Académique Documents
Professionnel Documents
Culture Documents
Accounting in Action
ASSIGNMENT CLASSIFICATION TABLE
Brief
Exercises
A
Problems
B
Problems
5, 6,
7, 11
1A, 2A,
4A
1B, 2B,
4B
6, 7, 8, 11
1A, 2A,
4A, 5A
1B, 2B,
4B, 5B
9, 10, 12,
13, 14, 15,
16, 17
2A, 3A,
4A, 5A
2B, 3B,
4B, 5B
Study Objectives
Questions
Do It!
Exercises
1.
Explain what
accounting is.
1, 2, 5
1, 2, 4
2.
3, 4
3.
4.
Explain accounting
standards and the
measurement principles.
6, 7
5.
8, 9, 10, 11
6.
12, 13, 14
1, 2, 3,
4, 5
7.
15, 16,
17, 19
6, 7, 8, 9
8.
18, 20, 21
22, 23
10, 11
1-1
1-2
Description
Difficulty
Level
Time Allotted
(min.)
1A
Moderate
4050
2A
Moderate
5060
3A
Moderate
5060
4A
Moderate
4050
5A
Moderate
4050
1B
Moderate
4050
2B
Moderate
5060
3B
Moderate
5060
4B
Moderate
4050
5B
Moderate
4050
WEYGANDT IFRS 1E
CHAPTER 1
ACCOUNTING IN ACTION
Number
SO
BT
Difficulty
BE1
AP
Simple
24
BE2
AP
Simple
35
BE3
AP
Moderate
46
BE4
AP
Moderate
46
BE5
Simple
24
BE6
Simple
24
BE7
Simple
24
BE8
Simple
24
BE9
Simple
12
BE10
AP
Simple
35
BE11
Simple
24
DI1
1, 2, 4
Simple
24
DI2
Simple
24
DI3
AP
Simple
68
DI4
AP
Moderate
810
EX1
Moderate
57
EX2
Simple
68
EX3
Moderate
68
EX4
4, 5
Moderate
68
EX5
Simple
46
EX6
6, 7
Simple
68
EX7
6, 7
Simple
46
EX8
AP
Moderate
1215
EX9
AP
Simple
1215
EX10
AP
Moderate
810
EX11
6, 7
AP
Moderate
68
EX12
AP
Simple
810
EX13
AN
Simple
810
EX14
AP
Simple
1012
EX15
AP
Simple
68
EX16
AP
Moderate
68
EX17
AP
Moderate
810
Time (min.)
1-3
SO
BT
Difficulty
P1A
6, 7
AP
Moderate
4050
P2A
68
AP
Moderate
5060
P3A
AP
Moderate
5060
P4A
68
AP
Moderate
4050
P5A
7, 8
AP
Moderate
4050
P1B
6, 7
AP
Moderate
4050
P2B
68
AP
Moderate
5060
P3B
AP
Moderate
5060
P4B
68
AP
Moderate
4050
P5B
7, 8
AP
Moderate
4050
BYP1
AN
Simple
1015
BYP2
AN, E
Simple
1015
BYP3
C, AN
Simple
1520
BYP4
Moderate
1520
BYP5
Simple
1215
BYP6
Simple
1012
1-4
Time (min.)
Study Objective
Knowledge Comprehension
DI1-1
Q1-1
Q1-2
Q1-5
E1-1
DI1-1
Q1-3
Q1-4
E1-2
Application
Analysis
Synthesis
Evaluation
E1-3
Q1-7
DI1-1
Q1-6
E1-4
Q1-8
Q1-9
Q1-10
Q1-11
E1-4
Q1-11
Q1-12
Q1-13
DI1-2
BE1-5
Q1-14
E1-5
E1-6
E1-7
Q1-15
Q1-16
Q1-17
Q1-19
BE1-6
BE1-7
BE1-8
BE1-9
E1-6
E1-7
Q1-18
Q1-20
BE1-11
BE1-1
BE1-2
BE1-3
BE1-4
E1-11
P1-1A
P1-2A
P1-4A
P1-1B
P1-2B
P1-4B
DI1-3
E1-8
E1-11
P1-1A
P1-2A
P1-4A
P1-5A
P1-1B
P1-2B
P1-4B
P1-5B
Q1-21
Q1-22
Q1-23
BE1-10
DI1-4
E1-9
E1-10
E1-12
E1-14
E1-15
E1-16
E1-17
P1-2A
P1-3A
P1-4A
P1-5A
P1-2B
P1-3B
P1-4B
P1-5B
E1-13
Financial Reporting
Comparative Analysis
1-5
Comparative Analysis
Decision Making Across
the Organization
Communication Activity
Ethics Case
Correlation Chart between Blooms Taxonomy, Study Objectives and End-of-Chapter Exercises and Problems
ANSWERS TO QUESTIONS
1.
