entry is recorded to bring an asset or

liability account balance to its proper amount.
Framework for Adjustments
Adjustments

Paid
Paid (or
(or received)
received) cash
cash before
before Paid
Paid (or
(or received)
received) cash
cash after
after
expense
expense (or(or revenue)
revenue) recognized
recognized expense
expense (or
(or revenue)
revenue) recognized
recognized

Prepaid
Prepaid Unearned
Unearned Accrued
Accrued Accrued
Accrued
(Deferred)
(Deferred) (Deferred)
(Deferred) expense
expense revenues
revenues
expenses*
expenses* revenues
revenues
The accrual basis dictates that revenues be
*including depreciation recognized when earned and expenses be
recognized when incurred.
 3 - 12
P1 PREPAID (DEFERRED) EXPENSES
Debit Prepaid Expense Credit Debit Cash Credit
2400 2400

Here
Here is
is the
the check
check
Resources paid for
for my
my 24-month
24-month
insurance
insurance policy.
policy.
for prior to
receiving the
actual benefits.

Adjustments
 3 - 13

P1
PREPAID INSURANCE
a
(a) On 12/1/15, FastForward paid $2,400 for insurance for
2-years (24-months, December 2015 through November
2017). FastForward recorded the expenditure as Prepaid
Insurance on 12/31/15.
What adjustment is required?

Date Journal Debit Credit

Dec. 31 Insurance Expense 100
Prepaid Insurance 100
To record first month's expired insurance

Prepaid Insurance 637 Insurance Expense 128

Dec. 1 2,400 Dec
Dec.3131 100100 Dec.
Dec 31 31 100100
Bal.
Bal. 2,300
2,300
 3 - 14

P1 SUPPLIES b
(b) During 2015, FastForward purchased $9,720 of supplies.
FastForward recorded the expenditures in the asset account,
“Supplies.” On December 31, 2015, a count of the supplies
indicated $8,670 on hand, so $1,050 of supplies were used
during December.
What adjustment is required?

Date Journal Debit Credit

Dec. 31 Supplies Expense 1,050
Supplies 1,050
To record supplie used during 2015

Supplies 126 Supplies Expense 652

Bought 9,720 DecDec.3131 1,050
1,050 Dec.
Dec 3131 1,050
1,050
________________ ________________
Bal. 8,670
Bal. 8,670
 3 - 15
P1 OTHER PREPAID EXPENSES
1.
1. Other
Other prepaid
prepaid expenses,
expenses, such
such as
as Prepaid
Prepaid Rent,
Rent, are
are accounted
accounted for for exactly
exactly asas
Insurance
Insurance and
and Supplies.
Supplies.
2.
2. We
We should
should note
note that
that some
some prepaid
prepaid expenses
expenses are
are both
both paid
paid for
for and
and fully
fully used
used up
up
within
within aa single
single period.
period.
3.
3. For
For example,
example, aa company
company maymay pay
pay monthly
monthly rent
rent on
on the
the first
first day
day ofof each
each month.
month.
This
This payment
payment creates
creates aa prepaid
prepaid expense
expense onon the
the first
first day
day of
of the
the month
month thatthat fully
fully
expires
expires by
by the
the end
end of
of the
the month.
month.
4.
4. In
In these
these special
special cases,
cases, we
we can
can record
record the
the cash
cash paid
paid with
with aa debit
debit to
to the
the expense
expense
account
account instead
instead of
of an
an asset
asset account.
account.

Aug Sep Sep Oct JOURNAL

31 1 2 3 … … … 29 30 1 Account Debit Credit
Rent Expense $$$
Rental period coverage
Cash $$$
$$$
Pay

Aug Sep Sep Oct JOURNAL

31 1 2 3 … … … 29 30 1 Account Debit Credit
Rental period coverage Prepaid rent $$$
$$$ Cash $$$
Pay
 3 - 16

P1
DEPRECIATION ( 折旧 )
Depreciation is the process of allocating the
cost of a plant asset over its useful life in a
systematic and rational manner.

