2100 Solutions - CH3

Kimmel, Weygandt, Kieso, Trenholm
Financial Accounting, Second Canadian Edition
CHAPTER 3
The Accounting Information System
ASSIGNMENT CLASSIFICATION TABLE
Study Objectives
Questions
Brief
Exercises
1
1, 2, 3, 4,
13
1A, 2A
1B, 2B
5, 6
3A, 4A
3B, 4B
Exercises
A
Problems
B
Problems
1.
Analyse the effect of

business transactions
on the basic accounting
equation.
1, 2, 3
2.
Explain what an
account is and how it
helps in the recording
process.
3.
Define debits and

credits and explain how
they are used to record
business transactions.
5, 6, 7, 8,
9, 10, 11,
12, 13
2, 3
4.
Identify the basic steps

in the recording
process.
14
5.
Explain what a journal

is and how it helps in
the recording process.
15, 16
4, 6, 7
7, 8, 9, 12,
13
5A, 6A, 7A 5B, 6B, 7B
6.
Explain what a ledger

17
7.
Explain what posting

18
10, 11, 12,

13
6A, 7A
6B, 7B
8.
Explain the purposes of

a trial balance.
19, 20, 21
9, 10
10, 11, 12,

14, 15
6A, 7A,
8A, 9A,
10A
6B, 7B,
8B, 9B,
10B
Solutions Manual
3-1
Chapter 3
Copyright 2004 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited.
ASSIGNMENT CHARACTERISTICS TABLE

Problem
Number
Description
Difficulty
Level
Time
Allotted (min.)
1A
Analyse transactions, classify cash flows, and

calculate net earnings.
Moderate
40-50
2A
Analyse transactions and prepare financial

statements.
Moderate
40-50
3A
Identify normal account balance and associated

financial statement.
Simple
20-30
4A
Identify debits, credits, and normal balances;

calculate cash flow and net earnings.
Simple
30-40
5A
Journalize transactions.
Moderate
30-40
6A
Journalize transactions, post, and prepare trial

balance.
Moderate
40-50
7A

balance.
Moderate
40-50
8A
Analyse errors and their effects on trial balance.
Moderate
30-40
9A
Prepare corrected trial balance.
Complex
40-50
10A
Prepare trial balance and financial statements.
Moderate
40-50
1B
Analyse transactions, classify cash flows, and

calculate net earnings.
Moderate
40-50
2B
Analyse transactions and prepare financial

statements.
Moderate
40-50
3B
Identify normal account balance and associated

financial statement.
Simple
20-30
4B
Identify debits, credits, and normal balances;

calculate cash flow and net earnings.
Simple
30-40
5B
Journalize transactions.
Moderate
30-40
Solutions Manual
3-2
Chapter 3
Problem
Number
Description
Difficulty
Level
Time
Allotted (min.)
6B

balance.
Moderate
40-50
7B

balance.
Moderate
40-50
8B
Analyse errors and their effects on trial balance.
Moderate
30-40
9B
Prepare corrected trial balance.
Complex
40-50
10B
Prepare trial balance and financial statements.
Moderate
40-50
Solutions Manual
3-3
Chapter 3
ANSWERS TO QUESTIONS
1.
Yes, a business can enter into a transaction in which only the left side of the accounting
equation is affected. An example would be a transaction where an increase in one asset is
offset by a decrease in another asset. An increase in the Equipment account which is
offset by a decrease in the Cash account is a specific example.
2.
Accounting transactions are the economic events of the enterprise recorded by

accountants because they affect the basic equation.
(a)
The death of a major shareholder of the company is not an accounting
transaction, as it does not affect the basic equation.
(b)
Supplies purchased on account is an accounting transaction because it
affects the basic equation.
(c)
An employee being fired is not an accounting transaction, as it does not
affect the basic equation.
(d)
Paying a cash dividend to shareholders is an accounting transaction as it
does affect the basic equation.
3.
(a)
(b)
(c)
(d)
Decrease assets and decrease shareholders' equity.

Increase assets and increase liabilities.
Increase assets and increase shareholders' equity.
Decrease assets and decrease liabilities.
4.
An account consists of three parts: (a) the title, (b) the left or debit side, and (c) the right or
credit side. Because the alignment of these parts resembles the letter T, it is referred to as
a T account.
5.
Charles is incorrect. The double-entry system merely records the dual effect of a
transaction on the accounting equation. A transaction is not recorded twice; it is recorded
once, with a dual effect.
6.
Natalie is incorrect. A debit balance only means that debit amounts exceed credit amounts
in an account. Conversely, a credit balance only means that credit amounts are greater
than debit amounts in an account. Thus, a debit or credit balance is neither favourable nor
unfavourable.
7.
(a)
(b)
(c)
Solutions Manual
Asset accounts are increased by debits and decreased by credits.