Yes, this is correct. Virtually every organization and person in our society uses accounting
information. Businesses, investors, creditors, government agencies, and not-for-profit organizations
must use accounting information to operate effectively.
2.
Accounting is the process of identifying, recording, and communicating the economic events of
an organization to interested users of the information. The first step of the accounting process is
therefore to identify economic events that are relevant to a particular business. Once identified
and measured, the events are recorded to provide a history of the financial activities of the
organization. Recording consists of keeping a chronological diary of these measured events in an
orderly and systematic manner. The information is communicated through the preparation and
distribution of accounting reports, the most common of which are called financial statements.
A vital element in the communication process is the accountants ability and responsibility to
analyze and interpret the reported information.
3.
(a) Internal users are those who plan, organize, and run the business and therefore are officers
and other decision makers.
(b) To assist management, accounting provides internal reports. Examples include financial
comparisons of operating alternatives, projections of income from new sales campaigns,
and forecasts of cash needs for the next year.
4.
(a) Investors (owners) use accounting information to make decisions to buy, hold, or sell shares.
(b) Creditors use accounting information to evaluate the risks of granting credit or lending money.
5.
Bookkeeping usually involves only the recording of economic events and therefore is just one part
of the entire accounting process. Accounting, on the other hand, involves the entire process of
identifying, recording, and communicating economic events.
6.
Karen Sommers Travel Agency should report the land at $90,000 on its December 31, 2011
statement of financial position. An important concept that accountants follow is the cost principle.
The cost principle states that assets should be recorded at their cost. Cost has an important
advantage over other valuations: it is reliable. Cost can be objectively measured and can be
verified.
7.
Fair value is defined as the price received to sell an asset or settle a liability.
8.
The monetary unit assumption requires that only transaction data capable of being expressed in
terms of money be included in the accounting records. This assumption enables accounting to
quantify (measure) economic events.
9.
The economic entity assumption requires that the activities of the entity be kept separate and
distinct from the activities of its owners and all other economic entities.
10.
The three basic forms of business organizations are: (1) proprietorship, (2) partnership, and
(3) corporation.
1-6
One of the advantages Maria Gonzalez would enjoy is that ownership of a corporation is represented by transferable shares. This would allow Maria to raise money easily by selling a part
of her ownership in the company. Another advantage is that because holders of the shares
(shareholders) enjoy limited liability, they are not personally liable for the debts of the corporate
entity. Also, because ownership can be transferred without dissolving the corporation, the corporation
enjoys an unlimited life.
12.
13.
(a) Assets are resources owned by a business. Liabilities are claims against assets. Put more
simply, liabilities are existing debts and obligations. Equity is the ownership claim on total assets.
(b) Equity is affected by shareholders investments, dividends, revenues, and expenses.
14.
The liabilities are: (b) Accounts payable and (g) Salaries payable.
15.
Yes, a business can enter into a transaction in which only the left side of the accounting equation
is affected. An example would be a transaction where an increase in one asset is offset by
a decrease in another asset. An increase in the Equipment account which is offset by a decrease
in the Cash account is a specific example.
16.
Business transactions are the economic events of the enterprise recorded by accountants
because they affect the basic equation.
(a) No, the death of the president of the company is not a business transaction as it does not
affect the basic equation.
(b) Yes, supplies purchased on account is a business transaction as it affects the basic equation.
(c) No, an employee being fired is not a business transaction as it does not affect the basic
equation.
17.
(a)
(b)
(c)
(d)
18.
19.
No, this treatment is not proper. While the transaction does involve a receipt of cash, it does not
represent revenues. Revenues are the gross increase in equity resulting from business activities
entered into for the purpose of earning income. This transaction is simply an additional investment
made by one of the owners of the business.
20.
Yes. Net income does appear on the income statementit is the result of subtracting expenses
from revenues. In addition, net income appears in the retained earnings statementit is shown
as an addition to the beginning-of-period retained earnings. Indirectly, the net income of a company is
also included in the statement of financial position. It is included in the Retained Earnings account
which appears in the equity section of the statement of financial position.
1-7
22.
23.
1-8
$198,000
168,000
$ 30,000
$198,000
168,000
30,000
13,000
$ 17,000
90,000
66,000
(c)
90,000
66,000
24,000
Nestls accounting equation (in millions of Swiss Francs) at December 31, 2008 was CHF106,215 =
CHF51,299 + CHF54,916.