Straight-Line Asset Cost - Residual Value

Depreciation =
Expense Useful Life
 3 - 17

P1
DEPRECIATION c

On December 1, 2015, FastForward purchased

equipment for $26,000 cash. The equipment has
an estimated useful life of four years (48 months)
and FastForward expects to sell the equipment at
the end of its life for $8,000 cash.
(c) Let’s record depreciation expense for the
month ended December 31, 2015.

Dec. 2015 $26,000 - $8,000

Depreciation = = $375 per month
Expense 48 months
 3 - 18

DEPRECIATION
P1
Date Journal Debit Credit
Dec.31 Depreciation Expense 375
Accumulated Deprecition - Equipment 375
To record monthly equipment depreciation

Contra asset account

Debit Equipment Credit
Dec 1 26,000

Debit Accumulated Depreciation Credit

Dec 31 375

Debit Depreciation (Exp.) Credit

Dec 31 375
 3 - 19

DEPRECIATION
P1

FastForward
Partial Statement of Financial Position
At December 31, 2015 Equipment
Equipment is
is shown
shown net
net
Assets of
of accumulated
accumulated
Cash depreciation.
depreciation.
.
Equipment $ 26,000
Accumulated depreciation (375) 25,625
.
. $
Total Assets

Debit Equipment Credit

Dec 1 26,000

Debit Accumulated Depreciation Credit

Dec 31 375
 3 - 20

UNEARNED (DEFERRED) REVENUES

P1

Paid in advance $ We
We will
will apply
apply this
this cash
cash
Cash received in $$$ you
you gave
gave usus towards
towards
advance of providing 预付顾问费 your
your total
total consulting
consulting fees.
fees.
products or services.

$$$$
 3 - 21

UNEARNED (DEFERRED) REVENUES

P1

On December 26, 2015, FastForward agrees to

provide consulting services to a client for a fixed fee
of $3,000 for 60 days. On this date, the client pays
the entire consulting fee in advance. FastForward
makes the following entry:

Dec. 26 Cash 3,000

Unearned Revenue 3,000
Consulting fees received in advance

Unearned Revenue
Dec. 26 3,000
 3 - 22
UNEARNED (DEFERRED) REVENUES d
P1

(d) On December 31, FastForward earns 5-days of

consulting fees. Each day that passes results in
consulting fees of $50 ($3,000 ÷ 60), so FastForward
earned ($50 × 5 days) $250.

Dec. 31 Unearned Revenue 250

Consulting Revenue 250
To recognize 5-days of consulting fees

Unearned Revenue Consulting Revenue

Dec
Dec 31 31 250250 Dec 26 3,000 Dec.
Dec 3131 250
250
________________
Bal
Bal. 2,750
2,750
 3 - 23

ACCRUED EXPENSES
P1
We’re
We’re about
about one-half
one-half
done with this job and
Costs
Costs incurred
incurred in
in Accrued Expenses
want to be paid for
预提费用
aa period
period that
that are
are our work!
both
both unpaid
unpaid and
and
unrecorded.
unrecorded.
 3 - 24

ACCRUED EXPENSES 24

Costs
Costs incurred
incurred in
in aa period
period that
that are
are
both
both unpaid
unpaid and
and unrecorded.
unrecorded.
Monthly staff salary is $5,000 and paid on the 5 th day of following month.