Liability accounts are decreased by debits and increased by credits.
The Common Shares and revenue accounts are decreased by debits and
increased by credits. The dividend and expense accounts are increased by
debits and decreased by credits.
3-4
Chapter 3
Questions (Continued)
8. (a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Accounts Receivable
Cash
Dividends
Accounts Payable
Service Revenue
Income Tax Expense
Common Shares
Unearned Revenue
debit balance
debit balance
debit balance
credit balance
credit balance
debit balance
credit balance
credit balance
9. (a)
(b)
(c)
(d)
(e)
(f)
Accounts Receivable
Accounts Payable
Equipment
Dividends
Supplies
Service Revenue
asset
liability
asset
shareholders' equity
asset
shareholders equity
10. (a)
(b)
(c)
Debit Supplies and credit Accounts Payable.

Debit Cash and credit Notes Payable.
Debit Salaries Expense and credit Cash.
11. (a)
(b)
(c)
(d)
(e)
(f)
Cash
Accounts Receivable
Dividends
Accounts Payable
Salaries Expense
Service Revenue
debit balance
credit balance
debit balance
debit balance
debit balance
credit balance
both debit and credit entries

debit entries only
debit entries only
credit entries only
12. The balance in total Shareholders Equity should not equal the balance in the Cash
account. The balance in Shareholders Equity includes Common Shares (investment by
shareholders) and Retained Earnings (net earnings retained in the business). Investment
by shareholders would normally be made in cash. The Retained Earnings component
would include earnings calculated on an accrual basis and therefore would not equal the
entries to the Cash account.
13. Two other accounts that the company might have used to record a cash receipt from a
customer are:
(1)
Unearned revenue where customer paid in advance.
(2)
Accounts Receivable - where the customer was making a payment on a previous
credit purchase.
Solutions Manual
3-5
Chapter 3
14. The basic steps in the recording process are:
(1)
Analyse each transaction in terms of its effect on the accounts.
(2)
Enter the transaction information in the general journal (book of original entry).
(3)
Transfer the journal information to the appropriate accounts in the general ledger
(book of accounts).
15. This would not be a more efficient process because all transaction would be posted
individually rather than posting summary amounts.
16. (a)
(b)
(c)
(d)
17. (a)
(b)
Cash
9,000
Common Shares
9,000
(Invested cash in the business in exchange for common shares)
Prepaid Insurance
Cash
(Paid one-year insurance policy)
800
Supplies
1,500
Accounts Payable
(Purchased supplies on account)
Cash
7,500
Service Revenue
(Received cash for services rendered)
800
1,500
7,500
The general ledger is the entire group of accounts maintained by a company,

including all the asset, liability, and shareholders' equity accounts.
The chart of accounts is important, particularly for a company that has a large
number of accounts because it helps organize the accounts and identify their
location in the ledger.
18. Posting from the general journal to the general ledger should be performed on a timely
basis to ensure that the general ledger reflects the most up-to-date accounting
information. With the use of computers in the recording process, entries posted to the
general journal are usually simultaneously posted to the general ledger. The more
frequently the journal entries are posted the more accurate the accounting records.
Solutions Manual
3-6
Chapter 3
19. A trial balance is a list of accounts and their balances at a given time. The primary purpose
of a trial balance is to prove the mathematical equality of debits and credits after all
journalized transactions have been posted. A trial balance also facilitates the discovery of
errors in journalizing and posting. In addition, it is useful in preparing financial statements .
The main limitation of the trial balance is that numerous errors may still exist even though
the debit and credit columns of the trial balance agree. For example, provided the debits
and credit are equal, a trial balance will still balance even though a journal entry has been
omitted or if an entry is posted to the wrong account.
20. The proper sequence is as follows:
2.
An accounting transaction occurs.
3.
Information is entered in the general journal.
1.
Debits and credits are posted to the general ledger.
5.
A trial balance is prepared.
4.
Financial statements are prepared.
21. (a)
equal.
(b)
Solutions Manual
The trial balance would balance because the debits and credits would still be
The trial balance would not balance because the debit side would be $810 higher
than the credit side
3-7
Chapter 3
SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 3-1
a
.
b
.
c.
d
.
e
.
f.
Assets
Liabilities
Shareholders
Equity
NE
NE
NE
NE
NE
+/-
NE
NE
BRIEF EXERCISE 3-2
1.
2.
3.
4.
5.
6.
Accounts Payable
Advertising Expense
Service Revenue
Accounts Receivable
Unearned Service Revenue
Dividends
(a)
Debit
Effect
(a)
Credit
Effect
Decrease
Increase
Decrease
Increase
Decrease
Increase
Increase
Decrease
Increase
Decrease
Increase
Decrease
(b)
Normal
Balance
Credit
Debit
Credit
Debit
Credit
Debit
BRIEF EXERCISE 3-3

June
Solutions Manual
1
2
3
12
30
Account Debited
Cash
Equipment
Rent Expense
Accounts Receivable
Income Tax Expense
3-8
Account Credited
Common Shares
Accounts Payable
Cash
Service Revenue
Cash
Chapter 3
BRIEF EXERCISE 3-4

June 1
Cash
2,500
Common Shares
2
3
12
30
2,500
Equipment
Accounts Payable
900
Rent Expense
Cash
500
Accounts Receivable
Service Revenue
300
Income Tax Expense