Assets
Liabilities
90,000
90,000
330,000
Share
Capital
(a)
X
X
X
=
=
=
(b)
$57,000
$57,000
X
=
X
+ $25,000
=
X
+ $33,000
= $24,000 ($57,000 $33,000)
(c)
+ 150,000
+ 240,000
Equity
Retained Earnings
+ Revenues Expenses Dividends
+
450,000
+ $50,000
320,000
40,000
$35,000
$7,000
1-9
A
E
L
(a)
(b)
(c)
Liabilities
+
NE
NE
Equity
NE
+
NE
(a)
(b)
(c)
Liabilities
NE
NE
NE
Equity
+
NE
(a)
(b)
(c)
(d)
Advertising expense
Commission revenue
Insurance expense
Salaries expense
D
R
E
(e) Dividends
(f) Rent revenue
(g) Utilities expense
1-10
$ 72,500
49,000
$121,500
$ 31,500
90,000
$121,500
(a)
(b)
(c)
(d)
(e)
(f)
Notes payable
Advertising expense
Share capitalordinary
Cash
Service revenue
Dividends
SOLUTIONS FOR DO IT! REVIEW EXERCISES
DO IT! 1-1
1.
2.
3.
4.
5.
1-11
DO IT! 1-2
(1)
(2)
(3)
(4)
DO IT! 1-3
Assets
Cash
(1)
(2) +R20,000
(3)
(4) R 5,000
= Liabilities +
Accounts
Accounts
+ Receivable = Payable +
+R20,000
R20,000
Equity
Share
Capital
Retained Earnings
Revenues Expenses Dividends
+R20,000
+R2,000
R2,000
R5,000
DO IT! 1-4
(a) The total assets are R$49,500, comprised of Cash R$7,000, Accounts
Receivable R$13,500, and Equipment R$29,000.
(b) Net income is R$21,000, computed as follows:
Revenues
Service revenue ..........................................
Expenses
Salaries expense ........................................
Rent expense ..............................................
Advertising expense ..................................
Total expenses ...................................
Net income .........................................................
1-12
R$54,000
R$16,500
10,500
6,000
33,000
R$21,000
R$49,500
R$25,000
3,000
28,000
R$21,500
Note that it is not possible to determine the companys equity in any other
way, because the beginning balance for equity is not provided.
1-13
SOLUTIONS TO EXERCISES
EXERCISE 1-1
C
R
C
R
R
C
C
I
R
EXERCISE 1-2
(a)
Internal users
Marketing manager
Production supervisor
Store manager
Vice-president of finance
External users
Customers
Taxing authority
Labor unions
Securities regulator
Suppliers
(b)
1-14
I
E
I
E
I
I
E
EXERCISE 1-3
Larry Smith, president of Smith Company, instructed Ron Rivera, the head of
the accounting department, to report the companys land in their accounting
reports at his assumed market value of $170,000 instead of its cost of
$100,000, in an effort to make the company appear to be a better investment.
Although we have an accounting system that permits various measurement
approaches, cost should be used whenever there are questions regarding the
reliability of a market value. In this case, valuation of land is too subjective
and therefore the cost principle should be used.
The stakeholders include shareholders and creditors of Smith Company,
potential shareholders and creditors, other users of Smiths accounting
reports, Larry Smith, and Ron Rivera. All users of Smiths accounting reports
could be harmed by relying on information which violates accounting
principles. Larry Smith could benefit if the company is able to attract more
investors, but would be harmed if the fraudulent reporting is discovered.
Similarly, Ron Rivera could benefit by pleasing his boss, but would be
harmed if the fraudulent reporting is discovered.
Rons alternatives are to report the land at $100,000 or to report it at
$170,000. Reporting the land at $170,000 is not appropriate since it would
mislead many people who rely on Smiths accounting reports to make financial decisions. Ron should report the land at its cost of $100,000. He should
try to convince Larry Smith that this is the appropriate course of action, but
be prepared to resign his position if Smith insists.
EXERCISE 1-4
1.
2.
3.
1-15
EXERCISE 1-5
Asset
Cash
Cleaning equipment
Cleaning supplies
Accounts receivable
Liability
Accounts payable
Notes payable
Salaries payable
Equity
Share capitalordinary
EXERCISE 1-6
1.
2.
3.
4.
5.
6.
7.
8.
9.
EXERCISE 1-7
1.
2.
3.
4.
(c)
(d)
(a)
(b)
5.
6.
7.
8.
(d)
(b)
(e)
(f)
EXERCISE 1-8
(a) 1.
2.
3.
4.
5.
1-16
(b) Investment...............................................................................
Service revenue ......................................................................
Dividends ................................................................................
Rent expense ..........................................................................
Salaries expense.....................................................................
Utilities expense .....................................................................