Staff have worked Pay to staff

Month-end Month-end Salary Month-end
Jul Aug Aug Sep Pay date
1 2 3 4 5 ….. ….. ….. ….. 29 30 31 1 2 3 4 5 ….. ….. ….. ….. 29 30

Adjustment at month end:

Accrued salary $5,000
Date Account Title and Explanation PR Debit Credit
Aug 31 Salaries Expenses   5,000  
  Salaries Payable   5,000
  Accrued Salaries for August    
       
 3 - 25

P1 ACCRUED SALARIES EXPENSES

FastForward’s
FastForward’s employee
employee earns
earns $70
$70 per
per day
day and
and is is paid
paid every
every two
two
weeks
weeks on
on Friday.
Friday. Year-end,
Year-end, 12/31/15,
12/31/15, falls
falls on
on aa Wednesday.
Wednesday. The The last
last
payday
payday of
of 2015,
2015, is
is Friday,
Friday, 12/26/15.
12/26/15. From
From 12/26
12/26 until
until year-end
year-end isis three
three
working
working days.
days. The
The employee
employee has
has earned
earned salaries
salaries of
of $210
$210 for
for Monday
Monday
through
through Wednesday.
Wednesday. TheyThey will
will not
not be
be paid
paid until
until the
the next
next Friday.
Friday.

2015 December 2016 January

 3 - 26

ACCRUED SALARIES EXPENSES

P1 e

(e) FastForward’s employee has earned but not been paid

on December 31, 2015, $210.

Dec. 31 Salaries Expense 210

Salaries Payable 210
To accrue 3 days' salary (3 x $70)

Salaries Expense Salaries Payable

Dec.12 700 Dec. 31
Dec 31 210
210
Dec.26 700
Dec.
Dec 3131 210210
Bal. 1,610
 3 - 27

P1 FUTURE PAYMENT OF
ACCRUED EXPENSES
On January 9, 2016, FastForward will pay the payroll for
the two weeks from December 26, 2015 through January
9, 2016. Here is the journal entry for the payroll:

Jan 9 Salaries Payable (3 days @ $70) 210

Salaries Expense (7 days @ $70) 490
Cash (10 days @ $70) 700
P aid two-we e k s alary

Salaries Expense Salaries Payable

Dec.12 700 Dec. 31 210
2015

Dec.26 700 Jan 9 210 Bal. 210

Dec. 31 210
Bal. 1,610 Cash
2016

Jan 9 490 Bal. XXX Jan 9 700

 3 - 28

ACCRUED INTEREST EXPENSES

P1 ?
FastForward
FastForward borrowed
borrowed $6,000
$6,000 from
from First
First National
National Bank
Bank on
on
December
December 1, 1, 2015.
2015. The
The note
note bears
bears interest
interest at
at the
the annual
annual
rate
rate of
of 6%
6% and
and is
is due
due to to be
be repaid
repaid in
in one
one year.
year. Let’s
Let’s accrue
accrue
interest
interest for
for the
the month
month ended
ended 12/31/15.
12/31/15.

Dec. 31 Interest Expense 30

Interest Payable 30
To accrue interest ($6,000 × 6% × 30/360)

Interest Expense Interest Payable

Dec. 31 30 Dec. 31 30
 3 - 29

P1 ACCRUED REVENUES
Revenues earned Yes,
Yes, I’ve
I’ve completed
completed youryour
in a period that consulting
consulting job,
job, but
but have
have not
not
had
had time
time to
to bill
bill you
you yet.
yet.
are both
unrecorded and not
yet received.
 3 - 30

P1
ACCRUED SERVICE REVENUE f
(f)
(f) On
On December
December 12,12, 2015,
2015, FastForward
FastForward agrees
agrees to to render
render
consulting
consulting services
services under
under aa 30-day
30-day fixed
fixed fee
fee contract
contract for for
$2,700
$2,700 ($90
($90 per
per day).
day). All
All services
services are
are to
to be
be completed
completed by by
January
January 10,
10, 2016,
2016, when
when the
the client
client will
will pay
pay in
in full.
full.
Dec Dec Jan
1 2 … 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 1 2 3 4 5 6 7 8 9 10 11
90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90

$1,800 $900

$2,700

Dec. 31 Accounts Receivable 1,800

Consulting Revenue 1,800
To accrue revenue (20-days @ $90 per day)