Cash
100
900
500
300
100
BRIEF EXERCISE 3-5

The basic steps in the recording process are:
1.
Analyse each transaction. In this step, business documents are examined to determine the
effects of the transaction on the accounts.
2.
Enter each transaction in the general journal. This step is called journalizing and it results
in making a chronological record of the transactions.
3.
Transfer general journal information to general ledger accounts. This step is called posting. Posting makes it possible to accumulate the effects of journalized transactions on
individual accounts.
Solutions Manual
3-9
Chapter 3
BRIEF EXERCISE 3-6

Aug. 1
(a)
Basic Analysis
The asset Cash is increased.
(b)
The shareholders' equity

account Common Shares is
increased.
Aug. 4
(a)
Basic Analysis
The asset Prepaid Insurance
is increased.
Credits increase shareholders'

equity: credit Common Shares
$5,000.
(b)
The asset Cash

is decreased.
Aug. 16
(a)
(a)
Basic Analysis
The asset Cash is increased.
Basic Analysis
The expense Salaries
Expense is increased.
(b)
3-10
Debit-Credit Analysis
Debits increase assets:
debit Cash $900
Credits increase revenues:
credit Service Revenue $900.
(b)
The asset Cash is decreased.
Solutions Manual
debit Prepaid Insurance $2,100
Credits decrease assets:
credit Cash $2,100.
The revenue Service Revenue

is increased.
Aug. 27
debit Cash $5,000.
Debits increase expenses:
debit Salaries Expense $500.
credit Cash $500.
Chapter 3
BRIEF EXERCISE 3-7

Aug.
1
4
16
27
Cash
Common Shares
5,000
Prepaid Insurance
Cash
2,100
5,000
2,100
Cash
Service Revenue
900
Salaries Expense
Cash
500
900
500
BRIEF EXERCISE 3-8

Accounts Receivable
May 5
3,200
Bal.
1,300
May 12
Service Revenue
1,900
May 5
May 15
Bal.
Cash
May 12
May 15
1,900
2,000
Bal.
3,900
3,200
2,000
5,200
Income Tax Expense

May 15
750
Income Tax Payable

May 15
Solutions Manual
3-11
750
Chapter 3
BRIEF EXERCISE 3-9

CARLAND INC.
Trial Balance
June 30, 2004
Debit
Cash
Accounts Receivable
Equipment
Accumulated Amortization
Accounts Payable
Unearned Service Revenue
Common Shares
Retained Earnings
Dividends
Service Revenue
Salaries Expense
Rent Expense
Income Tax Expense
Totals
Solutions Manual
Credit
$ 8,400
3,000
17,000
$ 3,400
4,000
150
20,000
1,090
1,200
6,600
4,000
1,000
640
$35,240
3-12
______
$35,240
Chapter 3
BRIEF EXERCISE 3-10

ING LIMITED
Trial Balance
December 31, 2004
Debit
Cash
Prepaid insurance
Accounts payable
Unearned revenue
Common shares
Retained earnings
Dividends
Service revenue
Salaries expense
Rent expense
Income tax expense
Totals
Solutions Manual
Credit
$17,600
3,500
$ 3,000
2,200
10,000
7,000
4,500
25,600
18,600
2,400
1,200
$47,800
3-13
00 0000
$47,800
Chapter 3
SOLUTIONS TO EXERCISES
EXERCISE 3-1
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Increase in assets and increase in shareholders' equity.

