Solutions manual for fundamental accounting principles canadian canadian 14th edition by larson by wocno

SOLUTIONS MANUAL for Fundamental Accounting Principles Canadian Canadian 14th Edition by Larson Full download: http://downloadlink.org/p/solutions-manual-for-fundamentalaccounting-principles-canadian-canadian-14th-edition-by-larson/ TEST BANK for Fundamental Accounting Principles Canadian Canadian 14th Edition by Larson Full download: http://downloadlink.org/p/test-bank-for-fundamentalaccounting-principles-canadian-canadian-14th-edition-by-larson/ SOLUTIONS MANUAL to accompany

Fundamental Accounting Principles 14th Canadian Edition by Larson/Jensen

Prepared by: Tilly Jensen, Athabasca University Wendy Popowich, Northern Alberta Institute of Technology Susan Hurley, Northern Alberta Institute of Technology Ruby So Koumarelas, Northern Alberta Institute of Technology

Technical checks by: Ross Meacher Betty Young, Red River College, ANSR Source

Chapter 2

Analyzing and Recording Transactions

Chapter Opening Critical Thinking Challenge Questions* “Financial health” can be interpreted in a number of ways. It could refer to an organization’s ability to meet long-term goals. One of the key factors in predicting longterm viability is to have an accurate understanding of the organization’s financial position. From an operational perspective, “financial health” could mean having adequate resources and systems in place to meet current objectives.

*The Chapter 2 Critical Thinking Challenge questions are asked at the beginning of the chapter. Students are reminded at the conclusion of the chapter, to refer to the Critical Thinking Challenge questions at the beginning of the chapter. The solutions to the Critical Thinking Challenge questions are available here in the Solutions Manual and accessible to students on the Online Learning Centre.

Concept Review Questions 1.

The fundamental steps in the accounting process are those involved in the accounting cycle: Analyze transactions to determine if an economic exchange has taken place and, if so, journalize and post the transaction. An unadjusted trial balance is then prepared to help identify potential adjustments. Appropriate adjusting entries are journalized and posted and an adjusted trial balance is generated from which the financial statements are prepared. Closing entries are then journalized and posted. Finally, a post-closing trial balance is prepared.

A note receivable is a document that specifies the fixed amount due to a company on a fixed date or on demand. An account receivable is also an amount due to a company, but the amount can be increased by the debtor by making additional purchases. An account receivable is not a single document but represents the result of several written, oral, or implied promises to pay the creditor.

Fifteen possible expense accounts might be: Utilities Expense, Telephone Expense, Internet Expense, Office Supplies Expense, Salaries Expense, Wages Expense, Entertainment Expense, Travel Expense, Repair Expense, Postage Expense, Printing Expense, Advertising Expense, Interest Expense, Equipment Repair Expense, Insurance Expense, and any number of others.

4. Four different asset accounts would include any of the following from Danierâ&#x20AC;&#x2122;s June 25, 2011 balance sheet: Cash, Accounts receivable, Inventories, Prepaid expenses, Future income taxes asset, Property and equipment, or Intangible assets. Three different liability accounts would include any of the following: Accounts payable and accrued liabilities; Income taxes payable; or Deferred lease inducements and rent liability. 5.

Expense accounts have debit balances because they reflect decreases in equity.

Three debit balance accounts from WestJetâ&#x20AC;&#x2122;s December 31, 2011 balance sheet might include any of the following: Cash and cash equivalents; Restricted cash; Accounts receivable; Prepaid expenses, deposits and other; Inventory; Property and equipment; Intangible assets; or Other assets. Three credit balance accounts might include any of the following: Accounts payable and accrued liabilities; Advance ticket sales; Nonrefundable guest credits; Current portion of long-term debt; Current portion of obligations under finance leases; Maintenance provisions; Long-term debt; Obligations under finance leases; Other liabilities; Deferred income tax; Share capital; Equity reserves; or Retained earnings.

A General Journal can be used to record any economic transaction.

Debited accounts are recorded first. The credited accounts are indented.

A transaction should first be recorded in a journal to create a complete record of the transaction in one place. Then the transaction is posted to the ledger where entries are summarized by type, i.e., cash, accounts payable, interest expense, etc., to enable analysis by account. This arrangement also means that fewer errors will be made in the accounts.

10. The bookkeeper prepares a trial balance to summarize the contents of the ledger and to determine whether equal debits and credits have been recorded. The trial balance also serves as a helpful internal document for preparing the financial statements.

QUICK STUDY Quick Study 2-1 Answer A E E L A L A E L L R R E L R L A A E R L A L R W OE E L A A

Answer Detail Asset Expenses (Equity) Expenses (Equity) Liability Asset Liability Asset Expenses (Equity) Liability Liability Revenues (Equity) Revenues (Equity) Expenses (Equity) Liability Revenues (Equity) Liability Asset Asset Expenses (Equity) Revenues (Equity) Liability Asset Liability Revenues (Equity) Owner’s Withdrawals (Equity) Owner’s Capital (Equity) Expenses (Equity) Liability Asset Asset

Account 1. Buildings 2. Building Repair Expense 3. Wages Expense 4. Wages Payable 5. Notes Receivable 6. Notes Payable 7. Prepaid Advertising 8. Advertising Expense 9. Advertising Payable 10. Unearned Advertising 11. Advertising Fees Earned 12. Interest Earned 13. Interest Expense 14. Interest Payable 15. Earned Subscription Fees 16. Unearned Subscription Fees 17. Prepaid Subscription Fees 18. Supplies 19. Supplies Expense 20. Rent Revenue 21. Unearned Rent Revenue 22. Prepaid Rent 23. Rent Payable 24. Service Fees Earned 25. Jan Sted, Withdrawals 26. Jan Sted, Capital 27. Salaries Expense 28. Salaries Payable 29. Furniture 30. Equipment

Quick Study 2-2 Accounts Receivable 1,000 650 400 920 920 1,500 3,000 Bal. 2,250

Accounts Payable 250 250 900 1,800 650 1,400 650 2,300 Bal.

Utilities Expense 610 520 390 275 Bal. 1,795

Cash 3,900 2,400 17,800 3,900 14,500 21,800 340 Bal. 8,440

Quick Study 2-3 a. b. c. d. e. f. g. h. i. j. k. l. m. n. o.

Equipment.............................. Land........................................ Al Tait, Withdrawals .............. Rent Expense ........................ Interest Revenue ................... Prepaid Rent .......................... Accounts Receivable ............ Office Supplies ...................... Notes Receivable .................. Notes Payable ....................... Al Tait, Capital ....................... Rent Earned ........................... Rent Payable ......................... Interest Expense ................... Interest Payable ....................

Debit Debit Debit Debit Credit Debit Debit Debit Debit Credit Credit Credit Credit Debit Credit

Quick Study 2-4 a. b. c. d. e.

Credit Credit Credit Debit Credit

f. g. h. i. j.

Credit Debit Credit Debit Debit

k. l. m. n. o.

Debit Credit Debit Debit Debit

Service Revenue 13,000 2,500 810 3,500 19,810 Bal. Notes Payable 4,000 50,000 8,000 38,000 Bal.

Quick Study 2-5 a. b. c. d. e.

Credit Debit Credit Debit Credit

f. g. h. i. j.

Debit Credit Credit Credit Debit

k. Credit l. Debit m. Debit n. Credit o. Credit

Quick Study 2-6 Note: Students could choose any account number within the specified range. a. b. c. d. e.

173 409 302 301 128

f. g. h. i. j.

203 106 622 124 403

k. l. m. n. o.

629 219 222 170 115

Quick Study 2-7 1. Cash

Accounts Receivable 106

101

(a) 15,000 500 (c) (d) 1,000 500 (f) (g) 300 Bal. 15,300

(e) (h)

700 400

300 (g)

Bal. 800

Accounts 201 Payable (f) 500 2,000 (b)

1,500 Bal.

Furniture

161

(b) 2,000 (c) 500

Bal. 2,500

Del Martin, 301 Capital 15,000 (a)

15,000 Bal.

Revenue 403 1,000 (d) 700 (e) 400 (h) 2,100 Bal.

2. The account balance for each T-account is shown above. The accounting equation (Assets = Liabilities + Equity) is proved as follows: $18,600 = $1,500 + $17,100

Last revised: October 26, 2012

Quick Study 2-8 1 & 2.

Apr 30 May 12 May 16 Bal.

Cash 15,000 6,000 10,000 3,000 4,000 20,000

Unearned Revenue 1,800 10,000 11,800

101 May 15 May 22

205 Apr 30 May 12 Bal.

Accounts Receivable 106 Apr 30 3,200 4,000 May 16 May 10 4,000 Bal. 3,200

Dee Bell, Capital 8,900 8,000 16,900

301 Apr 30 May 2 Bal.

May 2 Bal.

Car 8,000 8,000

Revenue 3,000 4,000 7,000

150

410 Apr 30 May 10 Bal.

Accounts Payable May 22 3,000 6,000 3,000

Wages Expense 1,500 May 15 6,000 Bal. 7,500 Apr 30

3. The account balance for each T-account is shown above. The accounting equation (Assets = Liabilities + Equity) is proved as follows: $31,200 = $14,800 + $16,400

2-7

202 Apr 30 Bal.

650

Quick Study 2-9

Date 2014 May 1

General Journal Account Titles and Explanations

Debit

Equipment............................................................... Accounts Payable .......................................... Purchased equipment on account.

500

Accounts Payable .................................................. Cash ................................................................ Paid for the equipment purchased May 1.

500

Supplies .................................................................. Cash ................................................................ Purchased supplies for cash.

100

Wages Expense ...................................................... Cash ................................................................ Paid wages to employees.

2,000

Cash ........................................................................ Service Revenue ............................................ Performed services for a client for cash.

750

Accounts Receivable ............................................. Service Revenue ............................................ Did work for a customer on credit.

2,500

Cash ........................................................................ Accounts Receivable ..................................... Collected May 6 customer account.

2,500

Page 1 Credit

500

100

2,000

750

2,500

Quick Study 2-10

Date 2014 Jan.

General Journal Account Titles and Explanations 3

Debit

Cash ........................................................................ Equipment............................................................... Stan Adams, Capital....................................... Investment by owner.

60,000 40,000

Office Supplies ....................................................... Accounts Payable .......................................... Purchased office supplies on credit.

340

Cash ........................................................................ Landscaping Services Revenue ................... Received cash for landscaping services.

5,200

Accounts Payable .................................................. Cash ................................................................ Paid part of the January 4 credit purchase.

200

Office Supplies ....................................................... Accounts Payable .......................................... Purchased supplies on account.

700

Accounts Payable .................................................. Cash ................................................................ Paid the balance owing re January 4 credit purchase; 340 â&#x20AC;&#x201C; 200 paid on Jan. 15 = 140.

140

Page 1 Credit

100,000

340

5,200

200

700

140

Quick Study 2-11 Date 2014 Jan. 3 6 15 30

Date 2014 Jan. 4 16

Date 2014 Jan. 3

Date 2014 Jan. 4 15 16 30

Date 2014 Jan. 3

Date 2014 Jan. 6

Cash Explanation

Debit

Account No. 101 Credit Balance

60,000 5,200 200 140 Office Supplies Explanation

Debit

Account No. 124 Credit Balance

340 700 Equipment Explanation

Debit

340 1,040 Account No. 163 Credit Balance

40,000 Accounts Payable Explanation

Debit

40,000 Account No. 201 Credit Balance 340

200 700 140 Stan Adams, Capital Explanation

Debit

340 140 840 700

Account No. 301 Credit Balance 100,000

Landscaping Services Revenue Explanation

60,000 65,200 65,000 64,860

100,000

Account No. 403 Credit Balance 5,200

5,200

Quick Study 2-12 Vahn Landscaping Trial Balance January 31, 2014 Acct. No. 101 163 233 301 302 401 640 690

Account Cash ..................................................................... Equipment ........................................................... Unearned fees ..................................................... Brea Vahn, capital ............................................... Brea Vahn, withdrawals...................................... Fees earned ......................................................... Rent expense....................................................... Utilities expense.................................................. Totals ...................................................................

Debit

Credit

$ 7,000 9,000 $ 2,000 14,000 1,000 11,000 6,000 4,000 $27,000

_ ____ $27,000

Quick Study 2-13 The correct answer is c. If a $2,250 debit to Rent Expense is incorrectly posted as a credit, the effect is to understate the Rent Expense debit balance by $4,500. This causes the Debit column total on the trial balance to be $4,500 less than the Credit column total. Quick Study 2-14 1. Subtract total debits in the trial balance from total credits 24,250 - 21,550 = 2,700 2. Divide the difference by 9 2,700 รท 9 = 300 3. The quotient equals the difference between the two transposed numbers. 300 is the difference between the two transposed numbers. 4. The number of digits in the quotient tells us the location of the transposition Look for a difference of 3 between the third number from the right and the fourth number from the right. Through a process of elimination, the incorrect value is Rent Expense for $4,100. The correct value must be $1,400. Proof: Recalculate the trial balance replacing $1,400 for the incorrect $4,100 and the trial balance now balances at $21,550.

Quick Study 2-15 1. Subtract total debits in the trial balance from total credits 728 - 503 = 225 2. Divide the difference by 9 225 รท 9 = 25 The quotient equals the incorrect number. Through a review of the values in the trial balance, the incorrect value is Notes Payable for $25. The correct value must be $250. Proof: Recalculate the trial balance replacing $250 for the incorrect $25 and the trial balance now balances at $728.

EXERCISES Exercise 2-1 (30 minutes)

Balance

Cash 32,600 925 3,000 13,600 5,400 3,500 5,000 17,975

(f) Balance

Accounts Receivable 5,400 5,400 (h) 0

(a) (d) (h)

(b) (e) (g) (i)

(e)

Accounts Payable 13,600 13,600 0

Sandra Moses, Capital 32,600 (a) 32,600 Balance

(i) Balance

Sandra Moses, Withdrawals 5,000 5,000

Office Supplies (b) Balance

925 925

Fees Earned 3,000 5,400 8,400

Office Equipment 13,600 13,600 (g) Balance

Rent Expense 3,500 3,500

(d) (f) Balance

Exercise 2-2 (10 minutes) Jan. 31 Feb. 2 20 22 Bal.

Cash 890 4,000 3,100 125 2,400 1,000 10,000 1,600 9,665

Accounts Receivable Jan. 31 1,200 2,400 Feb. 20 Feb. 12 15,000 10,000 Feb. 22 18 1,900 Bal. 5,700

Jan. 31 Feb. 14 Bal.

Neil Poundmaker, Capital 800 Jan. 31 800 Bal.

Feb. 14 23 25 26

Neil Poundmaker, Withdrawals Jan. 31 -0Feb. 25 1,000 Bal. 1,000 Service Revenue 2,600 3,100 15,000 1,900 22,600

Prepaid Insurance -04,000 4,000

Computer Equipment 480 7,600 8,080 Accounts Payable Feb. 23 125 250 Jan. 31 125 Bal. Jan. 31 Feb. 10 Bal.

Jan. 31 Feb. 26 Bal.

Jan. 31 Feb. 2 12 18 Bal.

Wages Expense 1,080 1,600 2,680

NOTE: There is no entry to be recorded for February 21.

Notes Payable -0- Jan. 31 7,600 Feb. 10 7,600 Bal.

Analysis component: Revenue recognition requires that when work has been completed, it must be recorded whether cash has been received or not. A transaction has occurred when there has been an economic exchange â&#x20AC;&#x201D; when something has been given up or received. On February 12, services were performed and, although cash will not be received until a future date, a revenue must be recorded because an economic exchange has occurred.

Exercise 2-3 (10 minutes)

Mar. 31 Apr. 2 19 Bal.

Cash 1,800 1,000 2,100 950 2,800 1,500 3,250

Apr. 10 15 29

Nels Sigurdsen, Withdrawals Mar. 31 500 Apr. 29 1,500 Bal. 2,000 Repair Revenue 14,000 2,100 1,200 17,300

Accounts Receivable 4,800 2,800 Apr. 19 Mar. 31 1,200 Apr. 18 Bal. 3,200

Mar. 31 Apr. 9 Bal.

Repair Supplies 1,400 1,500 2,900

Mar. 31 Apr. 15 Bal.

Equipment 7,400 950 8,350

Apr. 10

Accounts Payable 1,000 500 1,500 820 1,820

Mar. 31 Apr. 25 Bal.

Mar. 31 Apr. 9 25 Bal.

Nels Sigurdsen, Capital 2,350 Mar. 31 2,350 Bal. NOTE: There is no entry to be recorded for April 5.

