Monopoly: An Analysis of Its Transactions.

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Monopoly: An Analysis of Its Transactions

Dana W. Edwards

Accounting 502

November 29, 2001


Monopoly: An Analysis of Its Transactions

In 1933, Charles Darrow lived in the period known as the Great Depression. During this period the United States was experiencing massive unemployment and misfortune.  This heightened period of economic ruin gave rise to the board game Monopoly which promised its players vicarious fame and fortune through characters such as a dog, a car, a horse, and many others.  In addition to its leisure value, Monopoly provides valuable lessons in business, specifically for those interested in Accounting principles.

The overall objective to Monopoly is to bankrupt all of your opponents.  To do this, a player needs to acquire multiple properties while maintaining a reasonable amount of cash to pay debts such as rent and fees.  The example company used in this analysis was Edwards Property Management (EPM) who managed properties for other companies and stayed at other properties in order to assess their competitive value.  The company goal was to own/rent certain monopolies and to manage others for companies.

To start the business, EPM borrowed $1500 from the local bank.  This money will be used to purchase property, pay taxes and general operating expenses.  These funds were acquired as a note payable at 10% interest.  The starting capital was recorded in the journal on January 1, 2001 and the game began.  In this scenario of game play, the four corners of the board represented the 4 quarters of the year for EPM.  Adjusting entries for the interest due to Monopoly Savings and Loan were journalized to the Interest Expense and Accrued Expenses accounts.  This was done to attempt to show the true value of EPM.  If we had not made these entries, we would have been overstating the value of the company.  The entries were tedious but proved to be helpful.  An example of one follows:

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Mar 31, 2001         Interest Expense                37.50

Accrued Expense                37.50

Description: First quarter’s interest on funds borrowed from Monopoly Savings and Loan for operating expenses.

In the first year, Edwards Property Management invested in a hotel on Connecticut Avenue along with several other properties including Tennessee Avenue, Ventnor Avenue, and Pacific Avenue.  These properties were bought with cash and intended to be rented by EPM for Rent Revenue. Their corresponding journal entries reflected their purchase with the balancing side of that entry to the Building-Hotel account and to the Hotel Property.  We made an across the board assumption that twenty percent of ...

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