Decrease in assets and decrease in shareholders' equity.
Increase in assets and increase in liabilities.
Decrease in assets and decrease in shareholders' equity.
Increase in assets and decrease in assets. No effect overall.
Increase in liabilities and decrease in shareholders' equity.
Increase in assets, decrease in assets and increase in liabilities.
Decrease in assets and decrease in shareholders equity.
EXERCISE 3-2
Transaction
1.
2.
3.
4.
5.
6.
7.
8.
Assets
+19,000
-4,000
+15,000
-15,000
+3,000
-11,000
+32,000
-19,000
+1,000
Solutions Manual
Shareholders
Equity
+19,000
NE
NE
-4,000
Liabilities
NE
NE
NE
+4,000
Net
Earnings
NE
-4,000
Revenues
Expenses
NE
NE
NE
NE
NE
NE
NE
NE
-19,000
+1,000
+3,000
-11,000
+32,000
NE
NE
+3,000
NE
NE
NE
NE
NE
+11,000
NE
NE
NE
+3,000
-11,000
NE
NE
NE
3-14
Chapter 3
EXERCISE 3-3
(a)
1. Shareholders invested $15,000 cash in the business.
2. Purchased office equipment for $5,000, paying $1,000 in cash and the balance of $4,000
on account.
3. Paid $750 cash for supplies.
4. Earned $8,000 in revenue, receiving $4,600 cash and $3,400 on account.
5. Paid $1,500 cash on accounts payable.
6. Paid $2,000 cash dividends to shareholders.
7. Paid $800 cash for rent.
8. Collected $450 cash from customers on account.
9. Paid salaries of $2,900.
10. Incurred $500 of utilities expense on account.
11. Paid $1,500 of income tax expense.
(b) Issued common Shares
Service revenue
Dividends
Rent expense
Salaries expense
Utilities expense
Income tax expense
Increase in shareholders' equity
(c) Service revenue
Rent expense
Salaries expense
Utilities expense
Income tax expense
Net earnings
Solutions Manual
$15,000
8,000
(2,000)
(800)
(2,900)
(500)
(1,500)
$15,300
$8,000
(800)
(2,900)
(500)
(1,500)
$2,300
3-15
Chapter 3
EXERCISE 3-4
HAGIWARA INC.
Statement of Earnings
Month Ended August 31, 2004
Revenues
Service revenue
Expenses
Salaries expense
Rent expense
Utilities expense
Total expenses
Earnings before income tax
Income tax expense
Net earnings
$8,000
2,900
800
500
4,200
3,800
1,500
$2,300
HAGIWARA INC.
Statement of Retained Earnings
Retained earnings, August 1
Add: Net earnings
$0,000
2,300
2,300
2,000
$ 300
Less: Dividends
Solutions Manual
3-16
Chapter 3
EXERCISE 3-4 (Continued)
HAGIWARA INC.
Balance Sheet
August 31, 2004
Assets
Current assets
Cash
Accounts receivable
Supplies
Total current assets
Property, plant and equipment
Office equipment0
Total assets
$ 9,600
2,950
750
$13,300
5,000
$18,300
Liabilities and Shareholders' Equity

Liabilities
Accounts payable
Shareholders' equity
Common shares
Retained earnings
Total shareholders equity
Total liabilities and shareholders equity
Solutions Manual
3-17
$ 3,000
$15,000
300
15,300
$18,300
Chapter 3
EXERCISE 3-5
Account
Normal Balance
Financial Statement
Account Classification
Accounts payable
Accounts receivable
Cash and cash
equivalents
Common stock
Dividends
Credit
Debit
Debit
Balance sheet
Balance sheet
Balance sheet
Current liability
Current asset
Current asset
Credit
Debit
Shareholders equity
N/A
Income taxes payable

Interest expense
Interest income
Inventories
Prepaid expenses
Property and
equipment
Revenues
Credit
Debit
Credit
Debit
Debit
Debit
Balance sheet
Statement of retained
earnings
Balance sheet
Statement of earnings
Balance sheet
Balance sheet
Balance sheet
Credit
Solutions Manual
3-18
Current liability
Expense
Revenue
Current asset
Current asset
Property, plant and
equipment
Revenue
Chapter 3
EXERCISE 3-6
Account Debited
Transaction
(a)
Basic
Type
(b)
Specific
Account
Account Credited
(c)
(d)
Effect
Dr./Cr.
(a)
Basic
Type
(b)
Specific
Account
(c)
(d)
Effect
Dr./Cr.
1.
Asset
Cash
Increase
Debit
Shareholders
Equity
Common
Shares
Increase
Credit
2.
Asset
Vehicle
Increase
Debit
Asset
Cash
Decrease
Debit
3.
Asset
Supplies
Increase
Debit
Liability
Accounts
Payable
Increase
Credit
4.
Asset
Accounts
Receivable
Increase
Debit
Shareholders
Equity
Service
Revenue
Increase
Credit
5.
Shareholders Advertising
Equity
Expense
Increase
Debit
Asset
Cash
Decrease
Debit
6.
Asset
Cash
Increase
Debit
Asset
Accounts
Receivable
Decrease
Debit
7.
Liability
Accounts
Payable
Decrease
Credit
Asset
Cash
Decrease
Debit
8.
Shareholders Dividends
Equity
Increase
Debit
Asset
Cash
Decrease
Debit
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3-19
Chapter 3
EXERCISE 3-7
General Journal
Trans.
1.
2.
3.
4.
5.
6.
7.
8.
Solutions Manual
Account Titles
Cash
Common Shares
Debit
Credit
10,000
10,000
Vehicle
Cash
018,000
018,000
Supplies
Accounts Payable
00,500
Accounts Receivable
Service Revenue
02,600
Advertising Expense
Cash
00,200
Cash
Accounts Receivable
00,700
Accounts Payable
Cash
00,300
Dividends
Cash
00,500
00,500
02,600
00,200
00,700
00,300
00,500
3-20
Chapter 3
EXERCISE 3-8
Oct.

Credits increase shareholders' equity:
No accounting transaction.

Credits increase liabilities:
Debit Office Furniture $1,900.

Credit Accounts Payable $1,900.

Debit Accounts Receivable $6,200.

Credit Service Revenue $6,200.
10

Debit Cash $140.

Credit Service Revenue $140.
27
Debits decrease liabilities:

Debit Accounts Payable $700.

Credit Cash $700.
30
Debits increase expenses:

Debit Salaries Expense $2,500.

Credit Cash $2,500.
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3-21
Debit Cash $25,000.