Rent Expense 950 820 1,770

Mar. 31 Apr. 2 18 Bal.

Exercise 2-4 (45 minutes) 2. Date 2014 July

GENERAL JOURNAL Account Titles and Explanations 1

Page 1 Credit

Debit

Cash ....................................................... Mira Delco, Capital ........................ To record investment by owner.

101 301

5,000

Equipment.............................................. Accounts Payable ......................... Purchased equipment on credit.

150 201

2,500

Cash ....................................................... Revenue ......................................... Performed services for cash.

101 401

10,000

Expenses ............................................... Cash................................................ Paid expenses.

501 101

3,500

Accounts Receivable ........................... Revenue ......................................... Completed services on account.

106 401

1,500

Mira Delco, Withdrawals ....................... Cash................................................ Owner withdrew cash.

302 101

250

5,000

2,500

10,000

3,500

1,500

Note: The account numbers in the PR column above would be included only during the posting of these journal entries into the ledger accounts in Part 3 of this exercise.

250

Exercise 2-4 (continued) *Note: The student could use T-accounts or balance column format accounts as their general ledger. Both are shown in this solution. 1 and 3. Cash 101 July 1 5,000 3,500 July 14 12 10,000 250 31 Balance 11,250 106

July 15

Accts. Receivable 1,500

Equipment 2,500

150

July 10

July 31

Accounts Payable 2,500

201 July 10

Mira Delco, Capital 5,000

301 July 1

Mira Delco, Withdrawals 250

Revenue 10,000 1,500 11,500

July 14

Expenses 3,500

302

401 July 12 15 Balance 501

Exercise 2-4 (continued) 1 and 3. Date 2014 July

Cash Explanation 1 12 14 31

Date 2014 July 15

Date 2014 July 10

Date 2014 July

Date 2014 July 14

Account No. 101 Balance

3,500 250 Accounts Receivable Explanation

PR G1

Equipment Explanation

PR G1

Accounts Payable Explanation

Debit

PR G1

Revenue Explanation

PR G1

Account No. 150 Credit Balance 2,500

Credit

Account No. 201 Balance

Debit

Credit

250 Account No. 401 Credit Balance 10,000 1,500

Debit 3,500

5,000

Account No. 302 Balance

250

Debit

2,500

Account No. 301 Credit Balance 5,000

G1 G1 Expenses Explanation

1,500

2,500

Debit

G1 5,000 G1 15,000 G1 11,500 G1 11,250

Account No. 106 Balance

2,500

G1 Mira Delco, Withdrawals Explanation

Credit

1,500

Date 2014 July 12 15

Credit

5,000 10,000

Mira Delco, Capital Explanation

Date 2014 July 31

Debit

Credit

10,000 11,500

Account No. 501 Balance 3,500

Exercise 2-4 (continued) 4.

MiraCom Trial Balance July 31, 2014 Acct. No. 101 106 150 201 301 302 401 501

Account Title Cash ..................................................... Accounts receivable .......................... Equipment ........................................... Accounts payable ............................... Mira Delco, capital .............................. Mira Delco, withdrawals ..................... Revenue ............................................... Expenses ............................................. Totals ...................................................

Debit $11,250 1,500 2,500

Credit

$ 2,500 5,000 250 11,500 3,500 $19,000

$19,000

Exercise 2-4 (concluded) 5.

MiraCom Income Statement For Month Ended July 31, 2014 Revenue ............................................................... Expenses ............................................................. Net income .......................................................... MiraCom Statement of Changes in Equity For Month Ended July 31, 2014 Mira Delco, capital, July 1 .................................. Add: Investments by owner .............................. $5,000 Net income ................................................ 8,000 Total ................................................................. Less: Withdrawals by owner ............................. Mira Delco, capital, July 31 ................................

$11,500 3,500 $ 8,000

13,000 13,000 250 $12,750

The arrows are imaginary but emphasize the link between statements.

MiraCom Balance Sheet July 31, 2014 Assets Cash ........................................... Accounts receivable................. Equipment .................................

Total assets ...............................

$11,250 1,500 2,500

$15,250

Liabilities Accounts payable ....................... Equity Mira Delco, capital....................... Total liabilities and equity.......................................

$ 2,500

12,750 $15,250

Analysis component: Accounts receivable result from credit sales to customers (debit accounts receivable and credit a revenue). Sales, or revenue, is part of equity. As revenues on account are recorded, assets on the left side of the accounting equation increase and equity on the opposite side of the accounting equation also increases. Therefore, accounts receivable are financed by, or created by, an equity transaction.

Exercise 2-5 (10 minutes) Note: Students could choose any account number within the specified range. Account Number 101 115 160 210 215 310 320 410 510 520 530

Account Name Cash Accounts Receivable Office Equipment Accounts Payable Unearned Revenue Aaron Paquette, Capital Aaron Paquette, Withdrawals Consulting Revenues Salaries Expense Rent Expense Utilities Expense

Last revised: October 26, 2012

Exercise 2-6 (30 minutes) 1. Date 2014 Feb.

General Journal Account Titles and Explanations 1

Debit

Cash .....................................................................

101

Consulting Revenues.................................. Performed work for cash.

410

Accounts Payable ............................................... Cash.............................................................. Paid account.

210 101

5,000

Cash .....................................................................

101

3,600

Unearned Revenue ...................................... Received cash in advance.

215

No entry.

Aaron Paquette, Withdrawals ............................

320

Cash.............................................................. Owner withdrew cash.

101

Salaries Expense.................................................

510

Cash.............................................................. Paid salaries.

101

Page G1 Credit

8,500 8,500

5,000

3,600

3,000 3,000

10,000 10,000

Note: The account numbers in the PR column above would be included only during the posting of these journal entries into the ledger accounts in Part 2 of this exercise.

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-22

Last revised: October 26, 2012

Exercise 2-6 (continued) 2.

Cash 5,000 3,000 10,000

Feb 5

Unearned Revenue 2,600 3,600 6,200

215

Bal Feb 1 10 Bal

15,000 8,500 3,600 9,100

101

Salaries Expense Bal 10,000 Feb 28 10,000 Bal 20,000

Accounts Receivable Bal

115

3,800

Office Equipment Bal

160

22,500

Accounts Payable Feb 5

5,000

8,000 3,000

210 Bal Bal

Bal

Aaron Paquette, Capital 9,500

310 Bal

Feb 10 Bal

510

Rent Expense Bal 7,500

520

Aaron Paquette, Withdrawals Bal 2,000 Feb 17 3,000 Bal 5,000

Utilities Expense 1,000 Bal

320

Consulting Revenues 410 41,700 Bal 8,500 Feb 1 50,200 Bal

530

2-23

Last revised: October 26, 2012

3. Paquette Advisors Trial Balance February 28, 2014 Acct. No. 101 115 160 210 215 310 320 410 510 520 530

Account Title Cash ................................................................... Accounts receivable ........................................ Office equipment ............................................... Accounts payable ............................................. Unearned revenue ............................................. Aaron Paquette, capital .................................... Aaron Paquette, withdrawals ........................... Consulting revenues......................................... Salaries expense ............................................... Rent expense ..................................................... Utilities expense ................................................ Totals..................................................................

Debit $ 9,100 3,800 22,500

Credit

$ 3,000 6,200 9,500 5,000 50,200 20,000 7,500 1,000 $68,900

$68,900

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-24

Last revised: October 26, 2012

4. Paquette Advisors Income Statement For Two Months Ended February 28, 2014 Revenues: Consulting revenues ..................................... Operating expenses: Salaries expense............................................ Rent expense ................................................. Utilities expense ............................................ Total operating expenses ........................ Net income ..........................................................

$50,200 $20,000 7,500 1,000

The arrows are imaginary but emphasize the link between statements.

28,500 $21,700

5. Paquette Advisors Statement of Changes in Equity For Two Months Ended February 28, 2014 Aaron Paquette, capital, March 1 ...................... Add: Investments by owner .............................. $ 9,500 Net income ................................................ 21,700 Total ................................................................. Less: Withdrawals by owner ............................. Aaron Paquette, capital, February 28 ...............

31,200 $31,200 5,000 $26,200

6. Paquette Advisors Balance Sheet February 28, 2014 Assets Cash ...................................... Accounts receivable............ Office equipment .................

Total assets ..........................

$ 9,100 3,800 22,500

Liabilities Accounts payable ..................... Unearned revenue .................... Total liabilities ...........................

$35,400

Equity Aaron Paquette, capital ............ Total liabilities and equity .....................................

$ 3,000 6,200 $ 9,200

26,200 $35,400

Analysis component: Unearned revenue occurs when cash is received from a customer in advance of the work being done. The collection is not recorded as revenue because it has not been earned until the work is done. Unearned revenue is therefore a liability because the business owes the customer a service (or work). For example, WestJet receives cash from customers in advance of the customer actually flying and records it as advance ticket revenue, a type of unearned revenue. These cash collections are recorded as advance ticket revenue, a liability, because the cash doesnâ&#x20AC;&#x2122;t belong to WestJet until they have earned it which occurs when the customer takes their flight.

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-25

Last revised: October 26, 2012

Exercise 2-7 (30 minutes) a.

Cash ........................................................................................ Equipment .............................................................................. Automobiles ........................................................................... Jerry Steiner, Capital ..................................................... The owner invested cash, an automobile, and equipment.

7,000 5,600 11,000 23,600

Prepaid Insurance ................................................................. Cash ................................................................................ Purchased insurance coverage in advance.

3,600

Office Supplies ...................................................................... Cash ................................................................................ Purchased supplies with cash.

600

Office Supplies ...................................................................... Equipment .............................................................................. Accounts Payable .......................................................... Purchased supplies and equipment on credit.

200 9,400

Cash ........................................................................................ Delivery Services Revenue ........................................... Received cash from customer for work done.

2,500

Accounts Payable.................................................................. Cash ................................................................................ Made payment on payables.

2,400

Gas and Oil Expense ............................................................. Cash ................................................................................ Paid for gas and oil.

700

3,600

600

9,600

2,500

2,400

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

700

2-26

Last revised: October 26, 2012

Exercise 2-8 (20 minutes) 2014 April 5

Cash ................................................................................... Surgical Revenues .................................................... Performed surgery and collected cash.

4,600

Supplies ............................................................................. Accounts Payable ..................................................... Purchased surgical supplies on credit.

19,000

Salaries Expense .............................................................. Cash ........................................................................... Paid salaries.

41,000

Accounts Payable ............................................................. Cash ........................................................................... Paid for the credit purchase of April 8.

19,000

4,600

19,000

41,000

19,000

No entry.

Accounts Receivable ........................................................ Surgical Revenues .................................................... Performed six surgeries on credit; $3,800 x 6 = $22,800

22,800

Cash ................................................................................... Accounts Receivable ................................................ Collection from four credit customers of April 22; $3,800 x 4 = $15,200.

15,200

Utilities Expense ............................................................... Cash ........................................................................... Paid the April utilities.

1,800

22,800

15,200

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

1,800

2-27

Last revised: October 26, 2012

Exercise 2-9 (20 minutes) b.

Accounts Receivable .............................................................. Services Revenue ............................................................ Provided services on credit.

2,700

Cash .......................................................................................... Services Revenue ............................................................ Provided services for cash.

3,150

2,700

3,150

Revenues are inflows of assets (or decreases in liabilities) received in exchange for goods or services provided to customers. The other transactions did not create revenues for the following reasons: a.

This transaction brought in cash, but it was an owner investment in the company.

This transaction brought in cash, but it also created a liability because the services have not yet been provided to the client.

This transaction changed the form of the asset from accounts receivable to cash. Total assets were not increased. Revenue was not generated.

This transaction brought cash into the company and increased assets, but it also increased a liability by the same amount.

Exercise 2-10 (20 minutes) b.

Salaries Expense ................................................................... Cash ................................................................................ Paid the salary of the receptionist.

1,125

Utilities Expense .................................................................... Cash ................................................................................ Paid the utilities bill for the office.

930

1,125

930

Expenses are outflows or using up of assets (or the creation of liabilities) that occur in the process of providing goods or services to customers. The transactions labelled a, c, and e were not expenses for the following reasons: a.

This transaction decreased assets in settlement of a previously existing liability. Thus, the using up of assets did not reduce equity.

This transaction was the purchase of an asset. The form of the companyâ&#x20AC;&#x2122;s assets changed, but total assets did not change, and the equity did not decrease.

This transaction was a distribution of cash to the owner. Even though equity decreased, the decrease did not occur in the process of providing goods or services to customers.

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-28

Last revised: October 26, 2012

Exercise 2-11 (25 minutes) Parts a and b:

Date 2013 Dec. 31 2014 Jan. 1 20 31 31 31

Date 2013 Dec. 31 2014 Jan. 12 31

Date 2013 Dec. 31 2014 Jan. 20

Date 2013 Dec. 31 2014 20 Jan.

Date 2013 Dec. 31 2014 Jan. 1

Cash Explanation

Debit

Account No. 101 Credit Balance

Beginning balance

850 G1 G1 G1 G1 G1

Accounts Receivable Explanation

3,500 2,000 5,000 3,000 750

Debit

Credit

4,350 2,350 7,350 4,350 3,600

Account No. 106 Balance

Beginning balance

300 G1 G1

Equipment Explanation

9,000 5,000

Debit

Credit

Account No. 167 Balance

Beginning balance

1,500 G1

Accounts Payable Explanation

9,300 4,300

12,000

Debit

13,500 Account No. 201 Credit Balance

Beginning balance

325 G1

Jay Walker, Capital Explanation

10,000

Debit

10,325

Account No. 301 Credit Balance

Beginning balance

2,325 G1

3,500

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

5,825

2-29

Last revised: October 26, 2012

Exercise 2-11 (Parts a and b continued)

Date 2013 31 Dec. 2014 Jan. 31

Date 2013 Dec. 31 2014 Jan. 12

Date 2013 31 Dec. 2014 Jan. 31

Jay Walker, Withdrawals Explanation

Debit

Account No. 302 Credit Balance 300

Beginning balance

Fees Earned Explanation

750

Debit

1,050 Account No. 401 Credit Balance

Beginning balance

1,800 G1

Salaries Expense Explanation

9,000

Debit

10,800

Account No. 622 Credit Balance

Beginning balance

1,500 G1

3,000

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

4,500

2-30

Last revised: October 26, 2012

Exercise 2-11 (Parts a and b continued) Note: After posting the journal entries, the PR column in the General Journal would appear as follows:

Date 2014 Jan. 1

General Journal Account Titles and Explanations

Debit

Cash ..................................................................................... 101 Jay Walker, Capital ..................................................... 301 Additional owner investment.

3,500

Accounts Receivable .......................................................... 106 Fees Earned ................................................................. 401 Performed work for a customer on account.

9,000

Equipment ........................................................................... 167 Cash ............................................................................. 101 Accounts Payable ....................................................... 201 Purchased equipment by paying cash and the balance on credit.

12,000

Cash ..................................................................................... 101 Accounts Receivable .................................................. 106 Collected cash from credit customer.

5,000

Salaries Expense ................................................................ 622 Cash ............................................................................. 101 Paid month-end salaries.

3,000

Jay Walker, Withdrawals .................................................... 302 Cash ............................................................................. 101 Jay Walker withdrew cash for personal use.

750

Page 1 Credit

3,500

9,000

2,000 10,000

5,000

3,000

750

Analysis component: All of the details regarding a transaction, such as serial numbers or invoice numbers, form part of the journal entry recorded in the journal and provide a chronological picture of what has happened in the business. The general ledger does not accommodate these kinds of very necessary details. Therefore, we need to journalize to ensure important details are readily available. The general ledger summarizes by account all of the transactions recorded in the journal. For example, without the ledger, we would not be able to determine the balance in cash without going through the journal and adding/subtracting all of the individual transactions. The ledger allows us to have account balance information. In summary, although it appears that journalizing and posting are recording the same information twice, the journal and ledger each serve different and important functions in the accounting system.

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-31

Last revised: October 26, 2012

Exercise 2-12 (25 minutes) Date 2014 Aug. 1

General Journal Account Titles and Explanations

Debit

Cash................................................................ Photography Equipment............................... Joseph Eetok, Capital ........................... Investment by owner.

101 167 301

20,000 42,000

Prepaid Rent .................................................. Cash ........................................................ Rented studio space.

131 101

12,000

Office Supplies .............................................. Cash ........................................................ Purchased office supplies.

124 101

1,800

Cash................................................................ Photography Fees Earned .................... Collected photography fees.

101 401

9,200

Utilities Expense............................................ Cash ........................................................ Paid for August utilities.