Increase in equity ...................................................................
$15,000
8,300
(2,000)
(650)
(4,900)
(500)
$15,250
$ 8,300
(650)
(4,900)
(500)
$ 2,250
EXERCISE 1-9
S. MOSES & CO.
Income Statement
For the Month Ended August 31, 2011
Revenues
Service revenue .........................................................
Expenses
Salaries expense........................................................
Rent expense .............................................................
Utilities expense ........................................................
Total expenses ...................................................
Net income .........................................................................
$8,300
$4,900
650
500
6,050
$2,250
1-17
0
2,250
2,250
2,000
$ 250
$ 5,000
750
3,250
8,250
$17,250
$15,000
250
$15,250
2,000
$17,250
EXERCISE 1-10
(a) Equity12/31/10 (TL400,000 TL250,000) ...........................
Equity1/1/10 ........................................................................
Increase in Equity ..................................................................
Add: Dividends.....................................................................
Net income for 2010 ...............................................................
1-18
TL150,000
100,000
50,000
15,000
TL 65,000
TL160,000
150,000
10,000
50,000
TL 40,000
TL190,000
160,000
30,000
15,000
15,000
30,000
TL 45,000
EXERCISE 1-11
(a) Total assets (beginning of year) ....................................
Total liabilities (beginning of year) ................................
Total equity (beginning of year).....................................
95,000
85,000
10,000
40,000
10,000
30,000
215,000
175,000
40,000
30,000
40,000
24,000
(16,000)
14,000
129,000
80,000
49,000
1-19
130,000
80,000
50,000
100,000
55,000
45,000
Increase in equity.........................................
Less: Net income ........................................
Additional investment ......................
Dividends .....................................................
50,000
45,000
25,000
(70,000)
20,000
EXERCISE 1-12
LINDA STANLEY CO.
Income Statement
For the Year Ended December 31, 2011
Revenues
Service revenue ....................................................
Expenses
Salaries expense ...................................................
Rent expense ........................................................
Utilities expense ...................................................
Advertising expense .............................................
Total expenses ..............................................
Net income ....................................................................
$62,500
$30,000
10,400
3,100
1,800
45,300
$17,200
1-20
$48,000
17,200
65,200
6,000
$59,200
EXERCISE 1-13
MENDEZ COMPANY
Statement of Financial Position
December 31, 2011
Assets
Equipment........................................................................
Supplies ...........................................................................
Accounts receivable .......................................................
Cash .................................................................................
Total assets ..............................................................
46,000
8,000
8,500
15,000
77,500
50,000
7,500
57,500
20,000
77,500
EXERCISE 1-14
(a) Camping fee revenues ..........................................................
General store revenues .........................................................
Total revenue ..................................................................
Expenses ................................................................................
Net income .............................................................................
(b)
$140,000
50,000
190,000
150,000
$ 40,000
DEER PARK
Statement of Financial Position
December 31, 2011
Assets
Equipment ..............................................................................
Supplies .................................................................................
Cash........................................................................................
Total assets ....................................................................
$105,500
2,500
23,000
$131,000
1-21
$20,000
40,000
$ 60,000
60,000
11,000
71,000
$131,000
EXERCISE 1-15
SILVA CRUISE COMPANY
Income Statement
For the Year Ended December 31, 2011
Revenues
Ticket revenue ..................................................
Expenses
Salaries expense ..............................................
Maintenance expense ......................................
Property tax expense .......................................
Advertising expense ........................................
Total expenses .........................................
Net income ...............................................................
1-22
R$325,000
R$142,000
95,000
10,000
3,500
250,500
R$ 74,500
EXERCISE 1-16
KEVIN AND JOHNSON, ATTORNEYS AT LAW
Retained Earnings Statement
For the Year Ended December 31, 2011
Retained earnings, January 1 ................................................
Add: Net income ..................................................................
Less: Dividends .....................................................................
Retained earnings, December 31 ..........................................
$ 23,000
139,000*
162,000
79,000
$ 83,000
$350,000
211,000
$139,000
EXERCISE 1-17
BORNEO COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2011
Cash flows from operating activities
Cash receipts from revenues ...........................
Cash payments for expenses ..........................
Net cash provided by operating activities
Cash flows from investing activities
Purchase of equipment ....................................
Cash flows from financing activities ......................
Sale of shares ................................................... R p 350,000
Payment of cash dividends ..............................
(20,000)
Net increase in cash.................................................
Cash at the beginning of the period .......................
Cash at the end of the period ..................................
R p 600,000
(410,000)
190,000
(100,000)
330,000
420,000
30,000
R p 450,000
1-23
1-24
(a)
1. +10,000
=
3. +
400
4,600
4. +
500
4,100
7.