Credit Common Shares $25,000.
Chapter 3
EXERCISE 3-9
General Journal
Date
Oct. 1
Cash
Common Shares
Debit
25,000
No entry.
Office Furniture
Accounts Payable
01,900
Accounts Receivable
Service Revenue
06,200
Cash
Service Revenue
00,140
Accounts Payable
Cash
00,700
Salaries Expense
Cash
00,2,500
10
27
30
Credit
25,000
Solutions Manual
Account Titles
01,900
06,200
00,140
00,700
00,2,500
3-22
Chapter 3
EXERCISE 3-10
(a)
Cash
Oct. 1
10
25,000
140
Bal.
Oct. 27
30
Accounts Payable
700
2,500
Oct. 27
700
Oct. 3
1,900
Bal.
1,200
21,940
Common Shares
Accounts Receivable
Oct. 6
Bal.
Oct. 1
25,000
Bal.
25,000
6,200
6,200
Service Revenue
Office Furniture
Oct. 3
1,900
Oct. 6
Oct. 10
6,200
140
Bal.
1,900
Bal.
6,340
Salaries Expense
Oct. 30
2,500
Bal.
2,500
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3-23
Chapter 3

(b)
AUBUT REAL ESTATE AGENCY CORPORATION
Trial Balance
October 31, 2004
Debit
Cash
Accounts receivable
Office furniture
Accounts payable
Common shares
Service revenue
Salaries expense
Totals
Credit
$21,940
006,200
1,900
2,500
9$32,540
$ 1,200
25,000
0 6,340
______
$32,540
EXERCISE 3-11
(a)
Bal.
Cash
Aug. 1
10
31
Bal.
1,600
2,900
600
Aug. 12
1,000
Service Revenue
4,100
Accounts Receivable
Aug. 25
1,800
Bal.
1,200
Aug. 31
600
Office Equipment
Aug. 12
4,000
Bal.
4,000
1,600
Notes Payable
Aug. 12
3,000
Bal.
3,000
Common Shares
Aug. 1
1,600
Aug. 10
25
2,900
1,800
Bal.
4,700

(b)
KANG, INC.
Trial Balance
August 31, 2004
Debit
Cash
Accounts Receivable
Office Equipment
Notes Payable
Common Shares
Service Revenue
Totals
Credit
$4,100
00,1,200
04,000
_____
$9,300
$3,000
01,600
4,700
$9,300
EXERCISE 3-12
(a) Oct. 1
10
10
12
15
20
20
Cash
4,000
Common Shares
4,000
(Invested cash in business in exchange for common shares)
Furniture
3,000
Accounts Payable
(Purchased furniture on account)
Supplies
Cash
(Purchased supplies)
3,000
400
400
Accounts Receivable
800
Service Revenue
(Billed clients for services provided)
800
Cash
750
Service Revenue
(Received cash for services rendered)
750
Cash
Notes Payable
(Obtained loan from bank)
8,000
8,000
Accounts Payable
1,500
Cash
(Made payment on accounts payable)
Rent Expense
Cash
(Paid cash for rent)
1,500
250
250
Cash
800
Accounts Receivable
(Received cash in payment of account)
800
Accounts Receivable
740
Service Revenue
(Billed clients for services provided)
740

(a) (Continued)
Oct. 25
30
31
31
Cash
2,000
Common Shares
2,000
(Invested cash in business in exchange for common shares)
Dividends
Cash
(Paid cash dividends)
300
Store Wages Expense

Cash
(Paid wages)
500
Supplies Expense
Supplies
(Used supplies for operating)
180
300
500
180
(b)
HOLLY CORP.
Trial Balance
October 31, 2004
Debit
Cash
Accounts Receivable
Supplies
Furniture
Notes Payable
Accounts Payable
Common Shares
Dividends
Service Revenue
Store Wages Expense
Supplies Expense
Rent Expense
Totals
Credit
$12,600
00740
000,220
003,000
$08,000
0001,500
006,000
000,300
002,290
000,500
000,180
250
$17,790
______
$17,790
EXERCISE 3-13
(a)
Cash
Sept. 1
Accounts
Shareholders
+ Equipment = Payable +
Equity
+$15,000
+15,000
5,000
+12,000
+10,000 +
12,000
+3,000
______
+7,000 +
12,000
+ -500
______
$ 6,500 + +$12,000
5
25
30
=
=
=
=
+$15,000 Investment
+15,000
+7,000
____ _____
7,000 +
+15,000
-3,000
______
4,000 +
+15,000
_____
-500 Dividends
$4,000 +
$14,500
(b)
General Journal
Date
Sept. 1
5
25
30
Account Titles
Debit
Cash
Common Shares
15,000
Equipment
Cash
Accounts Payable
12,000
Accounts Payable
Cash
03,000
Dividends
Cash
00,500
Credit
15,000
05,000
07,000
03,000
00,500