690 101

1,400

Page G1 Credit

62,000

12,000

1,800

9,200

1,400

Note: The account numbers in the PR column above would be included only during the posting of these journal entries into the ledger accounts in Exercise 2-13.

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-32

Last revised: October 26, 2012

Exercise 2-13 (30 minutes)

2014 Aug.

1 1 5 20 31

Date 2014 Aug. 5

Date 2014 Aug. 1

Date 2014 Aug. 20

Date 2014 Aug. 31

Office Supplies Explanation

G1 G1 G1 G1 G1

20,000

Debit

G1 Prepaid Rent Explanation

PR G1

Photography Equipment Explanation

PR G1

Joseph Eetok, Capital Explanation

12,000 1,800 9,200 1,400

Debit

PR G1

Account No. 131 Credit Balance 12,000 Account No. 167 Credit Balance

42,000

Debit

42,000 Account No. 301 Credit Balance 62,000

Debit

G1 Utilities Expense Explanation

1,800

12,000

G1 Photography Fees Earned Explanation

Account No. 124 Credit Balance

1,800

Debit

62,000

Account No. 401 Credit Balance 9,200

Debit

20,000 8,000 6,200 15,400 14,000

9,200

Account No. 690 Credit Balance

1,400

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

1,400

2-33

Last revised: October 26, 2012

Exercise 2-13 (concluded)

THE PIXEL SHOP Trial Balance August 31, 2014 Acct No. 101 124 131 167 301 401 690

Account Title Cash ........................................... Office supplies .......................... Prepaid rent ............................... Photography equipment ........... Joseph Eetok, capital ............... Photography fees earned ......... Utilities expense ........................ Totals..........................................

Debit $ 14,000 1,800 12,000 42,000

Credit

$62,000 9,200 1,400 $71,200

$71,200

Analysis component: The trial balance is not a financial statement; it is an internal working paper used to verify that debits and credits in the general ledger are equal and to review account balances. The trial balance format does not readily communicate information such as financial performance and financial position, information that is desired by external decision makers. Financial statements are used for external reporting because the formats of these communicate information desired by external users. For example, the income statement reports financial performance while the balance sheet reports financial position.

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-34

Last revised: October 26, 2012

Exercise 2-14 (20 minutes)

Aug. 1 20 Bal

Cash 101 20,000 12,000 Aug. 1 9,200 1,800 5 1,400 31 14,000

Photography Equipment Aug. 1 42,000

167

Photography Fees Earned 401 9,200 Aug. 20

Aug. 5

Office Supplies 1,800

124 Aug. 1

Prepaid Rent 12,000

Joseph Eetok, Capital 301 62,000 Aug. 1

Utilities Expense Aug. 31 1,400

690

THE PIXEL SHOP Trial Balance August 31, 2014 Acct. No. 101 124 131 167 301 401 690

Account Title Cash ........................................................... Office supplies .......................................... Prepaid rent ............................................... Photography equipment ........................... Joseph Eetok, capital ............................... Photography fees earned ......................... Utilities expense ........................................ Totals..........................................................

Debit $14,000 1,800 12,000 42,000

Credit

$62,000 9,200 1,400 $71,200

$71,200

Analysis component: The trial balance is an internal working paper used to verify that debits and credits in the general ledger are equal and to review account balances. The trial balance format does not readily communicate information such as financial performance and financial position, information that is desired by external decision makers. Financial statements are used for external reporting because the formats of these communicate information desired by external users. For example, the income statement reports financial performance while the balance sheet reports financial position.

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2-35

131

Last revised: October 26, 2012

Exercise 2-15 (20 minutes) Hogan’s Consulting Income Statement For Year Ended December 31, 2014 Revenues: Consulting fees earned ................................. Operating expenses: Wages expense .............................................. Rent expense ................................................. Total operating expenses ........................ Net loss ................................................................

$18,000 $29,000 8,000

Hogan’s Consulting Statement of Changes in Equity For Year Ended December 31, 2014 Lisa Hogan, capital, January 1 .......................... Add: Investments by owner .............................. Total ................................................................. Less: Withdrawals by owner ............................. $2,000 Net loss ...................................................... 19,000 Lisa Hogan, capital, December 31.....................

37,000 $19,000

0 50,000 $50,000

The arrows are imaginary

21,000 $29,000

but emphasize the link between statements.

Hogan’s Consulting Balance Sheet December 31, 2014 Assets Cash ........................................... Accounts receivable................. Prepaid rent............................... Machinery ..................................

Total assets ...............................

$18,000 5,200 13,000 57,100

$93,300

Liabilities Accounts payable ........................... Notes payable .................................. Total liabilities ................................. Equity Lisa Hogan, capital ......................... Total liabilities and equity...........................................

$ 17,300 47,000 $ 64,300 29,000 $ 93,300

Analysis component:

Losses cause equity to decrease. If equity decreases, either assets have to decrease and/or liabilities must increase to keep the balance sheet in balance. Therefore, if Hogan’s Consulting continues to experience losses, there are two short-term alternatives available to prevent a decrease in assets. First, the business could borrow which would increase liabilities and temporarily increase assets until payments had to be made. Second, Lisa Hogan, the owner, could invest additional assets into the business which would increase equity and assets. However, for the long-term, the owner does not want to support the business through continual investments; the business must be able to support itself through positive performance (net income).

2-36

Last revised: October 26, 2012

Exercise 2-16 (20 minutes) JenCo Income Statement For Month Ended March 31, 2014 Revenues: Service revenue .............................................................................. Operating expenses: Salaries expense............................................................................. Interest expense ............................................................................. Total operating expenses .......................................................... Net income ...........................................................................................

$1,650 $ 800 10 810 $ 840

JenCo Statement of Changes in Equity For Month Ended March 31, 2014 Marie Jensen, capital, March 1 ........................................................... Add: Investment by owner ................................................................. Net income ................................................................................. Total ................................................................................................. Less: Withdrawal by owner ............................................................... Marie Jensen, capital, March 31 .........................................................

$ $2,050 840

2,890 $2,890 1,500 $1,390

JenCo Balance Sheet March 31, 2014 Assets Cash ......................................... Accounts receivable ............... Prepaid insurance................... Equipment ...............................

Total assets .............................

$ 500 1,950 300 700

Liabilities Accounts payable ................................. $ 500 Unearned service revenue ................... 460 Notes payable ........................................ 1,100 Total liabilities .................................. $2,060

$3,450

Equity 1,390 Marie Jensen, capital ............................ Total liabilities and equity .................... $3,450

The arrows are imaginary but emphasize the link between statements.

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-37

Last revised: October 26, 2012

Exercise 2-17 (20 minutes) Nanimahoo Marketing Services Income Statement For Month Ended March 31, 2014 Revenues: Fees earned .......................................................................... Operating expenses: Wages expense .................................................................... $126,000

Office supplies expense ...................................................... Total operating expenses ................................................ Net loss .......................................................................................

$146,000 7,000 153,000 $ 27,000

Nanimahoo Marketing Services Statement of Changes in Equity For Month Ended March 31, 2014 Dee Nanimahoo, capital, March 1............................................. Add: Investment by owner ....................................................... Total ...................................................................................... Less: Withdrawal by owner ..................................................... Net loss ............................................................................ Dee Nanimahoo, capital, March 31...........................................

Assets Cash .............................. Accounts receivable .... Office supplies ............. Building ........................ Land .............................. Machinery ..................... Total assets ..................

$87,000* 35,000 $122,000 $ 18,000 27,000

45,000 $77,000

Nanimahoo Marketing Services Balance Sheet March 31, 2014 Liabilities $ 17,000 Accounts payable .............................. $ 46,000 3,000 Notes payable ..................................... 114,000 3,000 Total liabilities .................................. $ 160,000 80,000 84,000 Equity 50,000 Dee Nanimahoo, capital ....................... 77,000 $237,000 Total liabilities and equity .................... $237,000 The arrows are imaginary but emphasize the link between statements.

*$122,000 March 31/14 Balance - $35,000 invested in March = $87,000 March 1/14 Balance

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-38

Last revised: October 26, 2012

Exercise 2-18 (20 minutes) (1) Difference (2) (3) Identify Between Debit Column Account(s) and Credit With the Incorrectly Larger Description a. A $2,400 debit to Rent Expense was posted as a $1,590 debit. b. A $42,000 debit to Machinery was posted as a debit to Accounts Payable.

c. A $4,950 credit to Services Revenue was posted as a $495 credit. d. A $1,440 debit to Store Supplies was not posted at all. e. A $2,250 debit to Prepaid Insurance was posted as a debit to Insurance Expense.

Columns $810

—

$4,455

Debit

$1,440

Credit

A $4,050 credit to Cash was posted twice as two credits to the Cash account.

$4,050

g. A $9,900 debit to the owner’s withdrawals account was debited to the owner’s capital account.

Total Credit

—

Credit

—

(4) Amount That Account(s) is Overstated or

Stated Rent Expense

Understated Rent Expense is understated by $810 Machinery is Machinery understated by $42,000 and Accounts Accounts Payable is understated by Payable $42,000 Services Revenue Services is understated by Revenue $4,455 Store Supplies is Store understated by Supplies $1,440 Prepaid Insurance Prepaid is understated by Insurance $2,250 and Insurance Expense is overstated by Insurance Expense Cash

$2,250 Cash is understated by $4,050

Owner’s Capital

Owner’s Capital account is understated by $9,900

Owner’s Withdrawals

Owner’s Withdrawals is understated by $9,900

2-39

Last revised: October 26, 2012

Exercise 2-19 (15 minutes) a. 1. Dr = Cr 2. Accounts Receivable is understated (too low) by $3,500 and Revenue is understated by $3,500. b. 1. Dr = Cr 2. Accounts Payable is overstated (too high) by $600 and Cash is overstated by $600. c. 1. Dr ≠ Cr 2. Cash is overstated by $180. d. 1. Dr ≠ Cr 2. Accounts Receivable is overstated by $750. e. 1. Dr = Cr 2. Accounts Payable is understated by $2,000 and Equipment is understated by $2,000.

Exercise 2-20 (15 minutes) Case A: 1. Subtract total debits in the trial balance from total credits 5,010 – 4,290 = 720 2. Divide the difference by 9 720 ÷ 9 = 80 3. The quotient equals the difference between the two transposed numbers. 80 is the difference between the two transposed numbers. 4. The number of digits in the quotient tells us the location of the transposition. Look for a difference of 8 between the second number from the right and the third number from the right. Through a process of elimination, the incorrect value is Accounts Payable of $190. The correct value must be $910. Proof: Recalculate the trial balance replacing $910 for the incorrect $190 and the trial balance now balances at $5,010.

2-40

Last revised: October 26, 2012

Exercise 2-20 (concluded) Case B: 1. Subtract total debits in the trial balance from total credits 34,400 – 28,100 = 6,300 2. Divide the difference by 9 to reveal a slide error 6,300 ÷ 9 = 700 3. The quotient identifies a slide error and equals the correct value. Through a process of elimination, the incorrect value is Withdrawals for $7,000. The correct value must be $700. Proof: Recalculate the trial balance replacing $700 for the incorrect $7,000 and the trial balance now balances at $28,100.

Case C: 1. Subtract total debits in the trial balance from total credits 942 – 906 = 36 2. Divide the difference by 9 36 ÷ 9 = 4 3. The quotient equals the difference between the two transposed numbers. 4 is the difference between the two transposed numbers. 4. The number of digits in the quotient tells us the location of the transposition. Look for a difference of 4 between the first number from the right and the second number from the right. Through a process of elimination, the incorrect value is Cash for $59. The correct value must be $95. Proof: Recalculate the trial balance replacing $95 for the incorrect $59 and the trial balance now balances at $942.

2-41

Last revised: October 26, 2012

PROBLEMS Problem 2-1A (40 minutes) Parts 1 and 2

(a) (g) (n)

Bal

(l) Bal

Cash 100,000 80,000 16,000 3,200 1,900 1,800 4,600 9,300 3,200 3,200 12,600 Accounts Receivable 5,100 1,900 3,200

(c)

Office Supplies 4,600

(d)

Automobiles 9,000

(a) (e) (k) Bal.

(b)

(j)

Office Equipment 9,000 700 3,000 10,000 21,300

(b) (f) (h) (j) (k) (m) (o)

Joel Douglas, Capital 109,000 (a) 9,000 (d) 118,000 Bal.

(o)

Joel Douglas, Withdraw als 3,200 Fees Earned 16,000 5,100 21,100

(n)

(f) (m) Bal

Wages Expense 3,200 3,200 6,400

(h)

Utilities Expense 1,800

(g) (l) Bal

(k)

Building 85,000

Land 115,000

Accounts Payable 4,600 4,600 3,000 3,000

Note: There is no entry for (i) since it is not a transaction.

Long-Term Notes Payable 120,000 (b)

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-42

Last revised: October 26, 2012

Problem 2-2A (30 minutes) Date 2014 May 1

General Journal Account Titles and Explanations

Debit

Equipment ............................................................................ Cash .............................................................................. Notes Payable............................................................... Purchased new equipment paying cash and signing a 90-day note payable.

46,000

Prepaid Insurance ................................................................ Cash .............................................................................. Purchased 12 months of insurance to begin May 2.

24,000

Page 1 Credit

14,000 32,000

24,000

Cash ..................................................................................... . Design Revenue ........................................................... Completed a fitness contract for a group of customers and collected cash.

6,000

Office Supplies ..................................................................... Accounts Payable ........................................................ Purchased office supplies on account.

3,750

Accounts Payable ................................................................ Office Supplies ............................................................. Returned defective supplies to supplier.

750

Accounts Receivable ........................................................... Fitness Contract Revenue ........................................... Did work for a client today on account.

11,500

Accounts Payable ................................................................ Cash .............................................................................. Paid for the May 4 purchase less the return of May 6; $3,750 - $750 return = $3,000.

3,000

Cash ...................................................................................... Accounts Receivable ................................................... Received payment from the client of May 10.

11,500

6,000

3,750

750

11,500

3,000

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

11,500

2-43

Last revised: October 26, 2012

Problem 2-2A (concluded) May 25

Cash ...................................................................................... Unearned Revenue....................................................... Received cash for work to be done in June.

2,500

Salaries Expense ................................................................. Cash .............................................................................. Paid month-end salaries.

47,000

Telephone Expense ............................................................. Cash .............................................................................. Paid the May telephone bill.

2,250

Utilities Expense .................................................................. Accounts Payable (or Utilities Payable)..................... May electrical bill to be paid June 15.

3,100

2,500

47,000

2,250

3,100

Note: Assume that all entries were journalized on Page 1 of the General Journal.

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-44

Last revised: October 26, 2012

Problem 2-3A (90 minutes) Date 2014 Mar. 1

General Journal Account Titles and Explanations

Cash .......................................................................... 101 Office Equipment ..................................................... 163 Abe Factor, Capital........................................... 301 Invested cash and equipment to start the business.

Debit

Page 1 Credit

50,000 12,000 62,000

Prepaid Rent ............................................................. Cash................................................................... Prepaid three monthsâ&#x20AC;&#x2122; rent.

131 101

9,000

Office Equipment ..................................................... Office Supplies ......................................................... Accounts Payable ............................................ Purchased equipment and supplies on credit.

163 124 201

6,000 1,200

Cash .......................................................................... Accounting Fees Earned ................................. Received cash from client for completed work.

101 401

6,200

Accounts Receivable ............................................... Accounting Fees Earned ................................. Billed client for completed work.

106 401

4,000

Accounts Payable .................................................... Cash................................................................... Paid balance due on accounts payable.

201 101

7,200

Prepaid Insurance ..................................................... Cash.................................................................... Paid annual premium for insurance.

128 101

3,000

Cash .......................................................................... Accounts Receivable ....................................... Collected part of the amount owed by a client.

101 106

1,500

9,000

7,200

6,200

4,000

7,200

3,000

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

1,500

2-45

Last revised: October 26, 2012

Problem 2-3A (concluded) Mar.

No entry.

Accounts Receivable ............................................... Accounting Fees Earned ................................. Billed client for completed work.

106 401

2,850

Abe Factor, Withdrawals ......................................... Cash................................................................... Ownerâ&#x20AC;&#x2122;s withdrawal of cash.

302 101

3,600

Office Supplies ......................................................... Accounts Payable ............................................ Purchased supplies.

124 201

650

Utilities Expense ...................................................... Cash................................................................... Paid monthly utility bill.

690 101

860

2,850

3,600

650

860

Note: The account numbers in the PR column above would be included only when these journal entries are being posted in Problem 3-4A. Assume that all entries were journalized on Page 1 of the General Journal.