9. +
140
6,060
10. +000,000
+
11.
+ 6,180 +
+630
10,0000 +
400
+00,000
+ 500 +
+ 5,000
+0000
+00,000
+ 500 +
+ 5,000
+0000
+00,000
+ 500 +
+ 5,000
+0000
+00,000
+ 500 +
+ 5,000
+0000
+00,000
+ 500 +
+ 5,000
+0250
10,000 +
+500 +
+5,000
+250
10,000 +
+750
+120
+0000
+120
+ 5,000
+ 750
400
+ 500 +
6,060 +
10,000 +
+00,000
8. + 2,000
6,200
+0000
8,200
+ 5,000
9,200
+ 5,000
400
+ 500 +
4,100
+ 0010,000 +
+00,000
1,000
+
+500
6. +5,100
+
+ 5,000
+000,
+00,000
5. +000,000
+
0010,000
+5,000
+
(a)
12,310
+250
=
+ 250
250
+ 00010,0000 +
+0000
=
+ 250
(b)
(c)
650
+5,100
+ 00010,000 +
5,100
(d)
650
+0000
=
+ 250
1,000
+
10,000 +
5,100
+0000
=
+ 250
+0250
1,000
2,000
+
10,000 +
5,100
+0000
=
650
(f)
2,650
1,000
140
+
10,000 +
+0000
5,100
(g)
2,790
1,000
+750
5,850
5,850
12,310
(e)
(h)
2,790
2,790
1,000
1,000
SOLUTIONS TO PROBLEMS
2. + 5,000
5,000
Equity
Retained Earnings
+ Revenues Expenses Dividends
+10,000 +
+ 10,000
Share
Capital
PROBLEM 1-1A
Cash
Accounts
Accounts
+ Receivable + Supplies + Equipment = Payable +
5,850
2,000
400
250
140
2,790
3,060
1-25
1-26
(a)
Bal.
$ 9,000 +
$1,700
1.
2,900
00,000
6,100 +
2.
+1,300
7,400 +
3.
800
4.
+2,500
6,600 +
9,100 +
5.
1,000
8,100 +
6.
2,900
5,200 +
7.
000,000
5,200 +
8.
1,700
600
600
600
600
6,000
8,100
8,100
700
8,100
700
8,100
8,100
$700
0
+
13,000
700
13,000
700
2,000
13,000
700
00,000
=
2,000
(a)
+$8,000
+
13,000
700
8,000
00,000
=
2,000
$1,000
+
13,000
700
8,000
2,000
13,000
700
8,000
2,170
$1,700
(c)
900
(d)
300
(e)
2,900
+170
=
1,000
(f)
170
13,000
700
+ $13,000
$700
8,000
3,070
1,000
+$10,000
$5,900
$600
$29,800
$ 8,100
= +$10,000 + $2,170
$29,800
$8,000
(b)
1,000
00,000
000,000
+
+1,300
000,000
+
Retained
+ Earnings + Revenues Expenses Dividends
00,000
=
000,000
+10,000
$15,200 +
000,000
0000
+
6,000
+ $13,000
2,900
+2,100
0000
00,000
5,900
600
$3,600
000,000
+
0000
00,000
5,900
600
0000
00,000
5,900
0000
+5,500
5,900
600
$ 6,000
000,000
0000
+
00,000
400
0000
1,300
400
$600
Share
Capital
$ 3,070
$1,000
PROBLEM 1-2A
Cash
$8,000
$1,700
900
300
170
3,070
$4,930
$ 700
4,930
5,630
1,000
$4,630
1-27
$ 8,100
600
5,900
15,200
$29,800
1-28
$13,000
4,630
$17,630
10,000
2,170
12,170
$29,800
PROBLEM 1-3A
(a)
W7,500
W2,500
1,200
500
400
400
5,000
W2,500
W64,000
7,200
5,600
W76,800
1-29
W45,000
1,000
W46,000
W30,000
800
30,800
W76,800
W8,400
W4,000
1,200
500
400
400
6,500
W1,900
0
1,900
1,900
1,500
W 400
(For Instructor Use Only)
(a)
MILLER DELIVERIES
Assets
Liabilities
Accounts
Date
Cash
June 1
Delivery
+ Receivable + Supplies +
Van
Notes
=
Equity
Accounts
Share
Payable + Payable +
$10,000
+$12,000
8,000 +
+$10,000
=
10,000 +
10,000
+12,000
10,000 +
10,000
7,500 +
$4,400
+0012,000
10,000 +
10,000 +
4,400
500
+ 12,000
10,000 +
10,000 +
4,400
500
200
10,000 +
4,400
500
200
10,000 +
4,400
500
200
4,400
600
200
$ 500
+$4,400
4,400
7,3000+
4,400
7,300 +
4,400
150
12,000
10,000 +
$200
+050
+$150
June 15 + +1,250
1,250
+ 150
+00
8,550 +
3,150
150
12,000
10,000 +
+ 150
+ 8,550 +
3,150
150
12,000
10,000 +
+ 250
10,000 +
3,150
150
+12,000
10,000 +
+ 250
10,000 +
5,900
600
200
3,150
150
12,000
9,500 +
+0250
10,000 +
5,900
600
200
3,150
150
12,000
9,500 +
10,000 +
5,900
850
200
3,150
150
12,000
9,500 +
150
10,000 +
5,900
850
200
1,000
$3,150
$150
$12,000