(c)
Cash
Sept. 1
Bal.
15,000 Sept. 5
Sept. 25
Sept. 30
Common Shares
5,000
3,000
500
Sept. 1
15,000
Bal.
15,000
6,500
Dividends
Equipment
Sept. 5
12,000
Bal.
12,000
Accounts Payable
Sept. 25
3,000 Sept. 5
Bal.
7,000
4,000
Sept. 30
500
Bal.
500
EXERCISE 3-14
Error
(a)
In Balance
(b)
Difference
(c)
Larger Column
1.
2.
3.
4.
5.
6.
No
Yes
Yes
No
Yes
No
$400
0
0
$300
0
$9
Debit
n/a
n/a
Credit
n/a
Credit
EXERCISE 3-15
(a)
SPEEDY DELIVERY SERVICE, INC.
Trial Balance
July 31, 2004
Debit
Cash ($111,640 - $83,920 debit total of all accts. without cash)
Accounts Receivable
Prepaid Insurance
Delivery Equipment
Accounts Payable
Salaries Payable
Notes Payable
Common Shares
Retained Earnings
Dividends
Service Revenue
Amortization Expense
Salaries Expense
Gas and Oil Expense
Repair Expense
Insurance Expense
Income Tax Expense
Totals
Credit
$ 27,720
13,640
1,960
49,360
$ 19,745
7,390
815
18,450
40,000
4,630
700
20,610
9,870
4,420
750
1,200
520
1,500
$111,640
000 0000
$111,640

(b)
Year Ended July 31, 2004
Revenues
Service revenue
Expenses
Amortization expense
Salaries expense
Gas and oil expense
Repair expense
Insurance expense
Total expenses
Income tax expense
Net earnings
$ 20,610
9,870
4,420
750
1,200
520
16,760
3,850
1,500
$ 2,350

Year Ended July 31, 2004
Retained earnings, August 1, 2003
Add: Net earnings
Less: Dividends
Retained earnings, July 31, 2004
$4,630
2,350
6,980
700
$6,280

(b) (Continued)
Balance Sheet
July 31, 2004
Assets
Current assets
Cash
Accounts receivable
Prepaid insurance
Delivery equipment0
Less: Accumulated amortization
Total property, plant and equipment
Total assets
$27,720
13,640
1,960
$43,320
$49,360
(19,745)

Liabilities
Accounts payable
$7,390
Salaries payable
815
Total current liabilities
Notes payable
Total liabilities
Common shares
$40,000
Retained earnings
6,280
29,615
$72,935
$ 8,205
18,450
26,655
46,280
$72,935
SOLUTIONS TO PROBLEMS
PROBLEM 3-1A
(a) and (b)
TransAction
1.
Cash
Flow
Statement
F
2.
- 5,000
3.
- 500
4.
- 400
5.
6.
+4,100
+4,100 (c)
7.
-500
-500 (d)
8.
-1,500
-1,500 (e)
9.
-140
-140 (f)
10.
11.
+120
12.
-1,000
Total
Cash
+$15,000
Accounts
Receivabl
e
Supplies
Equipment
Accounts Payable
Common
Shares
+$15,000
+$5,000
- $500 (a)
+ $400
+ $250
- 250 (b)
+400
$10,180
Retained
Earnings
+400 (g)
-120
-1,000 (h)
$280
$400
$5,000
$250
$15,000
$610
PROBLEM 3-1A (Continued)

(a) (Continued)
Key to Retained Earnings column on previous page.
(a)
(b)
(c)
(d)
(e)
(f )
(g)
(h)
Rent expense
Advertising expense
Service revenue
Dividends
Salaries expense
Utilities expense
Service revenue
Income tax expense
(c)
Service revenue
Expenses
Salaries expense
Rent expense
Advertising expense
Utilities expense
Income tax expense
Net earnings
$4,500
$1,500
500
250
140
1,000
3,390
$1,110
OR
Increase in retained earnings
Add: Dividends
Net earnings
$ 610
500
$1,110
PROBLEM 3-2A
(a)
CORSO CARE CORP.

Cash
Bal.
1.
2.
3.
4.
5.
6.
7.
8.
9.
$ 9,000
3,100
+1,600
-1,000
+2,300
600
1,700
+7,000
-2,500
$11,000
Accounts
Office
Notes
Accounts
Common
+ Receivable + Supplies + Equipment = Payable + Payable + Shares
$1,700
$600
$6,000
$3,600
3,100
+3,100
1,600
+4,100
+6,600
00 000
$6,700
0 0
$600
00 000
$10,100
+$7,000
700 000
$7,000
$28,400 = $28,400
+170
00 000
$3,770
Retained
Earnings
$13,000
$ 700
00 0 00
$13,000
+8,900
600
700
900
100
170
-2,500
$4,630
(a)
(b)
(c)
(d)
(e)
(f)
(g)

(b)
(a)
(b)
(c)
(d)
(e)
(f )
(g)
Service revenue
Dividends
Salaries expense
Rent expense
Advertising expense
Utility expense
Income tax expense
CORSO CARE CORP.
Month Ended September 30, 2004
Revenues
Service revenue
Expenses
Rent expense
Salaries expense
Utilities expense
Advertising expense
Total expenses
Earnings before taxes
Income tax expense
Net earnings
$8,900
900
700
170
100
1,870
7,030
2,500
$4,530
CORSO CARE CORP.