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-46

Last revised: October 26, 2012

Problem 2-4A (45 minutes) Parts 1 and 2 Cash Date 2014 Mar. 1 1 5 11 15 20 27 31

Date 2014 Mar. 9 20 23

Date 2014 Mar. 3 30

Date 2014 Mar. 15

Date 2014 Mar. 1

Date 2014 1 Mar. 3

Explanation

Debit

G1 G1 G1 G1 G1 G1 G1 G1

50,000

Accounts Receivable Explanation PR G1 G1 G1 Office Supplies Explanation

Prepaid Insurance Explanation

Prepaid Rent Explanation

Office Equipment Explanation

Acct. No. 101 Credit Balance 50,000 41,000 47,200 40,000 37,000 38,500 34,900 34,040

9,000 6,200 7,200 3,000 1,500 3,600 860

Debit

Acct. No. 106 Credit Balance

4,000 2,850

4,000 2,500 5,350

Debit

Acct. No. 124 Credit Balance

G1 G1

1,200 650

1,200 1,850

1,500

Acct. No. 128 Credit Balance

Debit

3,000

Debit

Acct. No. 131 Credit Balance

9,000

Debit

G1 G1

12,000 6,000

3,000

Credit

Acct. No. 163 Balance

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

12,000 18,000

2-47

Last revised: October 26, 2012

Problem 2-4A (continued)

Date 2014 3 Mar. 11 30

Date 2014 Mar. 1

Date 2014 Mar. 27

Date 2014 Mar. 5 9 23

Date 2014 Mar. 31

Accounts Payable Explanation

PR G1 G1 G1

Abe Factor, Capital Explanation

Debit

G1 Accounting Fees Earned Explanation PR

Utilities Expense Explanation

Acct. No. 201 Balance

7,200 7,200 650

Debit

G1 Abe Factor, Withdrawals Explanation PR

Credit

Acct. No. 301 Credit Balance 62,000

Debit

7,200 0 650

62,000

Acct. No. 302 Credit Balance

3,600

Debit

Acct. No. 401 Credit Balance

G1 G1 G1

6,200 4,000 2,850

Debit

Acct. No. 690 Credit Balance

860

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

6,200 10,200 13,050

2-48

Last revised: October 26, 2012

Problem 2-4A (concluded) Part 3 X-FACTOR ACCOUNTING Trial Balance March 31, 2014 Acct. No. 101 106 124 128 131 163 201 301 302 401 690

Account Title Cash ................................................................. Accounts receivable ....................................... Office supplies ................................................ Prepaid insurance ........................................... Prepaid rent ..................................................... Office equipment............................................. Accounts payable ........................................... Abe Factor, capital .......................................... Abe Factor, withdrawals................................. Accounting fees earned ................................. Utilities expense.............................................. Totals ...............................................................

Debit $34,040 5,350 1,850 3,000 9,000 18,000

Credit

650 62,000

3,600 13,050 860 $75,700

$75,700

2-49

Last revised: October 26, 2012

Problem 2-5A (20 minutes) X-FACTOR ACCOUNTING Income Statement For Month Ended March 31, 2014 Revenues: Accounting fees earned .................................. Operating expenses: Utilities expense .............................................. Net income ..........................................................

X-FACTOR ACCOUNTING Statement of Changes in Equity For Month Ended March 31, 2014 Abe Factor, capital, March 1 .............................. Add: Investments by owner .............................. $62,000 Net income ................................................ 12,190 Total ................................................................. Less: Withdrawals by owner ............................. Abe Factor, capital, March 31 ............................

Assets Cash .......................................... Accounts receivable................ Office supplies ......................... Prepaid insurance ................... Prepaid rent.............................. Office equipment ..................... Total assets ..........................

$13,050 860 $12,190

0 The arrows are imaginary

74,190 74,190 3,600 $70,590

but emphasize the link between statements.

X-FACTOR ACCOUNTING Balance Sheet March 31, 2014 Liabilities $34,040 Accounts payable ......................... 5,350 1,850 3,000 Equity 9,000 Abe Factor, capital ........................ 18,000 Total liabilities and $71,240 equity.........................................

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

650

70,590 $71,240

2-50

Last revised: October 26, 2012

Problem 2-6A (90 minutes) Part 1 General Journal Account Titles and Explanations

Date

Debit

Page 1 Credit

2011 May

Cash ................................................................. 101 Office Equipment ............................................ 163

75,000 48,000

Jill Wahpoosywan, Capital ..................... 301

123,000

Invested cash and equipment to start the business. 1

Prepaid Rent .................................................... 131 Cash ......................................................... 101

14,400 14,400

Prepaid three monthsâ&#x20AC;&#x2122; rent. 2

Office Equipment ............................................ 163

24,000

Office Supplies ................................................ 124

4,800

Accounts Payable ................................... 201

28,800

Purchased equipment and supplies on credit. 6

Cash ................................................................. 101 Services Revenue ................................... 403 Received cash from client for services performed.

8,000 8,000

Accounts Receivable ...................................... 106 Services Revenue ................................... 403 Billed client for completed work.

16,000

Accounts Payable ........................................... 201 Cash ......................................................... 101 Paid one-half of balance due on accounts payable.

14,400

16,000

14,400

Prepaid Insurance ........................................... 128 Cash ......................................................... 101 Paid annual premium for insurance.

7,500

Cash ................................................................. 101 Accounts Receivable .............................. 106 Collected part of the amount owed by a client.

12,800

Accounts Receivable ...................................... 106 Services Revenue ................................... 403 Billed client for completed work.

5,280

Wages expense ............................................... 623 Cash ......................................................... 101 Paid wage expense.

34,000

7,500

12,800

5,280

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

34,000

2-51

Last revised: October 26, 2012

Problem2-6A, Part 1 (continued) May

Jill Wahpoosywan, Withdrawals.................... 302 Cash ......................................................... 101 Owner withdrew cash.

5,000

Office Supplies ................................................ 124 Accounts Payable ................................... 201 Purchased supplies on credit.

1,600

Utilities Expense ............................................. 690 Cash ......................................................... 101 Paid monthly utility bill.

1,400

5,000

1,600

1,400

Note: Assume that all entries were journalized on Page 1 of the General Journal. Parts 2 and 3 Cash Date 2014 1 May 1 6 10 19 22 25 31 31

Date 2014 9 May 22 25

Explanation

Debit 75,000

14,400 8,000 14,400 7,500 12,800 34,000 5,000 1,400 Accounts Receivable Explanation

Debit

G1 G1 G1

16,000

Explanation 2 31

75,000 60,600 68,600 54,200 46,700 59,500 25,500 20,500 19,100

Acct. No. 106 Balance Credit

12,800 5,280

Office Supplies Date 2014 May

Acct. No. 101 Credit Balance

16,000 3,200 8,480

Acct. No. 124 PR G1 G1

Debit

Credit

4,800 1,600

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

Balance 4,800 6,400

2-52

G1 G1 G1 G1 G1 G1 G1 G1 G1

Last revised: October 26, 2012

Problem 2-6A (continued) Parts 2 and 3 Prepaid Insurance Explanation

Date 2014 May 19

PR G1

Debit 7,500

Prepaid Rent Date 2014 May 1

Date 2014 1 May 2

Date 2014 May 2 10 31

Date 2014 May 1

Date 2014 May 31

Date 2014 May 6 9 25 Date 2014 May 25

Explanation

Office Equipment Explanation

Debit

14,400

PR G1 G1

Accounts Payable Explanation

PR G1 G1 G1

Jill Wahpoosywan, Capital Explanation PR

Debit

G1 Services Revenue Explanation

Debit

Acct. No. 131 Credit Balance 14,400 Acct. No. 163 Credit Balance 48,000 72,000 Acct. No. 201 Credit Balance 28,800

14,400 1,600

Debit

5,000 Acct. No. 403 Credit Balance 8,000 16,000 5,280

Debit

34,000

123,000

Acct. No. 302 Credit Balance

5,000

Debit

28,800 14,400 16,000

Acct. No. 301 Credit Balance 123,000

G1 G1 G1 Wages Expense Explanation

7,500

48,000 24,000

G1 Jill Wahpoosywan, Withdrawals Explanation PR

Acct. No. 128 Credit Balance

8,000 24,000 29,280

Acct. No. 623 Credit Balance

34,000

2-53

Last revised: October 26, 2012

Problem 2-6A (continued) Parts 2 and 3 Date 2014 May 31

Utilities Expense Explanation

PR G1

Debit

Acct. No. 690 Credit Balance

1,400

Part 4 TECHNO WIZARDS Trial Balance May 31, 2014 Acct. No. 101 106 124 128 131 163 201 301 302 403 623 690

Account Title

Debit

Cash.......................................................... Accounts receivable ............................... Office supplies......................................... Prepaid insurance ................................... Prepaid rent ............................................. Office equipment ..................................... Accounts payable.................................... Jill Wahpoosywan, capital ...................... Jill Wahpoosywan, withdrawals............. Services revenue ..................................... Wages expense…………………………… Utilities expense ...................................... Totals ........................................................

$ 19,100 8,480 6,400 7,500 14,400 72,000

Credit

$ 16,000 123,000 5,000 29,280 34,000 1,400 $168,280

$168,280

Analysis component: Equity represents how much of Techno Wizards’ assets belong to the owner, Jill Wahpoosywan. Services Revenue is an equity account because as revenues are realized, the business’s net worth (assets – liabilities, or equity) increases either through the receipt of an asset (cash or accounts receivable) or satisfying a liability (unearned revenues). Utilities Expense is an equity account because as expenses are realized, net worth (what belongs to the owner) decreases either through the use of an asset (such as prepaid insurance) or increase in a liability (such as rent payable). Jill Wahpoosywan, Withdrawals is an equity account because as the owner withdraws assets, Jill Wahpoosywan’s equity in the business (what belongs to the owner) decreases. The owner’s objective is for the business to generate sufficient revenues to cover all expenses, provide sufficient assets for the purpose of withdrawals, and at the same time maintain or preferably increase equity (because excess revenues remained after deducting expenses and withdrawals).

2-54

Last revised: October 26, 2012

Problem 2-7A TECHNO WIZARDS Income Statement For Month Ended May 31, 2014 Revenues: Service revenue .................................................. Operating expenses: Wages expense ................................................ Utilities expense .............................................. Total operating expenses ............................. Net loss ................................................................

$29,280 $34,000 1,400

TECHNO WIZARDS Statement of Changes in Equity For Month Ended May 31, 2014 Jill Wahpoosywan, capital, May 1 ..................... Add: Investments by owner…………………….. Less: Withdrawals by owner .............................. $5,000 Net loss ...................................................... 6,120 Jill Wahpoosywan, capital, May 31 ...................

35,400 $ 6,120

0 123,000

11,120 $111,880

The arrows are imaginary but emphasize the link between statements.

TECHNO WIZARDS Balance Sheet May 31, 2014 Assets Cash .......................................... Accounts receivable................ Office supplies ......................... Prepaid insurance ................... Prepaid rent.............................. Office equipment ..................... Total assets ..........................

$ 19,100 8,480 6,400 7,500 14,400 72,000 $127,880

Liabilities Accounts payable .........................

Equity Jill Wahpoosywan, capital............ Total liabilities and equity.........................................

$ 16,000

111,880 $127,880

2-55

Last revised: October 26, 2012

Problem 2-8A (25 minutes) WILDCAT OPTICIANS Income Statement For Month Ended May 31, 2014 Revenues: Service revenue .................................................. Operating expenses: Wages expense ................................................ Rent expense …………………………………… Utilities expense .............................................. Total operating expenses ............................. Net income ..........................................................

$25,280 $15,000 4,300 1,400

WILDCAT OPTICIANS Statement of Changes in Equity For Month Ended May 31, 2014 Bo Wildcat, capital, May 1 .................................. Add: Owner investment .................................... $ 56,300 Net income ................................................ 4,580 Total ................................................................. Less: Withdrawals by owner ............................. Bo Wildcat, capital, May 31 ................................

20,700 $ 4,580

-0-

60,880 $60,880 1,480 $59,400

The arrows are imaginary but emphasize the link between statements.

WILDCAT OPTICIANS Balance Sheet May 31, 2014 Assets Cash .......................................... Accounts receivable................ Office supplies ......................... Prepaid insurance ................... Office equipment .....................

Total assets ..........................

$18,500 8,480 6,400 9,820 25,600

$68,800

Liabilities Accounts payable ......................... Unearned service revenue ........... Total liabilities ...............................

Equity Bo Wildcat, capital ........................ Total liabilities and equity.........................................

$ 1,600 7,800 $ 9,400

59,400 $68,800

2-56

Last revised: October 26, 2012

Analysis component: 2014 May 31 Utilities Expense .......................................................... Cash .................................................................... Paid the May utilities. 31

Utilities Expense .......................................................... Accounts Payable .............................................. Received the May utility bill which will be paid next month.

1,400 1,400

Problem 2-9A (90 minutes) Part 1 Date 2014 July

General Journal Account Titles and Explanations 1

Debit

Cash ............................................................... Office Equipment .......................................... Drafting Equipment ....................................... Bishr Binbutti, Capital........................... Investment by owner.

101 163 167 301

300,000 12,000 90,000

Land................................................................ Cash........................................................ Long-Term Notes Payable .................... Purchased land.

183 101 251

108,000

Building .......................................................... Cash........................................................ Purchased a building.

173 101

150,000

Prepaid Insurance ......................................... Cash........................................................ Purchased two one-year insurance policies.

128 101

12,000

Cash ............................................................... Engineering Fees Earned ..................... Completed services for cash.

101 401

1,400

Drafting Equipment ....................................... Cash........................................................ Long-Term Notes Payable .................... Purchased drafting equipment.

167 101 251

45,000

Accounts Receivable .................................... Engineering Fees Earned ..................... Completed services on credit.

106 401

4,000

Page 1 Credit

402,000

10,800 97,200

150,000

12,000

1,400

21,000 24,000

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

4,000

2-57

Last revised: October 26, 2012

Problem 2-9A (continued) July

Office Equipment .......................................... Accounts Payable ................................. Purchased office equipment on credit.

163 201

4,500

Accounts Receivable .................................... Engineering Fees Earned ..................... Completed services on credit.

106 401

7,000

Equipment Rental Expense .......................... Accounts Payable ................................. Equipment rental to be paid in 30 days.

645 201

13,800

Cash ............................................................... Accounts Receivable ............................ Collection from credit customer.

101 106

400

Wages Expense ............................................. Cash........................................................ Paid drafting assistants.

623 101

12,000

Accounts Payable ......................................... Cash........................................................ Paid July 12 transaction.

201 101

4,500

Repairs Expense ........................................... Cash........................................................ Paid for repairs on drafting equipment.

684 101

1,350

Bishr Binbutti, Withdrawals ......................... Cash........................................................ Owner withdrawal.

302 101

800

Wages Expense ............................................. Cash........................................................ Paid drafting assistants.

623 101

12,000

Advertising Expense..................................... Cash........................................................ Paid for advertising in local newspaper.

655 101

6,000

4,500

7,000

13,800

400

12,000

4,500

1,350

800

12,000

6,000

Note: Assume all entries were journalized on Page 1 of the General Journal.