Accounts Receivable Consulting Revenue

Other receivables Other revenues
1,900 Receipts 1,900 6,050
Dec 31
Dec. 31 1,800
1,800 Dec 31
Dec. 31 1,800
1,800
Bal. 1,800 Bal . 7,850
 FUTURE RECEIPT OF SERVICE 3 - 31

P1 REVENUES
On
On January
January 10,
10, 2016,
2016, FastForward
FastForward completed
completed itsits
obligation
obligation under
under the
the consulting
consulting contract.
contract. The
The client
client was
was
billed
billed $2,700
$2,700 and
and FastForward
FastForward received
received $2,700
$2,700 in
in cash.
cash.
Dec Dec Jan
1 2 … 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 1 2 3 4 5 6 7 8 9 10 11
90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90

$1,800 $900
Jan 10 Cash 2,700
Accounts Receivable 1,800 Revenue in January
Consulting Revenue 900 10 days @ $90 = $900
T o re c ord c om p le tion of c on trac t an d c as h c olle c tion
Cash
Accounts Receivable Bal. XXX
Other receivables Jan 10 2,700
2015

1,900 Receipts 1,900

Dec. 31 1,800 Consulting Revenue
Bal. 1,800
Bal. 1,800 Jan 10 1,800 Jan 10 900
2016
 3 - 32

A1 LINKS TO FINANCIAL STATEMENTS

 3 - 33
33
ACCRUAL BASIS (MATCHING PRINCIPLE)
FastForward paid $2,400 for a 24-month insurance
Example: policy beginning December 1, 2011.

2015
Year-end Year-end Year-end
Year 2015 2016 2017
Month ……… Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

$100 $1,200 $1,100

$2,400
 3 - 34
REASON FOR PERIOD END ADJUSTMENT
On
On 12/1/15,
12/1/15, FastForward
FastForward paid
paid $2,400
$2,400 for
for insurance
insurance for
for 2-years
2-years (24-months,
(24-months, December
December 2015
2015 through
through
November
November 2017).
2017). FastForward
FastForward recorded
recorded thethe expenditure
expenditure as
as Prepaid
Prepaid Insurance
Insurance on
on 12/31/15.
12/31/15.

Without
Without adjustment
adjustment on
on 31
31 Dec:
Dec:
Asset
Asset overstated,
overstated, Equity
Equity understated,
understated, Expenses
Expenses understated
understated
Prepaid Insurance 637 Insurance Expense 128
Dec. 1 2,400 Dec. 31 100 Dec.
Dec 31 31 Nil100
Bal. 2,300

---------------------------------------------------------------------------------------------------------

Period
Period End
End Adjustment
Adjustment on
on 31
31 Dec
Dec is
is required
required based
based on
on accrual
accrual accounting
accounting

Dec. 31 Insurance Expense 100

Prepaid Insurance 100
To record first month's expired insurance

Prepaid Insurance 637 Insurance Expense 128

Dec. 1 2,400 Dec
Dec.3131 100100 Dec.
Dec 31 31 100100
Bal.
Bal. 2,300
2,300
 3 - 35

P2 FastForward - Trial Balance - December 31, 2015

Unadjusted Adjusted
Trial Balance Adjustments Trial Balance

First, the
initial
unadjusted
amounts are
added to the
worksheet.
 3 - 36

P 2
FastForward - Trial Balance - December 31, 2015

Unadjusted Adjusted
Trial Balance Adjustments Trial Balance

Next,
FastForward’s
adjustments
are added.
 3 - 37

P 2 FastForward – Adjusted Trial Balance - December 31, 2015

Unadjusted Adjusted
Trial Balance Adjustments Trial Balance
 3 - 39

P 3

PREPARING FINANCIAL STATEMENTS

Let’s use FastForward’s adjusted trial balance to
prepare the company’s financial statements.
 3 - 40