Month Ended September 30, 2004
Retained earnings, September 1
Add: Net earnings
Less: Dividends
Retained earnings, September 30
$0,700
4,530
5,230
0 600
$4,630

(b) (Continued)
CORSO CARE CORP.
Balance Sheet
September 30, 2004
Current assets
Cash
Accounts receivable
Supplies
Office equipment
Total assets
Assets
$11,000
6,700
600
$18,300
10,100
$28,400
Liabilities
Notes payable
$ 7,000
Accounts payable
3,770
Total liabilities
Common shares
$13,000
Retained earnings
3
4,630
Total shareholders equity 0
Total liabilities and shareholders' equity
$10,770
17,630
$28,400
PROBLEM 3-3A
Normal
Financial
Balance
Statement
Credit
Balance Sheet
Classification
Current Liabilities
Accounts receivable
Debit
Balance Sheet
Current Assets
Capital assets
Debit
Balance Sheet
Cash
and
short-term Debit
deposits
Cost of goods sold and
Debit
selling, general and
administrative expenses
Balance Sheet
Property, Plant and

Equipment
Current Assets
Depreciation and
amortization expense
Debit
Statement of Earnings Expense
Dividends
Debit
Statement of
Retained Earnings
Income tax expense
Debit
Income tax payable
Credit
Balance Sheet
Investments
Debit
Balance Sheet
Investment income
Credit
Short-term or Longterm investments

Statement of Earnings Revenue
Merchandise inventories
Debit
Balance Sheet
Current Assets
Prepaid expenses
Debit
Balance Sheet
Current Assets
Retained earnings
Credit
Balance Sheet
Shareholders Equity
Sales
Credit
Statement of Earnings Revenues
Share capital
Credit
Balance Sheet
Account
Accounts payable and
accrued items
N/A
Current Liabilities
Shareholders Equity
PROBLEM 3-4A
(a)
(1)
TransBasic
action
Type
1.
Asset
Account Debited
(2)
(3)
(4)
Specific
Account Effect Dr./Cr.
Cash
Increase Debit
2.
Asset
Cash
Increase Debit
3.
Asset
Vehicle
Increase Debit
(1)
Basic
Type
Shareholders
Equity
Account Credited
(2)
(3)
Specific
Account
Effect
Common
Increase
Shares
(4)
Dr./Cr.
Credit
Shareholders
Equity
(Revenue)
Asset
Service
Revenue
Increase
Credit
Cash
Decrease Credit
Liability
Note
Payable
Increase
Credit
Credit
4.
Asset
Cash
Increase Debit
Liability
Unearned
Revenue
Increase
5.
Shareholders
Equity
(Expense)
Wages
Expense
Increase Debit
Asset
Cash
Decrease Credit
6.
Asset
Accounts Increase Debit

Receivable
Service
Revenue
Increase
Credit
7.
Asset
Supplies
Increase Debit
Shareholders
Equity
(Revenue)
Liability
Accounts
Payable
Increase
Credit
8.
Asset
Cash
Increase Debit
Asset
Accounts
Receivable
Decrease Credit

(a) (Continued)
Transaction
(1)
Basic
Type
9.
Shareholders
Equity
(Expense)
10.
Shareholders
Equity
(Expense
Account Debited
(2)
(3)
Specific
Account Effect
(4)
Dr./Cr.
Rent
Increase Debit
Expense
Income
Increase Debit
Tax
Expense
(1)
Basic
Type
Asset
Asset
Account Credited
(2)
(3)
Specific
Account
Effect
Cash
Cash
(b)
Cash Flow
Issue shares
Provide services
Payment for truck
Deposit from customers
Payment of wages
Collection from customers
Payment of rent
Payment of income taxes
Ending cash
$10,000
2,500
(10,000)
5,000
(2,000)
20,000
(1,500)
(800)
$23,200
Net Earnings
Provide services
Payment of wages
Bill customers
Payment of rent
Payment of income tax
Net earnings
$ 2,500
(2,000)
20,000
(1,500)
(800)
$18,200
(4)
Dr./Cr.
Decrease Credit
Decrease Credit
PROBLEM 3-5A
Date
Account Titles and Explanation
Apr. 1 Cash
Common Shares
(Issued shares for cash)
Debit
75,000
4 Land
Cash
Note Payable
(Purchased land for cash, note)
50,000
8 Advertising Expense
Accounts Payable
(Incurred advertising expense on
account)
01,800
11 Salaries Expense
Cash
(Paid salaries)
01,700
Credit
75,000
10,000
40,000
01,800
01,700
12 No entry.
13 Prepaid Insurance
Cash
(Paid for one-year insurance policy)
03,000
17 Dividends
Cash
(Payment of cash dividend)
00,600
20 Cash
Admission Revenue
(Received cash for admission fees)
05,700
03,000
00,600
05,700
Date
Apr. 25 Cash
Unearned Admissions Revenue
(Received advance for future
services)
Debit
Credit
07,500
07,500
30 Cash
Admission Revenue
(Received cash for admission fees)
7,875
30 Accounts Payable
Cash
(Paid creditor on account)
0,700
7,875
0,700
PROBLEM 3-6A
(a)
Date
Debit
May 1 Cash
Common Shares
Credit
52,000
52,000
2 No entry. Not an accounting transaction.