$ 9,500 +
$150
$10,000 +
$5,900
$1,850
$200
+100
100
June 20 + +1,500
10,050 +
June 23
9,550 +
June 30
(e)
250
+0250
(f)
100
1,000
$ 8,200 +
1,500
+0
100
9,200 +
(d)
500
250
9,300 +
June 29
500
+
(c)
+$150
June 17
June 26
(b)
200
June 12
(a)
500
$23,500
$23,500
(g)
PROBLEM 1-4A
7,500 +
June 5
Weygandt, IFRS, 1/e, Solutions Manual
12,000
500
June 9 +
+$10,000
June 2 + 2,000
June 3 +
Capital
Retained Earnings
1-31
(e)
(f)
(g)
Service revenue
Utilities expense
Salaries expense
MILLER DELIVERIES
Income Statement
For the Month Ended June 30, 2011
Revenues
Service revenue ($4,400 + $1,500) .....................
Expenses
Salaries expense ................................................
Rent expense ......................................................
Utilities expense .................................................
Gasoline expense ...............................................
Total expenses ............................................
Net income .................................................................
(c)
$5,900
$1,000
500
250
100
1,850
$4,050
MILLER DELIVERIES
Statement of Financial Position
June 30, 2011
Assets
Delivery Van ...............................................................
Supplies ......................................................................
Accounts receivable ..................................................
Cash ............................................................................
Total assets ........................................................
$12,000
150
3,150
8,200
$23,500
$13,850
9,650
$23,500
PROBLEM 1-5A
(a)
(b)
Karma
Company
(a) $ 45,000
(b)
115,000
(c)
10,000
Yates
Company
(d) $50,000
(e)
62,000
(f)
48,000
McCain
Company
(g) $120,000
(h)
70,000
(i)
431,000
Dench
Company
(j) $ 80,000
(k)
250,000
(l)
435,000
YATES COMPANY
Retained Earnings Statement
For the Year Ended December 31, 2011
Retained earnings, January 1 ...........................
Add: Net income ..............................................
Less: Dividends ................................................
Retained earnings, December 31......................
$20,000
35,000
55,000
48,000
$ 7,000
1-33
1-34
(a)
1. +10,000
+ 10,000
2. + 400
+ 9,600
3. + 2,500
+ 7,100
4. +000,000
+ 7,100
5. + 600
+ 6,500
6. +3,000
+ 9,500
7. + 200
+ 9,300
8. + 300
+ 9,000
9. + 2,200
+ 6,800
10. +4,000
+10,800
10,000
=
+
+
+
+
+
+
+
+
+6,500
+ 6,500
+ 0,000
+ 6,500
+ 0,000
+ 6,500
+ 0,000
+ 6,500
+4,000
+2,500
+
+
+
+
+
+600
+ 600
+0000
+ 600
+0000
+ 600
+0000
+ 600
+0000
+ 600
+
+600
16,400
+
+
+
+
+
+
+2,500
Equity
Retained Earnings
+ Revenues Expenses Dividends
+10,000
10,000
+2,500
+ 2,500
+00,000
+ 2,500
+00,000
+ 2,500
+00,000
+ 2,500
+00,000
+ 2,500
+00,000
+ 2,500
+00,000
+ 2,500
Share
Capital
400
400
400
300
700
700
(a)
+
10,000
=
=
=
=
=
=
+300
+ 300
+0000
+ 300
+0000
+ 300
+0000
+ 300
+300
+
0
+0000
+
+000,000
+
+
10,000
10,000
10,000
10,000
=
+
+
(b)
+
+
9,500
+ 9,500
(c)
(d)
700
200
200
200
700
700
2,200
2,900
10,000
200
10,000
2,900
200
+ 9,500
+000,000
+ + 9,500
+ 9,500
+
+9,500
16,400
(e)
PROBLEM 1-1B
Cash
Accounts
Office
Accounts
+ Receivable + Supplies + Equipment = Payable +
(d) Dividends
(e) Salaries Expense
9,500
2,200
400
300
2,900
6,600
1-35
1-36
(a)
Bal.