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-58

Last revised: October 26, 2012

Problem 2-9A (continued) Parts 2 and 3

Date 2014 June 30 July 1 2 3 5 7 9 17 19 22 25 26 30 31

Date 2014 30 June July 10 15 17

Date 2014 30 June July 5

Date 2014 30 June July 1 12

Cash Explanation

Debit

G1 G1 G1 G1 G1 G1 G1 G1 G1 G1 G1 G1 G1

300,000

Account No. 101 Credit Balance

Beginning balance

Accounts Receivable Explanation

10,800 150,000 12,000 1,400 21,000 400 12,000 4,500 1,350 800 12,000 6,000

Debit

Account No. 106 Credit Balance

Beginning balance

Prepaid Insurance Explanation

3,000 7,000 14,000 13,600

G1 G1 G1

4,000 7,000

Debit

Account No. 128 Credit Balance

12,000

500 12,500

Debit

Account No. 163 Credit Balance

G1 G1

12,000 4,500

1,700 13,700 18,200

400

Beginning balance G1 Office Equipment Explanation

26,000 326,000 315,200 165,200 153,200 154,600 133,600 134,000 122,000 117,500 116,150 115,350 103,350 97,350

Beginning balance

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-59

Last revised: October 26, 2012

Problem 2-9A (continued) Parts 2 and 3 (continued)

Date 2014 June 30 July 1 9

Date 2014 June 30 July 3

Date 2014 June 30 July 2

Date 2014 June 30 July 12 16 22

Date 2014 30 June July 2 9

Date 2014 June 30 July 1

Drafting Equipment Explanation

Debit

Account No. 167 Credit Balance

G1 G1

90,000 45,000

1,200 91,200 136,200

Debit

Account No. 173 Credit Balance

150,000

Beginning balance

Building Explanation Beginning balance

Land Explanation

Debit

108,000

42,000 192,000 Account No. 183 Credit Balance

Beginning balance

Accounts Payable Explanation

Debit

28,000 136,000 Account No. 201 Credit Balance

Beginning balance

Long-Term Notes Payable Explanation

G1 G1 G1

4,500 13,800 4,500

Debit

Credit

Account No. 251 Balance

Beginning balance G1 G1 Bishr Binbutti, Capital Explanation

97,200 24,000

Debit

24,000 121,200 145,200

Account No. 301 Credit Balance

Beginning balance G1

1,740 6,240 20,040 15,540

402,000

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

54,000 456,000

2-60

Last revised: October 26, 2012

Problem 2-9A (continued) Parts 2 and 3 (continued)

Date 2014 June 30 July 26

Date 2014 June 30 July 7 10 15

Date 2014 June 30 July 19 30

Date 2014 30 June July 16

Date 2014 30 June July 31

Date 2014 June 30 July 25

Bishr Binbutti, Withdrawals Explanation

Debit

800

Account No. 302 Credit Balance

Beginning balance

Engineering Fees Earned Explanation

Debit

1,000 1,800 Account No. 401 Credit Balance

Beginning balance G1 G1 G1 Wages Expense Explanation

1,400 4,000 7,000

Debit

Account No. 623 Credit Balance

Beginning balance G1 G1 Equipment Rental Expense Explanation

4,000 16,000 28,000

12,000 12,000

Debit

13,800

Account No. 645 Credit Balance

Beginning balance

Advertising Expense Explanation

Debit

1,000 14,800 Account No. 655 Credit Balance

Beginning balance G1 Repairs Expense Explanation

640 6,640

6,000

Debit

Credit

Account No. 684 Balance

Beginning balance G1

29,600 31,000 35,000 42,000

1,350

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

300 1,650

2-61

Last revised: October 26, 2012

Problem 2-9A (concluded) Part 4 BINBUTTI ENGINEERING Trial Balance July 31, 2014 Acct. No. 101

Account Title Cash .....................................................................

Debit $ 97,350

106 128

Accounts receivable ........................................... Prepaid insurance ...............................................

13,600 12,500

163

Office equipment .................................................

18,200

167 173

Drafting equipment ............................................. Building ................................................................

136,200 192,000

183 201

Land...................................................................... Accounts payable ...............................................

136,000

251

Long-term notes payable ...................................

301 302 401 623

Bishr Binbutti, capital ......................................... Bishr Binbutti, withdrawals ................................ Engineering fees earned .................................... Wages expense ...................................................

28,000

645 655 684

Equipment rental expense ................................. Advertising expense ........................................... Repairs expense.................................................. Totals....................................................................

14,800 6,640 1,650 $658,740

Credit

$ 15,540 145,200 456,000 1,800 42,000

$658,740

2-62

Last revised: October 26, 2012

Problem 2-10A (25 minutes) BINBUTTI ENGINEERING Income Statement For Three Months Ended July 31, 2014 Revenues: Engineering fees earned .................................... Operating expenses: Wages expense ................................................ Equipment rental expense .............................. Advertising expense........................................ Repairs expense .............................................. Total operating expenses ............................ Net loss ................................................................

$42,000 $28,000 14,800 6,640 1,650

BINBUTTI ENGINEERING Statement of Changes in Equity For Three Months Ended July 31, 2014 Bishr Binbutti, capital, May 1............................. Add: Investments by owner .............................. Total ................................................................. Less: Withdrawals by owner ............................. $1,800 Net loss ..................................................... 9,090 Bishr Binbutti, capital, July 31 ..........................

51,090 $ 9,090

0 456,000 456,000

10,890 $445,110

The arrows are imaginary but emphasize the link between statements.

BINBUTTI ENGINEERING Balance Sheet July 31, 2014 Assets Cash .......................................... Accounts receivable................ Prepaid insurance ................... Office equipment ..................... Drafting equipment.................. Building .................................... Land .......................................... Total assets ..........................

$ 97,350 13,600 12,500 18,200 136,200 192,000 136,000 $605,850

Liabilities Accounts payable ..................... Long-term notes payable ......... Total liabilities ........................ Equity Bishr Binbutti, capital ............... Total liabilities and equity.....................................

$ 15,540 145,200 160,740

445,110 $605,850

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-63

Last revised: October 26, 2012

Problem 2-11A (45 minutes) Part 1 Date 2014 July

General Journal Account Titles and Explanations 1

Debit

Supplies ......................................................... Accounts Payable ............................... Purchased supplies on account.

126 201

100

Cash ............................................................... Unearned Teaching Revenue ............... Collected teaching fees for August.

101 233

4,000

Cash ............................................................... Teaching Revenue .............................. Collected teaching fees for July.

101 401

2,000

Rent Expense ................................................ Cash........................................................ Paid July rent.

640 101

3,000

Accounts Payable ......................................... Cash ..................................................... Paid for supplies purchased on account.

201 101

500

Ted Ng, Withdrawals ..................................... Cash........................................................ The owner withdrew cash.

302 101

500

Wages Expense ............................................. Cash ..................................................... Paid wages.

623 101

1,300

Furniture ........................................................ Accounts Payable ............................... Purchased a new chair on account.

161 201

300

Page 1 Credit

100

4,000

2,000

3,000

500

1,300

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

300

2-64

Last revised: October 26, 2012

Problem 2-11A (continued) Parts 2 and 3

Bal. Jul. 2 3

Bal.

Cash 6,000 4,000 3,000 2,000 500 500 1,300 6,700

101 Jul. 4 Jul. 5 Jul. 15 Jul. 20

Unearned Teaching Rev 233 9,800 Bal. 4,000 Jul. 2 13,800 Bal.

Wages Expense Bal. 26,350 Jul. 20 1,300 Bal. 27,650

623

Bal. Jul. 1 Bal.

Supplies 950 100 1,050

126 Bal. Jul. 31 Bal.

Ted Ng, Capital 301 3,000 Bal.

Rent Expense Bal. 6,000 Jul. 4 3,000 Bal. 9,000

Furniture 8,000 300 8,300

Ted Ng, Withdrawals Bal. 13,000 Jul. 15 500 Bal. 13,500

161

302

Accounts Payable 1,500 Jul. 5 500 100 300 1,400

201 Bal. Jul. 1 Jul. 31 Bal.

Teaching Revenue 401 46,000 Bal. 2,000 Jul. 3 48,000 Bal.

640

2-65

Last revised: October 26, 2012

Problem 2-11A (continued) Part 4 NG’S ENGLISH SCHOOL Trial Balance July 31, 2014 Acct. No. 101 126 161 201 233 301 302 401 623 640

Account Title Cash ................................................................. Supplies ........................................................... Furniture .......................................................... Accounts payable ........................................... Unearned teaching revenue ........................... Ted Ng, capital ................................................ Ted Ng, withdrawals ....................................... Teaching revenue ........................................... Wages expense ............................................... Rent expense................................................... Totals ...............................................................

Debit $ 6,700 1,050 8,300

Credit

$ 1,400 13,800 3,000 13,500 48,000 27,650 9,000 $66,200

$66,200

2-66

Last revised: October 26, 2012

Problem 2-11A (concluded) Part 5 NG’S ENGLISH SCHOOL Income Statement For Three Months Ended July 31, 2014 Teaching revenue ............................................... Operating expenses: Wages expense ................................................ Rent expense ................................................... Total operating expenses ............................. Net income ..........................................................

$48,000 $27,650 9,000

NG’S ENGLISH SCHOOL Statement of Changes in Equity For Three Months Ended July 31, 2014 Ted Ng, capital, May 1 ........................................ Add: Owner investment .................................... $ 3,000 Net income ................................................ 11,350 Total ................................................................. Less: Withdrawals by owner ............................. Ted Ng, capital, July 31 ......................................

36,650 $11,350

-0-

14,350 $14,350 13,500 $ 850

The arrows are imaginary but emphasize the link between statements.

NG’S ENGLISH SCHOOL Balance Sheet July 31, 2014 Assets Cash .......................................... Supplies.................................... Furniture ...................................

Total assets ..........................

$ 6,700 1,050 8,300

$16,050

Liabilities Accounts payable ......................... Unearned teaching revenue ......... Total liabilities ............................... Equity Ted Ng, capital............................... Total liabilities and equity.........................................

$ 1,400 13,800 $15,200 850 $16,050

2-67

Last revised: October 26, 2012

Problem 2-12A (25 minutes) FELINE PET CARE Income Statement For Year Ended July 31, 2014 Revenues: Fees earned ......................................................... Operating expenses: Wages expense ................................................ Equipment rental expense .............................. Pet food expense ............................................ Advertising expense........................................ Total operating expenses ............................ Net loss ................................................................

$117,000 $58,000 34,000 17,800 9,200

FELINE PET CARE Statement of Changes in Equity For Year Ended July 31, 2014 Betty Lark, capital, August 1 ............................. Add: Investments by owner .............................. Total ................................................................. Less: Withdrawals by owner ............................. $ 5,000 Net loss ..................................................... 2,000 Betty Lark, capital, July 31.................................

119,000 $ 2,000

0 292,760 292,760

7,000 $285,760

The arrows are imaginary but emphasize the link between statements.

FELINE PET CARE Balance Sheet July 31, 2014 Assets Cash .......................................... Accounts receivable................ Prepaid insurance ................... Equipment ................................ Building .................................... Land ..........................................

$ 23,000 11,600 12,500 18,200 192,000 136,000

Total assets ..........................

$393,300

Liabilities Accounts payable ..................... Unearned fees ........................... Total liabilities ........................ Equity Betty Lark, capital ..................... Total liabilities and equity.....................................

$ 15,540 92,000 107,540

285,760 $393,300

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-68

Last revised: October 26, 2012

Problem 2-12A (concluded)

Analysis component: 2014 July 31 Cash .............................................................................. Fees Earned ........................................................ Received cash for completing work for clients. 31

Accounts Receivable ................................................... Fees Earned ........................................................ Completed work for clients on account.

117,000 117,000

Problem 2-13A (15 minutes) Wilm’s Window Washing Services Trial Balance January 31, 2014 Cash (11,600 + 2,800b – 4,400d) ....................................... Accounts receivable (9,240 – 2,800b + 3,600c) ............... Prepaid insurance ............................................................ Equipment (24,000 + 4,000a) ............................................ Accounts payable (5,400 + 4,000a) .................................. Wilm Schmidt, capital ...................................................... Wilm Schmidt, withdrawals ............................................. Service revenues (60,400 + 3,600e) ................................. Salaries expense .............................................................. Insurance expense ........................................................... Maintenance expense (13,000 + 3,600e).......................... Utilities expense ............................................................... Totals .................................................................................

Debit $ 10,000 10,040 2,400 28,000

Credit

$ 9,400 45,000 8,960 64,000 32,000 5,200 16,600 5,200 $118,400

$118,400

Note: The superscripts (a) to (e) are references to items (a) to (e) listed in Problem 213A.

2-69

Last revised: October 26, 2012

ALTERNATE PROBLEMS Problem 2-1B (40 minutes) Parts 1 and 2

(a) (g) (m)

Balance

Cash 46,000 30,000 2,700 1,800 1,000 1,430 600 2,400 1,800 1,050 10,620

(b) (f) (h) (i) (j) (l) (n)

Land 268,000

(b)

Accounts Payable 600 600 4,600 4,600

(i)

Long-Term Notes Payab le 304,000

(b)

Accounts Receivable (k) Balance

2,400 1,400

1,000

(c)

Office Supplies 600

(d)

Automobiles 7,000

(a) (e) (j) Balance

(b)

Office Equipment 24,000 1,600 4,600 4,000 31,000 Building 66,000

(m)

Trevor Peeters, Capital 70,000 (a) 7,000 (d) 77,000 Balance

(n)

Trevor Peeters, Withdrawals 1,050 Fees Earned 2,700 2,400 5,100

(j)

(f) (l) Balance

Salaries Expense 1,800 1,800 3,600

(h)

Utilities Expense 1,430

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

(g) (k) Balance

2-70

Last revised: October 26, 2012

Problem 2-2B Date 2014 March

General Journal Accounts Titles and Explanations 1

Debit

Building ................................................................................ . Cash............................................................................... Note Payable ................................................................. Purchased new portable building paying cash and signing a five-year note payable.

375,000

Prepaid Insurance ................................................................ Cash............................................................................... Purchased six months of insurance to begin March 1.

5,700

75,000 300,000

5,700

No entry.

Cleaning Supplies ................................................................ Accounts Payable ........................................................ Purchased cleaning supplies on account.

450

Accounts Payable ................................................................ Cash............................................................................... Paid for the March 4 purchase.

450

Accounts Receivable ........................................................... Advertising Revenue (or other revenue account) ..... Performed work for a client on account.

35,000

Cash ...................................................................................... Unearned Revenue ....................................................... Collected cash from a customer for work to be done in April.

8,000

Hotel Expense or Travel Expense ...................................... Cash ............................................................................... Paid for a hotel regarding a business meeting.

240

Page 1 Credit

450

35,000

8,000

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

240

2-71

Last revised: October 26, 2012

Problem 2-2B (concluded) March

Cash ...................................................................................... Advertising Revenue (or other revenue account) ..... Provided advertising services and collected cash.

5,000

Salaries Expense.................................................................. Cash............................................................................... Paid month-end salaries.

25,600

Telephone Expense ............................................................. Accounts Payable ....................................................... March telephone bill to be paid on April 14.

1,300

17,500

5,000

25,600

1,300

17,500

Note: Assume all entries were journalized on Page 1 of the General Journal.

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-72

Last revised: October 26, 2012

Problem 2-3B (60 minutes) Date 2014 Sept.

General Journal Account Titles and Explanations 1

Debit

Cash .............................................................. Office Equipment ......................................... Susan Hurley, Capital .......................... Investment by owner.

101 163 301

20,000 9,200

Prepaid Rent ................................................. Cash....................................................... Paid two monthsâ&#x20AC;&#x2122; rent.

131 101

5,600

Office Supplies ............................................. Office Equipment ......................................... Accounts Payable ................................ Purchased items on credit.

124 163 201

1,380 3,800

Cash .............................................................. Accounting Fees Earned ..................... Sold accounting services for cash.

101 401

2,900

Accounts Receivable ................................... Accounting Fees Earned ..................... Sold accounting services on credit.

106 401

5,080

Accounts Payable ........................................ Cash....................................................... Paid for credit purchase.

201 101

5,180

Prepaid Insurance ........................................ Cash...................................................... Paid insurance premium.

128 101

3,300

Professional Development Expense ..........

680

1,250

Cash ...................................................... Paid for seminar.

101

Page 1 Credit

29,200

5,600

5,180

2,900

5,080

5,180

3,300

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

1,250

2-73

Last revised: October 26, 2012

Problem 2-3B (concluded) Sept.

Cash .............................................................. Accounts Receivable ........................... Received cash from credit customer.

101 106

5,080 5,080

No entry.

Accounts Receivable ................................... Accounting Fees Earned ..................... Sold accounting services on credit.

106 401

5,000

Susan Hurley, Withdrawals ......................... Cash....................................................... Owner withdrew cash.

302 101

2,500

Office Supplies ............................................. Accounts Payable ................................ Purchased supplies on credit.

124 201

450

Utilities Expense .......................................... Cash....................................................... Paid utilities bill.

690 101

1,750

5,000

2,500

450

1,750

Note: The account numbers in the PR column above would be included only when these journal entries are being posted in Problem 2-4B. Assume that all entries were journalized on Page 1 of the General Journal.

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-74

Last revised: October 26, 2012

Problem 2-4B Parts 1 and 2 Cash Date 2014 Sept.

Explanation 1 1 4 10 14 15 18 28 30

Date 2014 8 Sept. 18 24

Date 2014 Sept. 2 29

Date 2014 Sept.