P 3
1. PREPARE INCOME STATEMENT

Adjsuted
Trial Balance
No. Account Dr. Cr.
FastForward
101 Cash 4,350 Income Statement
106 Accounts receivable 1,800 For the month ended 31 December 2015
126 Supplies 8,670
128 Prepaid insurance 2,300 Revenue:
167 Equipment 26,000 Consulting revenue $7,850
209 Accumulated depreciation - Equip. 375 Rental revenue 300
201 Accounts payable 6,200 8,150
229 Salaries payable 210 Operating expenses:
236 Unearned consulting revenue 2,750 Depr. Expense - Equipment $ (375)
301 C. Taylor, Capital 30,000 Salaries expense (1,610)
302 C. Taylor, Withdrawals 200 Insurance expense (100)
403 Consulting revenue 6,050
Rent expense (1,000)
Supplies expense (1,050)
1,800
406 Rental revenue 300 Utilities expense (230)
(4,365)
612 Depreciation expense - Equip. 375
Net Profit 3,785
622 Salaries expense 1,610
637 Insureance expense 100
640 Rent expense 1,000
652 Supplies expense 1,050
690 Utilities expense 230
Totals 47,685 47,685
Profit Margin: 46.4%
 2. PREPARE STATEMENT
3 - 41

P 3
OF CHANGES IN EQUITY
FastForward
Income Statement
For the Month Ended December 31, 2015
Revenues: Note: Net profit from the Income
Consulting revenue $ 7,850 Statement carries to the Statement of
Rental revenue 300
Operating expenses:
Changes in Equity.
Depr. expense - Equip. $ (375)
Salaries expense (1,610)
Insurance expense (100)
Rent expense (1,000) FastForward
Supplies expense (1,050)
Statement of Changes in Equity
Utilities expense (230)
Total expenses (4,365) For the Month Ended December 31, 2015
Net profit $ 3,785
C. Taylor, Capital 12/1/15 $ -0-
Investment by owner $ 30,000
Net profit 3,785 33,785
Total 33,785
Withdrawal by owner (200)
C. Taylor, Capital 12/31/15 $ 33,585
 3 - 42

3. PREPARE STATEMENT OF FINANCIAL POSITION

Adjsuted
Trial Balance
No. Account Dr. Cr.
101 Cash 4,350
106 Accounts receivable 1,800
126 Supplies 8,670
128 Prepaid insurance 2,300
167 Equipment 26,000
FastForward
209 Accumulated depreciation - Equip. 375
Statement of Financial Position
201 Accounts payable 6,200
31 December 2015
229 Salaries payable 210
236 Unearned consulting revenue 2,750
Assets
301 C. Taylor, Capital 30,000
Cash $ 4,350
302 C. Taylor, Withdrawals 200 Accounts Receivable 1,800
403 Consulting revenue 6,050 Supplies 8,670
1,800 Prepaid Insurance 2,300
406 Rental revenue 300 Equipment $ 26,000
612 Depreciation expense - Equip. 375 Accumulated Depreciation (375) 25,625
622 Salaries expense 1,610 Total Assets $ 42,745
637 Insureance expense 100
640 Rent expense 1,000 Liabilities
652 Supplies expense 1,050 Accounts Payable 6,200
690 Utilities expense 230 Salaries Payable 210
Totals 47,685 47,685 Unearned Revenue 2,750
Total Liabilites 9,160

FastForward Equity
Statement of Changes in Equity
C.Taylor Capital 33,585
For the Month Ended December 31, 2015 Total Liabilities and Equity $ 42,745

C. Taylor, Capital 12/1/15 $ -0-

Investment by owner $ 30,000
Net profit 3,785 33,785
Total 33,785
Withdrawal by owner (200)
C. Taylor, Capital 12/31/15 $ 33,585
 3 - 43

A2
PROFIT MARGIN

The profit margin ratio measures the company’s

net profit to net sales.
Profit Net Profit
=
Margin Net Sales

Adidas
 3 - 44

END OF CHAPTER 3