$4,000 +
$1,500
1.
+1,400
1,400
5,400 +
2.
2,700
2,700 +
3.
+3,000
5,700 +
4.
400
5,300 +
5.
100
500
500
$4,200
5,000
5,000
4,200
5,000
1,500
6,000
$ 800
000,000
6,000
6,000
800
000,000
800
00,000
=
1,500
+1,000
+
$6,000
2,700
=
00,000
+
00,000
00,000
+
0000
+
6,000
+600
=
2,100
(a)
+$9,000
800 +
9,000
000,000
+
6,000
800 +
9,000
4,250
1,050 +
750
300 +
7.
0000
00,000
6.
500
$5,000
00,000
0000
00,000
6,100
500
+6,000
6,100
0000
00,000
100
$500
+2,000
2,300 +
6,100
0000
+
00,000
6,100
0000
+
00,000
6,100
500
00,000
500
500
2,100
00,000
+
0000
+
6,000
00,000
6,000
$6,100
$500
$14,900
800 +
9,000
(c)
350
(d)
4,250
2,100
$750
+
6,000
6,000
00,000
+$2,000
00,000
6,000
= + 2,000 +
2,100
+250
$6,000
6,000
(b)
900
00,000
8.
$2,300 +
$3,000
= +$2,000 +
$2,350
800 +
9,000
4,250
750
9,000
4,250
750
(e)
000,000
800 +
(f)
250
$6,000
$ 800 +
$14,900
$9,000
$4.500
$750
PROBLEM 1-2B
Accounts
Office
Notes
Accounts
Share
Retained
Cash + Receivable + Supplies + Equipment = Payable + Payable + Capital + Earnings + Revenues Expenses Dividends
$9,000
$3,000
900
350
250
4,500
$4,500
$ 800
4,500
5,300
750
$4,550
1-37
$ 6,000
500
6,100
2,300
$14,900
1-38
$6,000
4,550
$10,550
2,000
2,350
4,350
$14,900
PROBLEM 1-3B
(a)
6,000
1,600
800
500
300
3,200
2,800
0
2,800
2,800
1,200
1,600
25,000
2,000
4,000
11,000
42,000
1-39
(b)
27,800
14,200
42,000
6,800
1,600
900
500
300
3,300
3,500
0
3,500
3,500
1,200
2,300
(a)
GELLER CONSULTING
Assets
Liabilities
Accounts
Date
May 1
Cash
Office
+$ 8,000
May 2
Share
Retained Earnings
Capital
+$8,000
=
8,000
8,000 +
800
$ 800
7,200
May 3
+$500
7,200 +
May 5
500
8,000 +
500
8,000
500
500
8,000 +
500
500
8,000 +
500
+3,000
+050
10,150 +
May 12
800
50
7,150 +
850
3,000
850
3,000
850
700
850
700
+$3,000
(c)
$700
+$5,300
9,450 +
May 17
+5,300
500
500
8,000 +
8,300
5,300
500
500
8,000 +
8,300
3,850
700
5,300
500
8,000 +
8,300
3,850
700
2,300
500
8,000 +
8,300
3,850
700
13,950 +
2,300
500
5,000
8,000 +
8,300
3,850
700
13,950 +
2,300
500
2,800
5,000
2,800
8,000 +
8,300
3,850
700
+ $500
$2,800
$2,800
$8,000 +
$8,300
$4,000
6,450 +
500
5,950 +
May 23
+3,000
+
8,950 +
3,000
(f)
500
0
+
3,000
+5,000
+
+$5,000
May 29
+$2,800
+2,800
150
$13,800 +
(d)
(e)
5,300
3,000
May 20
(b)
700
9,450 +
May 15
(a)
800
150
$ 2,300
$19,400
$5,000 +
$19,400
(g)
$700
PROBLEM 1-4B
May 9
+$ 500
500
50
+
May 30
Accounts
8,000
May 26
Notes
Equity
1-41
Rent Expense
Advertising Expense
Service Revenue
Dividends
GELLER CONSULTING
Income Statement
For the Month Ended May 31, 2011
Revenues
Service revenue ($3,000 + $5,300) ................
Expenses
Salaries expense ...........................................
Rent expense .................................................
Utilities expense ............................................
Advertising expense .....................................
Total expenses .......................................
Net income ............................................................
(c)
$8,300
$3,000
800
150
50
4,000
$4,300
GELLER CONSULTING
Statement of Financial Position
May 31, 2011
Assets
Office equipment........................................................
Supplies ......................................................................