20,000 5,600 2,900 5,180 3,300 1,250 5,080 2,500 1,750 Accounts Receivable Explanation PR G1 G1 G1 Office Supplies Explanation

Date 2014 Sept. 1 2

PR G1 G1

Prepaid Insurance Explanation

Date 2014 Sept. 1

Debit

Acct. No. 101 Credit Balance

Prepaid Rent Explanation

Office Equipment Explanation

Debit

Acct. No. 106 Balance Credit

5,080 5,080 5,000

Debit

20,000G1 14,400G1 17,300G1 12,120G1 8,820G1 7,570G1 12,650G1 10,150G1 8,400G1

5,080 0 5,000

Acct. No. 124 Credit Balance

1,380 450

1,380 1,830 Acct. No. 128 Credit Balance

Debit

3,300

Debit

Acct. No. 131 Credit Balance

5,600

Debit

Acct. No. 163 Credit Balance

G1 G1

9,200 3,800

9,200 13,000

2-75

Last revised: October 26, 2012

Problem 2-4B (continued) Parts 1 and 2

Date 2014 Sept. 2 10 29

Date 2014 Sept. 1

Date 2014 Sept. 28

Date 2014 Sept. 4 8 24

Date 2014 Sept. 15

Date 2014 Sept. 30

Accounts Payable Explanation

Debit

G1 G1 G1

5,180

Susan Hurley, Capital Explanation PR

5,180

G1 Accounting Fees Earned Explanation PR

Debit

Credit

Acct. No. 301 Balance

29,200

Acct. No. 302 Credit Balance

2,500

Debit

Acct. No. 401 Credit Balance

G1 G1 G1

2,900 5,080 5,000

Professional Development Expense Explanation PR Debit

Utilities Expense Explanation

5,180 0 450

450

G1 Susan Hurley, Withdrawals Explanation PR

Acct. No. 201 Credit Balance

1,250

Debit

1,750

Credit

2,900 7,980 12,980 Acct. No. 680 Balance 1,250

Acct. No. 690 Credit Balance

1,750

2-76

Last revised: October 26, 2012

Problem 2-4B (concluded) Part 3 SUSAN HURLEY, PUBLIC ACCOUNTANT Trial Balance September 30, 2014 Acct. No. 101 106 124 128 131 163 201 301 302 401 680 690

Account Title Cash ........................................................................ Accounts receivable .............................................. Office supplies ....................................................... Prepaid insurance .................................................. Prepaid rent ............................................................ Office equipment.................................................... Accounts payable .................................................. Susan Hurley, capital............................................. Susan Hurley, withdrawals ................................... Accounting fees earned ........................................ Professional development expense ..................... Utilities expense..................................................... Totals ......................................................................

Debit $ 8,400 5,000 1,830 3,300 5,600 13,000

Credit

450 29,200

2,500 12,980 1,250 1,750 $42,630

$42,630

2-77

Last revised: October 26, 2012

Problem 2-5B (25 minutes) SUSAN HURLEY, PUBLIC ACCOUNTANT Income Statement For Month Ended September 30, 2014 Revenues: Accounting fees earned ..................................... Operating expenses: Utilities expense .............................................. Professional development expense............... Total operating expenses ............................ Net income ..........................................................

$12,980 $1,750 1,250 3,000 $ 9,980

SUSAN HURLEY, PUBLIC ACCOUNTANT Statement of Changes in Equity For Month Ended September 30, 2014

The arrows are imaginary but emphasize the

Susan Hurley, capital, September 1 .................. Add: Investments by owner ............................. Net income ............................................... Total ................................................................. Less: Withdrawals by owner ............................. Susan Hurley, capital, September 30 ................

$ $29,200 9,980

link between statements.

39,180 $39,180 2,500 $36,680

SUSAN HURLEY, PUBLIC ACCOUNTANT Balance Sheet September 30, 2014 Assets Liabilities $ 8,400 Cash .......................................... Accounts payable ..................... Accounts receivable................ 5,000 Office supplies ......................... 1,830 Prepaid insurance ................... 3,300 Equity Prepaid rent.............................. 5,600 Susan Hurley, capital ................ Office equipment ..................... 13,000 Total liabilities and Total assets .......................... $37,130 equity......................................

450

36,680 $37,130

2-78

Last revised: October 26, 2012

Problem 2-6B (90 minutes) Part 1 Date 2014 Nov.

General Journal Account Titles and Explanations 1

Debit

Cash ................................................................. 101 Office Equipment ............................................ 163 Tait Unger, Capital .................................. 301 Owner invested in the business.

62,000 19,000

Prepaid Rent .................................................... 131 Cash ......................................................... 101 Prepaid three monthsâ&#x20AC;&#x2122; rent.

21,000

Office Equipment ............................................ 163 Office Supplies ................................................ 124 Accounts Payable ................................... 201 Purchased equipment and supplies on credit.

9,000 1,650

Cash ................................................................. 101 Service Fees Earned ............................... 401 Received cash from client for completed work.

5,200

Accounts Receivable ...................................... 106 Service Fees Earned ............................... 401 Billed client for completed work.

4,800

Accounts Payable ........................................... 201 Cash ......................................................... 101 Paid balance due on accounts payable.

10,650

Prepaid Insurance ........................................... 128 Cash ......................................................... 101 Paid annual premium for insurance.

3,750

Cash ................................................................. 101 Accounts Receivable .............................. 106 Collected part of the amount owed by a client.

2,000

Accounts Receivable ...................................... 106 Service Fees Earned ............................... 401 Billed client for completed work.

3,600

Page 1 Credit

81,000

21,000

10,650

5,200

4,800

10,650

3,750

2,000

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

3,600

2-79

Last revised: October 26, 2012

Problem 2-6B (continued) Part 1 Nov.

Tait Unger, Withdrawals ................................. 302 Cash ......................................................... 101 Owner withdrew cash for personal use.

5,300

Office Supplies ................................................ 124 Accounts Payable ................................... 201 Purchased supplies on credit.

1,700

Wages Expense............................................... 680 Cash ......................................................... 101 Paid wages.

19,000

Utilities Expense ............................................. 690 Cash ......................................................... 101 Paid monthly utility bill.

1,650

5,300

1,700

19,000

1,650

Note: Assume all entries were journalized on Page 1 of the General Journal.

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2-80

Last revised: October 26, 2012

Problem 2-6B (continued) Parts 2 and 3

Date 2014 Nov. 1 2 8 13 19 22 28 30 30

Date 2014 12 Nov. 22 24

Cash Explanation

Accounts Receivable Explanation

Debit

G1 G1 G1 G1 G1 G1 G1 G1 G1

62,000

Debit

G1 G1 G1

21,000 5,200 10,650 3,750 2,000 5,300 19,000 1,650

Explanation

2,000 3,600

PR G1 G1

Explanation

Debit

Balance 1,650 3,350

Acct. No. 128 PR G1

Explanation

Credit

1,650 1,700

Debit 3,750

Prepaid Rent Date 2014 Nov. 2

4,800 2,800 6,400

Acct. No. 124

Prepaid Insurance Date 2014 Nov. 19

62,000 41,000 46,200 35,550 31,800 33,800 28,500 9,500 7,850

Acct. No. 106 Credit Balance

4,800

Office Supplies Date 2014 Nov. 4 29

Acct. No. 101 Credit Balance

Debit

21,000

Credit

Balance

3,750 Acct. No. 131 Credit

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

Balance 21,000

2-81

Last revised: October 26, 2012

Problem 2-6B (continued) Parts 2 and 3 Office Equipment Date 2014 Nov. 1 4

Explanation

Acct. No. 163 PR

Debit

G1 G1

19,000 9,000

Debit

Accounts Payable Date 2014 Nov. 4 13 29

Explanation

Date 2014 Nov. 28

Date 2014 8 Nov. 12 24

1,700

Debit

G1 Tait Unger, Withdrawals Explanation

PR G1

Service Fees Earned Explanation

Debit

Explanation

10,650 0 1,700

Debit

Balance 81,000

Acct. No. 302 Credit Balance

5,300

5,300 Acct. No. 401 Credit Balance 5,200 4,800 3,600

5,200 10,000 13,600

Acct. No. 680 PR

Debit

19,000

Debit

Utilities Expense Date 2014 Nov. 30

Credit 81,000

G1 G1 G1

Explanation

Balance

Acct. No. 301

Wages Expense Date 2014 Nov. 30

Credit

10,650

Explanation

Balance

19,000 28,000 Acct. No. 201

10,650

Tait Unger, Capital Date 2014 Nov. 1

Credit

Balance

19,000 Acct. No. 690 Credit

1,650

Balance 1,650

2-82

G G G

Last revised: October 26, 2012

Problem 2-6B (concluded) Part 4 WiCOM SERVICING Trial Balance November 30, 2011 Acct. No. 101 106 124 128 131 163 201 301 302 401 680 690

Account Title Cash ...................................................... Accounts receivable............................ Office supplies ..................................... Prepaid insurance ............................... Prepaid rent.......................................... Office equipment ................................. Accounts payable ................................ Tait Unger, capital ............................... Tait Unger, withdrawals ...................... Service fees earned ............................. Wages expense.................................... Utilities expense .................................. Totals ....................................................

Debit $ 7,850 6,400 3,350 3,750 21,000 28,000

Credit

$ 1,700 81,000 5,300 13,600 19,000 1,650 $96,300

$96,300

Analysis component: The November 29 purchase of office supplies is recorded as a debit to an asset account because they have not yet been used. Assets are economic resources held by the business. The supplies will remain on the books as an asset until they are used. Once used, the supplies will become an expense.

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2-83

Last revised: October 26, 2012

Problem 2-7B (25 minutes) WiCOM SERVICING Income Statement For Month Ended November 30, 2014 Revenues: Service fees earned ............................................ Operating expenses: Wages expense ................................................ Utilities expense .............................................. Total operating expenses ............................ Net loss ................................................................

$13,600 $19,000 1,650

WiCOM SERVICING Statement of Changes in Equity For Month Ended November 30, 2014 Tait Unger, capital, November 1 ........................ Add: Investments by owner .............................. Total ................................................................. Less: Withdrawals by owner ............................. $5,300 Net loss ..................................................... 7,050 Tait Unger, capital, November 30 ......................

20,650 $ 7,050

0 81,000 81,000

12,350 $68,650

The arrows are imaginary but emphasize the link between statements.

WiCOM SERVICING Balance Sheet November 30, 2014 Assets Cash .......................................... Accounts receivable................ Office supplies ......................... Prepaid insurance ................... Prepaid rent.............................. Office equipment ..................... Total assets ..........................

$ 7,850 6,400 3,350 3,750 21,000 28,000 $70,350

Liabilities Accounts payable……………..

Equity Tait Unger, capital ..................... Total liabilities and equity......................................

$ 1,700

68,650 $70,350

2-84

Last revised: October 26, 2012

Problem 2-8B (25 minutes) RUSH INNOVATIONS Income Statement For Month Ended November 30, 2014 Service fees earned ............................................ Operating expenses: Wages expense ................................................ Utilities expense .............................................. Total operating expenses ............................ Net loss ................................................................

$15,800 $16,000 2,920

RUSH INNOVATIONS Statement of Changes in Equity For Month Ended November 30, 2014 Jay Rush, capital, November 1 .......................... Add: Investments by owner .............................. Total ................................................................. Less: Withdrawals by owner ............................. $10,600 Net loss ..................................................... 3,120 Jay Rush, capital, November 30 ........................

18,920 $ 3,120

0 146,000 146,000

The arrows are imaginary but emphasize the link between

13,720 $132,280

statements.

RUSH INNOVATIONS Balance Sheet November 30, 2014 Assets Cash .......................................... Accounts receivable................ Office supplies ......................... Prepaid insurance ................... Prepaid rent.............................. Office equipment ..................... Total assets ..........................

$ 23,480 7,000 5,800 10,400 21,000 68,000 $135,680

Liabilities Accounts payable .....................

Equity Jay Rush, capital ....................... Total liabilities and equity......................................

3,400

132,280 $135,680

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-85

Last revised: October 26, 2012

Problem 2-8B (concluded) Analysis component: 2014 Nov. 30

Accounts Receivable ................................................... Service Fees Earned .......................................... Did work for a customer on account.

XXX

Cash .............................................................................. Accounts Receivable ......................................... Collected an amount owing from a credit customer.

XXX

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

XXX

2-86

Last revised: October 26, 2012

Problem 2-9B (90 minutes) Part 1

Date 2014 July 1

General Journal Account Titles and Explanations

Debit

Office Equipment ................................................. Trucks ................................................................... Long-Term Notes Payable ........................... Purchased assets on credit.

163 153 251

9,000 56,000

Land....................................................................... Cash............................................................... Long-Term Notes Payable ........................... Purchased land.

183 101 251

124,000

Building ................................................................. Cash............................................................... Purchased a building.

173 101

21,000

Prepaid Insurance ................................................ Cash............................................................... Purchased two one-year insurance policies.

128 101

9,600

Cash ...................................................................... Fees Earned .................................................. Performed services for cash.

101 401

3,200

Office Equipment ................................................. Cash............................................................... Long-Term Notes Payable ........................... Purchased office equipment.

163 101 251

6,500

Accounts Receivable ........................................... Fees Earned .................................................. Performed services on credit.

106 401

3,750

Accounts Receivable ........................................... Fees Earned .................................................. Performed services on credit.

106 401

9,200

Page 1 Credit

65,000

40,800 83,200

21,000

9,600

3,200

700 5,800

3,750

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

9,200

2-87

Last revised: October 26, 2012

Problem 2-9B (continued) Part 1

Date 2014 July 21

General Journal Account Titles and Explanations

Debit

Truck Rental Expense.......................................... Accounts Payable ........................................ Rented truck on credit.

645 201

1,300

Cash ...................................................................... Accounts Receivable ................................... Collected cash from credit customer.

101 106

5,000

Wages Expense .................................................... Cash............................................................... Paid wages to assistant.

623 101

1,600

Accounts Payable ................................................ Cash............................................................... Paid for July 21 rental on account.

201 101

1,300

Repairs Expense .................................................. Cash............................................................... Paid for truck repairs.

684 101

1,425

Brett Wilson, Withdrawals ................................... Cash............................................................... Owner withdrawal.

302 101

3,875

Wages Expense .................................................... Cash............................................................... Paid wages to assistant.

623 101

1,600

Advertising Expense............................................ Cash............................................................... Paid for advertising in local newspaper.

655 101

800

Cash ...................................................................... Unearned Fees.............................................. Received cash for services to be performed in August.

101 233

1,400

Page 2 Credit

1,300

5,000

1,600

1,300

1,425

3,875

1,600

800

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

1,400

2-88

Last revised: October 26, 2012

Problem 2-9B (continued) Parts 2 and 3

Date 2014 30 June July 2 3 5 9 12 22 23 24 25 26 27 28 29

Date 2014 June 30 July 15 20 22

Date 2014 June 30 July 5

Date 2014 June 30 July 1

Cash Explanation

Debit

Account No. 101 Credit Balance

Beginning balance G1 G1 G1 G1 G1 G2 G2 G2 G2 G2 G2 G2 G2 Accounts Receivable Explanation

40,800 21,000 9,600 3,200 700 5,000 1,600 1,300 1,425 3,875 1,600 800 1,400

Debit

Account No. 106 Credit Balance

Beginning balance G1 G1 G2 Prepaid Insurance Explanation

3,750 9,200 5,000

Debit

Trucks Explanation

275 9,875

9,600

Debit

950 4,700 13,900 8,900

Account No. 128 Credit Balance

Beginning balance G1

75,000 34,200 13,200 3,600 6,800 6,100 11,100 9,500 8,200 6,775 2,900 1,300 500 1,900

Account No. 153 Credit Balance

Beginning balance G1

20,80 76,80

56,000

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

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Last revised: October 26, 2012

Problem 2-9B (continued) Parts 2 and 3

Date 2014 June 30 July 1 12

Date 2014 June 30 July 3

Date 2014 June 30 July 2

Date 2014 30 June July 21 24

Date 2014 June 30 July 29

Date 2014 30 June July 1 2 12

Office Equipment Explanation

Debit

Account No. 163 Credit Balance

Beginning balance G1 G1 Building Explanation

1,200 10,200 16,700

9,000 6,500

Debit

Account No. 173 Credit Balance

21,000

-021,000

Debit

Account No. 183 Credit Balance

Beginning balance

Land Explanation Beginning balance

Accounts Payable Explanation

124,000

Debit

-0124,000 Account No. 201 Credit Balance

Beginning balance G1 G2 Unearned Fees Explanation

725 2,025 725

1,300 1,300

Debit

Account No. 233 Credit Balance

Beginning balance

0 1,400 1,400

G2 Long-Term Notes Payable Explanation

Debit

Account No. 251 Credit Balance

Beginning balance G1 G1 G1

65,000 83,200 5,800

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

7,000 72,000 155,200 161,000

2-90

Last revised: October 26, 2012

Problem 2-9B (continued) Parts 2 and 3 Date 2014 June 30

Date 2014 30 June July 26

Date 2014 June 30 July 9 15 20

Date 2014 June 30 July 23 27

Date 2014 June 30 July 21

Date 2014 June 30 July 28

Date 2014 June 30 July 25

Brett Wilson, Capital Explanation

Debit

Account No. 301 Credit Balance

Beginning balance Brett Wilson, Withdrawals Explanation

83,825

Debit

Account No. 302 Credit Balance

Beginning balance G2 Fees Earned Explanation

600 4,475

3,875

Debit

Account No. 401 Credit Balance

Beginning balance

8,400 3,200 11,600 3,750 15,350 9,200 24,550

G1 G1 G1 Wages Expense Explanation

Debit

Account No. 623 Credit Balance

Beginning balance G2 G2 Truck Rental Expense Explanation

78 2,38 3,98

1,600 1,600

Debit

Account No. 645 Credit Balance

Beginning balance G2 Advertising Expense Explanation

230 1,530

1,300

Debit

Account No. 655 Credit Balance

Beginning balance G2 Repairs Expense Explanation

75 875

800

Debit

Account No. 684 Credit Balance

Beginning balance G2

4 1,46

1,425

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-91

Last revised: October 26, 2012

Problem 2-9B (concluded) Part 4 FROG BOX COMPANY Trial Balance July 31, 2014 Acct. No. 101 106 128

Account Title Cash ............................................................... Accounts receivable ..................................... Prepaid insurance .........................................

153

Trucks ............................................................

76,800

163 173

Office equipment........................................... Building ..........................................................

16,700 21,000

183 201

Land................................................................

124,000

233 251 301 302 401 623 645 655 684

Debit 1,900 8,900 9,875

Accounts payable ......................................... Unearned fees ............................................... Long-term notes payable .............................

Credit

Brett Wilson, capital...................................... Brett Wilson, withdrawals ............................ Fees earned ................................................... Wages expense ............................................. Truck rental expense .................................... Advertising expense .....................................

4,475

Repairs expense ........................................... Totals..............................................................

1,465 $271,500

725 1,400 161,000 83,825 24,550

3,980 1,530 875 $271,500

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-92

Last revised: October 26, 2012

Problem 2-10B FROG BOX COMPANY Income Statement For Month Ended July 31, 2014 Revenues: Fees earned ......................................................... Operating expenses: Wages expense ................................................ Truck rental expense ....................................... Repairs expense .............................................. Advertising expense........................................ Total operating expenses ............................. Net income ..........................................................

$24,550 $3,980 1,530 1,465 875 7,850 $16,700

FROG BOX COMPANY Statement of Changes in Equity For Month Ended July 31, 2014

The arrows are imaginary but emphasize the link

Brett Wilson, capital, July 1 ............................... Add: Net income ................................................. Total ........................................................... Less: Withdrawals by owner ............................. Brett Wilson, capital, July 31 .............................

$ 83,825 16,700 $100,525 4,475 $ 96,050

between statements.

FROG BOX COMPANY Balance Sheet July 31, 2014 Assets Cash .......................................... Accounts receivable ................ Prepaid insurance.................... Trucks ....................................... Office equipment ..................... Building .................................... Land .......................................... Total assets ..............................

1,900 8,900 9,875 76,800 16,700 21,000 124,000

$259,175

Liabilities Accounts payable......................... Unearned fees............................... Long-term notes payable............. Total liabilities .............................. Equity Brett Wilson, capital ..................... Total liabilities and equity ........................................

725 1,400 161,000 $163,125

96,050 $259,175

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-93

Last revised: October 26, 2012

Problem 2-11B (45 minutes) Part 1 Date 2014 Nov.

General Journal Account Titles and Explanations 1

Debit

Accounts Payable ......................................... Cash ..................................................... Paid for purchase made on account.

201 101

10,000

Office Equipment .......................................... Cash ..................................................... Notes Payable...................................... Purchased a photocopier.

163 101 205

34,000

Office Supplies .............................................. Cash ..................................................... Purchased supplies for cash.

124 101

800

Wages Expense ............................................. Cash........................................................ Paid wages.

623 101

6,000

Cash ............................................................... Travel Revenue.................................... Collected cash for November travel.

101 401

14,000

Ike Petrov, Withdrawals ................................ Cash........................................................ The owner withdrew cash.

302 101

2,000

Interest Expense ........................................... Cash ..................................................... Paid interest on notes payable.

633 101

150

Page 1 Credit

10,000

6,000 28,000

800

6,000

14,000

2,000

150

Note: There is no entry to record for November 4 as this does not represent an economic exchange.

Solutions Manual to accompany Fundamental Accounting Principles, 14th Canadian Edition. ÂŠ 2013 McGraw-Hill Ryerson Ltd.

2-94

Last revised: October 26, 2012

Problem 2-11B (continued) Parts 2 and 3 Cash

Bal. Nov. 20

26,000 14,000

Bal.

15,050

101

10,000 6,000 800 6,000 2,000 150

Notes Payable

Office Supplies

Nov. 1 2 3 14 25 30

205

20,000 28,000 48,000

Bal. Nov. 2 Bal.

Wages Expense Bal. 38,000 Nov. 14 6,000 Bal. 44,000

623

Bal. Nov. 3

900 800

Bal.

1,700

Office

163

Equipment Bal. 36,000 Nov. 2 34,000

Bal.

Ike Petrov, Capital 8,000

Interest Bal. Nov. 30 Bal.

124

301 Bal.

Expense 100 150 250

Accounts Payable

Nov. 1

10,000

70,000

Ike Petrov, Withdrawals Bal. 4,000 Nov. 25 2,000 Bal. 6,000

302

Travel Revenue 34,000 14,000 48,000

201

43,000

Bal.

33,000

Bal.

401 Bal. Nov. 20 Bal.

633

2-95

Problem 2-11B (continued) Part 4 TOUR-ALONG Trial Balance November 30, 2014 Acct. No. 101 124 163 201 205 301 302 401 623 633

Account Title Cash ................................................................. Office supplies ................................................ Office equipment............................................. Accounts payable ........................................... Notes payable.................................................. Ike Petrov, capital ........................................... Ike Petrov, withdrawals .................................. Travel revenue................................................. Wages expense ............................................... Interest expense.............................................. Totals ...............................................................

Debit $ 15,050 1,700 70,000

Credit

$ 33,000 48,000 8,000 6,000 48,000 44,000 250 $137,000

$137,000

Problem 2-11B (continued) Part 5 TOUR-ALONG Income Statement For Two Months Ended November 30, 2014 Travel revenue .................................................... Operating expenses: Wages expense ................................................ Interest expense .............................................. Total operating expenses ............................. Net income ..........................................................

$48,000 $44,000 250 44,250 $ 3,750

TOUR-ALONG Statement of Changes in Equity For Two Months Ended November 30, 2014 Ike Petrov, capital, October 1 ............................ Add: Owner investment ..................................... Net income ................................................ Total ................................................................. Less: Withdrawals by owner ............................. Ike Petrov, capital, November 30.......................

$ $8,000 3,750

-0-

11,750 $11,750 6,000 $ 5,750

The arrows are imaginary but emphasize the link between statements.

TOUR-ALONG Balance Sheet November 30, 2014 Assets Cash .......................................... Office supplies ......................... Office equipment .....................

Total assets ..............................

$15,050 1,700 70,000

$86,750

Liabilities Accounts payable......................... Notes payable ............................... Total liabilities .............................. Equity Ike Petrov, capital......................... Total liabilities and equity ........................................

$33,000 48,000 $81,000 5,750 $86,750

Analysis component: The $8,000 October 31 balance in Ike Petrov, Capital represents investments made by the owner, Ike Petrov, into the business.

Problem 2-12B LINCOLN LANDSCAPING Income Statement For Three Months Ended July 31, 2014 Revenues: Fees earned ......................................................... Operating expenses: Wages expense ................................................ Advertising expense........................................ Rental expense ................................................ Repairs expense .............................................. Total operating expenses ............................ Net loss ................................................................

$29,100 $59,000 1,750 1,100 930

LINCOLN LANDSCAPING Statement of Changes in Equity For Three Months Ended July 31, 2014 Brielle Lincoln, capital, May 1............................ Add: Investments by owner .............................. Total ................................................................. Less: Withdrawals by owner .............................. $ 8,950 Net loss ...................................................... 33,680 Brielle Lincoln, capital, July 31 .........................

62,780 $33,680

0 65,000 65,000

$120,670

imaginary but emphasize the link between

42,630 $22,370

LINCOLN LANDSCAPING Balance Sheet July 31, 2014 Assets Liabilities Cash .......................................... $ 23,720 Accounts payable ..................... Accounts receivable................ 18,600 Unearned fees ........................... Prepaid insurance ................... 13,750 Long-term notes payable ......... Equipment ................................ 64,600 Total liabilities ........................

Total assets ..............................

The arrows are

Equity Brielle Lincoln, capital .............. Total liabilities and equity.....................................

Analysis component: a) Assets financed by debt = ($98,300/$120,670) x 100 = 81.5% b) Assets financed by equity = ($22,370/$120,670) x 100 = 18.5%

statements.

$ 37,500 2,800 58,000 $98,300

22,370 $120,670

Problem 2-13B DANCE-A-LOT Trial Balance December 31, 2014 Account Title Cash ($37,175 - $30,540 ).............................................. Accounts receivable ($7,900 - $275b)............................ Office supplies ($2,650 + 400c) ...................................... Office equipment ............................................................ Accounts payable ($9,465 + 400c) ................................. Bev Horricks, capital (a credit balance account)......... Services revenue ($23,250d not $22,350) ..................... Wages expense (a debit balance account) .................. Rent expense (a debit balance account) ...................... Advertising expense (a debit balance account) .......... Totals ............................................................................... a

Debit $ 6,635 7,625 3,050 20,500

Credit

$ 9,865 16,745 23,250 6,000 4,800 1,250 $49,860

$49,860

Note: The superscripts (a) to (d) are references to items (a) to (d) listed in Problem 2-13B.

ANALYTICAL AND REVIEW PROBLEMS A&R Problem 2-1 (35 minutes) YOUNG ENGINEERING Trial Balance March 31, 2014 Account Title Cash ..................................................................................... Office supplies .................................................................... Prepaid insurance .............................................................. Office equipment ................................................................ Accounts payable ............................................................... Carlos Young, capital ......................................................... Carlos Young, withdrawals................................................ Consulting fees earned ...................................................... Rent expense ...................................................................... Totals ...................................................................................

Debit $26,660 660 3,200 16,500

Credit

$16,500 17,000 3,740 24,000 6,740 $57,500

Purchased $660 of office supplies for cash.

Paid $3,200 insurance premium in advance.

Purchased $16,500 office equipment on credit.

Carlos Young invested $17,000 cash in the business.

Carlos Young withdrew $3,740 cash from the business for personal use.

Earned $24,000 in consulting services and was paid in cash.

Paid $6,740 rent expense with cash.

$57,500

A&R 2-2 (30 minutes) Nice-n-Fresh Drycleaning Statement of Changes in Equity For Months Ended April 30, 2014 Ed Fresh, capital, beginning .............................. $ 34,400 Add: Investment by owner ................................ 0 48,5004 Net income ................................................ Total ................................................................. $ 82,900 Less: Withdrawals by owner ............................. 25,100 Ed Fresh, capital, ending ................................... $57,800

Assets Cash .......................... Cleaning supplies .... Prepaid rent.............. Equipment ................

Total assets .............. Calculations: 1. 49,900 2. 98,500 3. 34,400 4. 57,800

April 30, 2014 $ 7,000 3,500 12,000 76,000

$98,500

March 31, 2014 $ 0 10,000 25,4003 $35,400 1,000 $34,400

Nice-n-Fresh Drycleaning Balance Sheet March 31, April 30, Liabilities 2014 2014 $ 3,000 Accounts payable....... $ 700 900 Notes payable ............. 40,000 16,000 Total liabilities ............ $40,700 30,000 Equity Ed Fresh, capital......... 57,8002 Total liabilities and $49,900 equity ....................... $98,500

March 31, 2014 $ 500 15,000 $15,500 34,4001 $49,900

– 15,500 = 34,400 – 40,700 = 57,800 + 1,000 – 10,000 = 25,400 + 25,100 – 34,400 = 48,500

Analysis component: a. Liabilities increased because of the $200 increase in accounts payable and the $25,000 increase in notes payable used, most probably, to finance the purchase of equipment (equipment increased by $46,000). b. Equity increased by a larger amount in March than April because the owner invested $10,000 during March and nothing during April. Also, during April, the owner made a withdrawal of $25,100 and only $1,000 in March. Net income in April was almost twice as much as that reported for March but the large withdrawal and no investments during April caused equity to increase by a smaller amount than in March.

ETHICS CHALLENGE This problem emphasizes the importance of source documents. 1. There are advantages to the process proposed by the manager. They include improved customer service, less delays, and less work for you. However, you should have serious concerns about the potential for fraud. In particular, there is no control over the possibility of embezzlement by the manager because there are no source documents* being prepared at the time of sale. The manager could steal cash and simply prepare sales receipts to match the remaining cash. This case involves a conflict between the need for efficiency and the need for control in the form of source documents*. While it makes sense to take and process sales receipts quickly, this efficiency is being accomplished by a shortcut that greatly weakens control over cash receipts. That is, cash could be received and lost because there would be no source documents to verify the sales and cash received. *Recall from Chapter 1 that source documents identify and describe transactions entering the accounting process and are the source of accounting information, whether in paper or electronic form. 2. The managerâ&#x20AC;&#x2122;s explanation that the owner does not arrive until 3:00 p.m. suggests that the owner does not know about the proposed shortcut. Thus, the new employee is faced with the dilemma of deciding whether to accept the managerâ&#x20AC;&#x2122;s instructions, to confront the manager with the argument that the shortcut seems wrong, or to ask the owner to confirm the instructions. Each of these alternatives involves personal risk. Initially, the best thing may be to simply work as instructed for a while in order to get an idea of whether the shortcut is being abused by the manager and perhaps to find out discreetly whether the owner knows about it. The relationship that develops between you and the manager may be of a nature that will allow you to explain your concern and convince the manager that the shortcut should be avoided. Even if the manager is not abusing this shortcut, there are other reasons for doing away with it, such as maintaining accurate records for tax reports and gathering marketing information. Also, the shortcut may result in fraud by other employees who might not be as honest as you and the manager. If you conclude that the manager is committing fraud, you should report the situation to the owner as quickly as possible.

FFS 2-1 McALLISTER SURVEYING Income Statement For Month Ended May 31, 2014 Revenue: Surveying fees earned ....................................................... Operating expenses: Advertising expense .......................................................... Rent expense ...................................................................... Salaries expense ................................................................ Insurance expense ............................................................. Telephone expense ............................................................ Utilities expense ................................................................. Total operating expenses................................................. Net income ................................................................................

$18,000 $3,200 3,100 3,000 900 600 300 11,100 $ 6,900

McALLISTER SURVEYING Statement of Changes in Equity For Month Ended May 31, 2014 Travis McAllister, capital, May 1 ............................................. Add: Investments by owner..................................................... Net income ... ................................................................... Total .......................................................................................... Less: Withdrawals by owner .................................................. Travis McAllister, capital, May 31 ...........................................

$75,000 $3,000 6,900

9,900 $84,900 6,000 $78,900

McALLISTER SURVEYING Balance Sheet May 31, 2014 Assets Cash.......................................... Accounts receivable ............... Office supplies......................... Prepaid insurance ................... Prepaid rent ............................. Surveying equipment .............. Buildings .................................. Land .......................................... Total assets..............................

3,900 2,700 300 1,800 4,200 5,400 81,000 36,000 $135,300

Liabilities Accounts payable ................................... Unearned surveying fees ....................... Short-term notes payable ...................... Total liabilities .......................................

$ 2,400 6,000 48,000 $ 56,400

Equity Travis McAllister, capital........................ Total liabilities and equity ......................

78,900 $135,300

Analysis component: Withdrawals are how an owner takes assets out of the business for personal use. McAllister Surveying realized a $6,900 net income during the month which caused equity to increase. It is reasonable for the owner to benefit from that net income by making a withdrawal even though withdrawals cause equity to decrease.

FFS 2-2 1(a)(i) Accounts Receivable ................................................... Guest Revenues ................................................. Provided services to customers on account.

XXX

Cash .............................................................................. Guest Revenues ................................................. Provided services to customers for cash.

XXX

1(a)(ii) Revenues affect the balance sheet because they cause equity to increase. 1(a)(iii) The Revenue Recognition Principle assures us that revenues on the income statement are for the year ended December 31, 2011. 1(b)(i) Interest Expense .......................................................... Cash .................................................................... Paid interest expense..