Accounts receivable ..................................................
Cash ............................................................................
Total assets ........................................................
$ 2,800
500
2,300
13,800
$19,400
$8,000
3,600
$11,600
5,000
2,800
7,800
$19,400
(For Instructor Use Only)
PROBLEM 1-5B
(a)
(b)
McKane
Company
(a) $30,000
(b)
95,000
(c)
5,000
Selara
Company
(d) $40,000
(e)
45,000
(f)
28,000
Gordon
Company
(g) $124,000
(h)
80,000
(i)
413,000
Hindi
Company
(j) $ 50,000
(k)
225,000
(l)
460,000
McKANE COMPANY
Retained Earnings Statement
For the Year Ended December 31, 2011
Retained earnings, January 1 .............................
Add: Net income ................................................
Less: Dividends ..................................................
Retained earnings December 31.........................
0
15,000
15,000
10,000
$ 5,000
1-43
BYP 1-1
(a) Cadburys total assets at December 31, 2008 were 8,895 million and at
December 31, 2007 were 11,338 million.
(b) Cadbury had 251 million of cash and cash equivalents at December 31,
2008.
(c) Cadbury had trade and other payables totaling 1,551 million on
December 31, 2008 and 1,701 million on December 31, 2007.
(d) Cadbury reports revenues for three consecutive years as follows:
2007
2008
5,384 million
4,699 million
(e) From 2007 to 2008, Cadburys net income (profit for the period)
decreased 416 million from 407 million to 366 million.
1-44
BYP 1-2
(a)
1.
2.
3.
4.
(in millions)
Total assets
Accounts (notes) receivable, (net)
Net sales
Net income
(b)
Receivables/Total assets
Net income/Sales
Cadbury
8,895
1,067
5,384
366
Cadbury
12.0%
6.8%
Nestl
CHF106,215
CHF 13,442
CHF109,908
CHF 19,051
Nestl
12.7%
17.3%
1-45
BYP 1-3
(a) The field is normally divided into three broad areas: auditing, financial/
tax, and management accounting.
(b) The skills required in these areas:
People skills, sales skills, communication skills, analytical skills, ability
to synthesize, creative ability, initiative, computer skills.
(c) The skills required in these areas differ as follows:
People skills
Sales skills
Communication skills
Analytical skills
Ability to synthesize
Creative ability
Initiative
Computer skills
Auditing
Medium
Medium
Medium
High
Medium
Low
Medium
High
Financial
and Tax
Medium
Medium
Medium
Very High
Low
Medium
Medium
High
Management
Accounting
Medium
Low
High
High
High
Medium
Medium
Very High
1-46
$46,000 $63,000
1-47
BYP 1-4
(a) The estimate of the $6,100 loss was based on the difference between
the $25,000 invested in the driving range and the bank balance of
$18,900 at March 31. This is not a valid basis for determining income
because it only shows the change in cash between two points in time.
(b) The statement of financial position at March 31 is as follows:
CHIP-SHOT DRIVING RANGE COMPANY
Statement of Financial Position
March 31, 2011
Assets
Caddy shack...............................................................
Equipment ..................................................................
Cash ............................................................................
Total assets ........................................................
$ 8,000
800
18,900
$27,700
$25,000
2,450
$27,450
250
$27,700
1-48
$27,450
25,000
2,450
1,000
$ 3,450
$25,000
$8,000
800
1,000
600
400
1,000
11,800
13,200
18,900
$ 5,700
1-49
BYP 1-5
To:
From:
COMMUNICATION ACTIVITY
Lynn Benedict
Student
2.
3.
4.
5.
6.
1-50
25,500
2,000
6,000
9,000
42,500
26,000
(2,000)
24,000
10,500
8,000
18,500
42,500
1-51
BYP 1-6
ETHICS CASE
(a) The students should identify all of the stakeholders in the case; that is,
all the parties that are affected, either beneficially or negatively, by the
action or decision described in the case. The list of stakeholders in this
case are:
Steve Baden, interviewee.
Both Baltimore firms.
Great Northern College.
(b) The students should identify the ethical issues, dilemmas, or other considerations pertinent to the situation described in the case. In this case
the ethical issues are:
Is it proper that Steve charged both firms for the total travel costs
rather than split the actual amount of $296 between the two firms?
Is collecting $592 as reimbursement for total costs of $296 ethical
behavior?
Did Steve deceive both firms or neither firm?
(c) Each student must answer the question for himself/herself. Would you
want to start your first job having deceived your employer before your
first day of work? Would you be embarrassed if either firm found out
that you double-charged? Would your school be embarrassed if your
act was uncovered? Would you be proud to tell your professor that
you collected your expenses twice?
1-52