XXX XXX

1(b)(ii) Yes, expenses affect the balance sheet because they cause equity to decrease. 2(a) Advance ticket sales represent airline tickets sold in advance to customers. 2(b) Cash .............................................................................. Advance Ticket Sales ........................................ Cash received in advance from customers for airline tickets sold

XXX XXX

Critical Thinking Question CT 2-1 Note to instructor: Student responses will vary and therefore the answer here is only suggested and not inclusive of all possibilities; it is presented in point form for brevity. Problem(s): — information that is available does not provide adequate detail to enable analysis and resulting decision making (from the Western Canadian Sales Division Manager’s perspective; from the perspective of the sales and admin staff, the limited detail would make recording information very straightforward/easy since there are only 2 accounts — 1 revenue and 1 expense) Goal(s)*: — Sales Division Manager would want to maximize sales, minimize costs, and at the same time accurately record and report with sufficient detail to assist decision making process Assumption(s)/Principle(s): — division results have been deteriorating but because of a lack of detail, appropriate questions were not being asked and consequently inappropriate decisions were likely being made — the disclosure principle (introduced in Chapter 6) requires that appropriate detail be provided and the materiality principle (introduced in Chapter 7) suggests that anything of significance be disclosed/reported Facts: — as presented in the sales reports — by converting the dollars to percentages, we see that from July to September, although net income is increasing in total dollars, expenses are increasing as a percentage of sales causing net income to shrink as a percentage of sales which is unfavourable Prairie Insurance – Western Canadian Division Sales Report Month Ended Sept. 30, 2014 Aug. 31, 2014 July 31, 2014 % % Sales revenue $680,000 100 $510,000 100 $440,000 Expenses 544,000 80 382,500 75 321,200 Net income $136,000 20 $127,500 25 $118,800

% 100 73 27

CT 2-1 (concluded) Conclusion(s)/Consequence(s): — more revenue and expense accounts are required to provide sufficient detail to allow appropriate monitoring/questions and resulting decisions; this will require a restructuring of the accounting including submission of expense reports which requires resources including expertise

*The goal is highly dependent on “perspective.”

Serial Problem, Echo Systems (120 minutes) Part A 2. General Journal Date 2014 Oct. 1

Page 1 Account Titles and Explanations

Debit

101 163 167 301

90,000 18,000 36,000

Prepaid Rent .................................................... 131 Cash ......................................................... 101 Paid rent in advance.

9,000

Computer Supplies ......................................... 126 Accounts Payable ................................... 201 Purchased supplies on credit.

2,640

Prepaid Insurance ........................................... 128 Cash ......................................................... 101 Paid 12 monthsâ&#x20AC;&#x2122; premium in advance.

4,320

Accounts Receivable ...................................... 106 Computer Services Revenue ................. 403 Billed customer for services.

6,600

Accounts Payable ........................................... 201 Cash ......................................................... 101 Paid balance due on account payable.

2,640

Cash ................................................................. Office Equipment ............................................ Computer Equipment ..................................... Mary Graham, Capital ............................. Owner invested in the business.

144,000

9,000

2,640

4,320

6,600

2,640

No entry recorded in the journal.

Accounts Receivable ...................................... 106 Computer Services Revenue ................. 403 Billed customer for services.

2,400

Cash ................................................................. 101 Accounts Receivable .............................. 106 Collected accounts receivable.

6,600

Repairs Expense, Computer .......................... 684 Cash ......................................................... 101 Paid for computer repairs.

1,410

Advertising Expense ...................................... 655 Cash ......................................................... 101 Purchased ad in local newspaper.

3,720

Cash ................................................................. 101 Accounts Receivable .............................. 106 Collected accounts receivable.

2,400

Credit

2,400

6,600

1,410

3,720

2,400

Serial Problem, Echo Systems (continued) Part A General Journal Account Titles and Explanations

Date 2014 Oct.

Debit

Accounts Receivable ...................................... 106 Computer Services Revenue ................. 403 Billed customer for services.

6,450

Wages Expense............................................... 623 Cash ......................................................... 101 Paid employee for part-time work.

1,400

Mary Graham, Withdrawals ............................ 302 Cash ......................................................... 101 Owner withdrew cash.

7,200

Page 2 Credit

6,450

1,400

7,200

1 and 3. Cash Date 2014 1 Oct. 2 5 8 15 17 20 22 31 31

Explanation

Acct. No. 101 PR G1 G1 G1 G1 G1 G1 G1 G1 G2 G2

Debit 90,000

9,000 4,320 2,640 6,600 1,410 3,720 2,400 1,400 7,200

Accounts Receivable Date 2014 Oct. 6 12 15 22 28

Explanation

Credit

Balance 90,000 81,000 76,680 74,040 80,640 79,230 75,510 77,910 76,510 69,310

Acct. No. 106 PR G1 G1 G1 G1 G2

Debit

Credit

6,600 2,400 6,600 2,400 6,450

Balance 6,600 9,000 2,400 0 6,450

Serial Problem, Echo Systems (continued) Part A

Date 2014 Oct. 3

Date 2014 Oct. 5

Date 2014 Oct. 2

Date 2014 Oct. 1

Date 2014 3 Oct. 8

Date 2014 Oct. 1

Date 2014 Oct. 31

Computer Supplies Explanation

PR G1

Prepaid Insurance Explanation

PR G1

Prepaid Rent Explanation

PR G1

Office Equipment Explanation

Computer Equipment Explanation

Accounts Payable Explanation

Mary Graham, Withdrawals Explanation

2,640

Debit

18,000

Debit

36,000

Acct. No. 128 Credit Balance 4,320 Acct. No. 131 Credit Balance

9,000

Debit

2,640

4,320

G1 G1 Mary Graham, Capital Explanation

Debit

Acct. No. 126 Credit Balance

Debit

9,000 Acct. No. 163 Credit Balance 18,000 Acct. No. 167 Credit Balance 36,000 Acct. No. 201 Credit Balance 2,640

2,640

Debit

2,640 0

Acct. No. 301 Credit Balance

144,000

Acct. No. 302 Credit Balance

Debit 7,200

144,000

7,200

Serial Problem, Echo Systems (continued) Part A Date 2014 Oct. 6 12 28

Date 2014 Oct. 31

Date 2014 Oct. 20

Date 2014

Date 2014 Oct. 17

Date 2014

Computer Services Revenue Explanation

Debit

G1 G1 G2 Wages Expense Explanation

PR G2

Advertising Expense Explanation

PR G1

Mileage Expense Explanation

Repairs Expense, Computer Explanation

PR G1

Charitable Donations Expense Explanation

Acct. No. 403 Credit Balance 6,600 2,400 6,450

Debit 1,400

Debit 3,720

6,600 9,000 15,450

Acct. No. 623 Credit Balance 1,400

Acct. No. 655 Credit Balance 3,720

Debit

Acct. No. 676 Credit Balance

Debit

Acct. No. 684 Credit Balance

1,410

Debit

1,410 Acct. No. 699 Credit Balance

Serial Problem, Echo Systems (continued) Part A 4. ECHO SYSTEMS Trial Balance October 31, 2014 Acct. No. 101 106 126 128

Account Title Cash ............................................................... Accounts receivable ..................................... Computer supplies........................................ Prepaid insurance .........................................

Debit $ 69,310 6,450 2,640 4,320

131 163 167 201 301 302

Prepaid rent ................................................... Office equipment........................................... Computer equipment .................................... Accounts payable ......................................... Mary Graham, capital.................................... Mary Graham, withdrawals ..........................

9,000 18,000 36,000

403 623

Computer services revenue ......................... Wages expense .............................................

655

Advertising expense .....................................

676 684 699

Mileage expense ........................................... Repairs expense, computer ......................... Charitable donations expense ..................... Totals..............................................................

NOTE: Accounts with zero balance may be omitted.

Credit

$ -0144,000 7,200 15,450 1,400 3,720 -01,410 -0$159,450

$159,450

Serial Problem, Echo Systems (continued) Part A 5. ECHO SYSTEMS Income Statement For Month Ended October 31, 2014 Revenues: Computer services revenue............................... Operating expenses: Advertising expense........................................ Repairs expense, computer ............................ Wages expense ................................................ Total operating expenses ............................ Net income ..........................................................

$15,450 $3,720 1,410 1,400

ECHO SYSTEMS Statement of Changes in Equity For Month Ended October 31, 2014 Mary Graham, capital, October 1....................... Add: Investments by owner .............................. $144,000 Net income ................................................ 8,920 Total ................................................................. Less: Withdrawals by owner ............................. Mary Graham, capital, October 31.....................

6,530 $ 8,920

The arrows are

imaginary but

emphasize the inkl

152,920 $152,920 7,200 $145,720

between statements.

ECHO SYSTEMS Balance Sheet October 31, 2014 Assets Cash .......................................... Accounts receivable................ Computer supplies .................. Prepaid insurance ................... Prepaid rent.............................. Office equipment ..................... Computer equipment .............. Total assets ..........................

$ 69,310 6,450 2,640 4,320 9,000 18,000 36,000 $ 145,720

Liabilities Accounts payable ..................

-0-

Equity Mary Graham, capital .............

145,720

Total liabilities and equity...................................

$145,720

Serial Problem, Echo Systems (continued) Part B 6. 2014 Nov.

Mileage Expense ............................................. 676 Cash ......................................................... 101 Reimbursed Mary Graham for business usage.

1,000

Cash ................................................................. 101 Computer Services Revenue ................. 403 Collected cash revenue from customer.

9,300

Computer Supplies ......................................... 126 Cash ......................................................... 101 Purchased computer supplies for cash.

1,920

Accounts Receivable ...................................... 106 Computer Services Revenue ................. 403 Billed customer for services.

8,700

1,000

9,300

1,920

8,700

No entry recorded in the journal.

Cash ................................................................. 101 Accounts Receivable .............................. 106 Collected accounts receivable.

3,750

Charitable Donations Expense ...................... 699 Cash ......................................................... 101 Made a donation.

1,500

Accounts Receivable ...................................... 106 Computer Services Revenue ................. 403 Billed customer for services.

7,500

3,750

1,500

7,500

No entry recorded in the journal.

Mileage Expense ............................................. 676 Cash ......................................................... 101 Reimbursed Mary Graham for business usage.

1,200

Wages Expense............................................... 623 Cash ......................................................... 101 Paid employee for part-time work.

2,800

Mary Graham, Withdrawals ............................ 302 Cash ......................................................... 101 Owner withdrew cash.

3,600

1,200

2,800

3,600

Serial Problem, Echo Systems (continued) Part B 7. General Ledger accounts: Cash Date 2014 Oct. 1 2 5 8 15 17 20 22 31 31 Nov. 1 2 5 18 22 28 30 30

Explanation

PR G1 G1 G1 G1 G1 G1 G1 G1 G2 G2 G2 G2 G2 G2 G2 G2 G2 G2

Debit 90,000

9,000 4,320 2,640 6,600 1,410 3,720 2,400 1,400 7,200 1,000 9,300 1,920 3,750 1,500 1,200 2,800 3,600

Accounts Receivable Date 2014 6 Oct. 12 15 22 28 Nov. 8 18 24

Explanation

Acct. No. 101 Credit Balance 90,000 81,000 76,680 74,040 80,640 79,230 75,510 77,910 76,510 69,310 68,310 77,610 75,690 79,440 77,940 76,740 73,940 70,340

Acct. No. 106 PR G1 G1 G1 G1 G2 G2 G2 G2

Debit

Credit

6,600 2,400 6,600 2,400 6,450 8,700 3,750 7,500

Balance 6,600 9,000 2,400 0 6,450 15,150 11,400 18,900

Serial Problem, Echo Systems (continued) Part B Computer Supplies Date 2014 Oct. 3 Nov. 5

Explanation

Acct. No. 126 PR G1 G2

Debit 2,640 1,920

Prepaid Insurance Date 2014 Oct. 5

Explanation

PR G1

Explanation

Debit

Explanation

Debit

18,000

Debit

36,000

Debit

Balance 18,000

Credit

Balance 36,000

Credit 2,640

Balance 2,640 0

Acct. No. 301 PR

Debit

Explanation

Credit

2,640

Credit 144,000

Mary Graham, Withdrawals Date 2014 Oct. 31 Nov. 30

9,000

Acct. No. 201

G1 G1

Explanation

Balance

Acct. No. 167

Mary Graham, Capital Date 2014 Oct. 1

Credit

Acct. No. 163

Accounts Payable Date 2014 Oct. 3 8

Balance 4,320

9,000

Computer Equipment Date 2014 Oct. 1

Credit

Acct. No. 131

Explanation

2,640 4,560

4,320

Office Equipment Date 2014 Oct. 1

Balance

Acct. No. 128

Prepaid Rent Date 2014 Oct. 2

Credit

Balance 144,000

Acct. No. 302 PR G2 G3

Debit 7,200 3,600

Credit

Balance 7,200 10,800

Serial Problem, Echo Systems (continued) Part B Date 2014 Oct. 6 12 28 Nov. 2 8 24

Date 2014 Oct. 31 Nov. 30

Date 2014 Oct. 20

Date 2014 Nov. 1 28

Date 2014 Oct. 17

Date 2014 Nov. 22

Computer Services Revenue Explanation

Debit

G1 G1 G2 G2 G2 G2 Wages Expense Explanation

PR G2 G2

Advertising Expense Explanation

PR G1

Mileage Expense Explanation

PR G2 G2

Repairs Expense, Computer Explanation

PR G1

Charitable Donations Expense Explanation

PR G2

Acct. No. 403 Credit Balance 6,600 2,400 6,450 9,300 8,700 7,500

Debit 1,400 2,800

Debit 3,720

Debit 1,000 1,200

Debit 1,410

Debit 1,500

6,600 9,000 15,450 24,750 33,450 40,950

Acct. No. 623 Credit Balance 1,400 4,200

Acct. No. 655 Credit Balance 3,720 Acct. No. 676 Credit Balance 1,000 2,200 Acct. No. 684 Credit Balance 1,410 Acct. No. 699 Credit Balance 1,500

Serial Problem, Echo Systems (continued) Part B 8. ECHO SYSTEMS Trial Balance November 30, 2014 Acct. No. 101

Account Title Cash ...............................................................

Debit $ 70,340

106 126 128 131

Accounts receivable ..................................... Computer supplies........................................ Prepaid insurance ......................................... Prepaid rent ...................................................

18,900 4,560 4,320 9,000

163 167

Office equipment........................................... Computer equipment ....................................

18,000 36,000

201 301 302 403 623

Accounts payable ......................................... Mary Graham, capital.................................... Mary Graham, withdrawals .......................... Computer services revenue ......................... Wages expense .............................................

10,800

655

Advertising expense .....................................

3,720

676 684 699

2,200 1,410

Credit

$ -0144,000 40,950 4,200

1,500 $184,950

$184,950

Serial Problem, Echo Systems (concluded) Part B 9. ECHO SYSTEMS Income Statement For Two Months Ended November 30, 2014 Computer services revenue............................... Operating expenses: Wages expense ................................................ Advertising expense........................................ Mileage expense .............................................. Charitable donations expense........................ Repairs expense, computer ............................ Total operating expenses ............................ Net income ..........................................................

$40,950 $4,200 3,720 2,200 1,500 1,410

ECHO SYSTEMS Statement of Changes in Equity For Two Months Ended November 30, 2014 Mary Graham, capital, October 1....................... Add: Investments by owner .............................. $144,000 Net income ................................................ 27,920 Total ................................................................. Less: Withdrawals by owner ............................. Mary Graham, capital, November 30 .................

13,030 $27,920

-0-

171,920 $171,920 10,800 $161,120

ECHO SYSTEMS Balance Sheet November 30, 2014 Assets Cash .......................................... Accounts receivable................ Computer supplies .................. Prepaid insurance ................... Prepaid rent.............................. Office equipment ..................... Computer equipment .............. Total assets ..........................

$ 70,340 18,900 4,560 4,320 9,000 18,000 36,000 $161,120

Liabilities Accounts payable .............................

Equity Mary Graham, capital ........................

161,120

Total liabilities and equity ..............................................

$161,120

SOLUTIONS MANUAL for Fundamental Accounting Principles Canadian Canadian 14th Edition by Larson

-0-

Full download: http://downloadlink.org/p/solutions-manual-for-fundamentalaccounting-principles-canadian-canadian-14th-edition-by-larson/ TEST BANK for Fundamental Accounting Principles Canadian Canadian 14th Edition by Larson Full download: http://downloadlink.org/p/test-bank-for-fundamental-accountingprinciples-canadian-canadian-14th-edition-by-larson/