3 Supplies
Accounts Payable
0800
0800
7 Rent Expense
Cash
(Paid office rent)
00,900
00,900
11 Accounts Receivable
Service Revenue
(Billed client for services provided)
01,100
12 Cash
Unearned Revenue
(Received an advance for future
services)
04,200
17 Cash
Service Revenue
(Received cash for revenue earned)
04,200
31 Salaries Expense
Cash
(Paid salaries)
01,000
31 Accounts Payable ($800 X 40%)

Cash
00,320
31 Income Tax Expense

Cash
(Paid income taxes)
00,100
01,100
04,200
04,200
01,000
00,320
00,100

(b)
Cash
May 1
52,000 May 7
900
May 12
May 17
Bal.
4,200 May 31
4,200 May 31
May 31
58,080
1,000
320
100
Accounts Payable
May 31
320 May 3
Bal.
800
480
Accounts Receivable
May 11
1,100
Bal.
1,100
Unearned Revenue
May 12
4,200
Bal.
4,200
Supplies
May 3
800
Bal.
800
Common Shares
May 1
52,000
Bal.
52,000
Bal.
1,000

Rent Expense
Service Revenue
May 11
May 17
1,100
4,200
Bal.
5,300
May 7
900
Bal.
900
Income Tax Expense

Salaries Expense
May 31
(c)
1,000
May 31
100
Bal.
100
ASTROMECH ACCOUNTING SERVICES INC.

Trial Balance
May 31, 2004
Debit
Cash
Accounts Receivable
Supplies
Accounts Payable
Unearned Revenue
Common Shares
Service Revenue
Salaries Expense
Rent Expense
Income Tax Expense
Totals
$58,080
001,100
00800
001,000
900
100
$61,980
Credit
$00,480
004,200
052,000
005,300
_ ___
$61,980
PROBLEM 3-7A
(a) and (c)
Apr. 1 Bal.
Apr. 9
Apr. 25
Apr. 30
Bal.
Apr. 30
Bal.
Cash
6,000 Apr. 2
3,800 Apr. 10
3,000 Apr. 12
85 Apr. 29
Apr. 30
5,885
Accounts Receivable
85
85
Apr. 30
Bal.
Prepaid Rentals
1,000
1,000
Apr. 1 Bal.
Bal.
Land
10,000
10,000
Apr. 1 Bal.
Bal.
Buildings
8,000
8,000
Apr. 1 Bal.
Bal.
Equipment
6,000
6,000
Apr. 10
Apr. 10
1,000
3,000
400
1,600
1,000
Accounts Payable
1,000 Apr. 1 Bal.
Apr. 20
Bal.
2,000
500
1,500
Mortgage Payable
2,000 Apr. 1 Bal.
Bal.
8,000
6,000
Common Shares
Apr. 1 Bal.
Bal.
20,000
20,000
Admission Revenue
Apr. 9
Apr. 25
Bal.
3,800
3,000
6,800
Concession Revenue
Apr. 30
Bal.
170
170
Apr. 12
Bal.
Advertising Expense
400
400
Apr. 2
Apr. 20
Bal.
Film Rental Expense

1,000
500
1,500
Apr. 29
Bal.
Salaries Expense
1,600
1,600

(b)
Date
Apr. 2 Film Rental Expense

Cash
(Paid film rental)
Debit
0,1,000
Credit
0,1,000
3 No entry not a transaction.

9 Cash
Admission Revenue
(Received cash for admissions)
10 Mortgage Payable
Accounts Payable
Cash
(Made payments on mortgage and
accounts payable)
3,800
2,000
1,000
3,800
3,000
11 No entry. Not a transaction.

Cash
(Paid advertising expenses)
0,400
20 Film Rental Expense

Accounts Payable
(Rented film on account)
0,500
25 Cash
Admission Revenue
3,000
29 Salaries Expense
Cash
(Paid salaries expense)
(b) (Continued)
1,600
0,400
0,500
3,000
1,600
Date
Debit
Apr. 30 Cash
Accounts Receivable
Concession Revenue (17% X $1,000)
(Received cash and balance on account
for concession revenue)
0,085
0,085
30 Prepaid Rentals
Cash
(Paid cash for future film rental)
(d)
0,1,000
LAKE THEATRE, INC.

Trial Balance
April 30, 2004
Debit
Cash
Accounts Receivable
Prepaid Rentals
Land
Buildings
Equipment
Accounts Payable
Mortgage Payable
Common Shares
Admission Revenue
Concession Revenue
Advertising Expense
Film Rental Expense
Salaries Expense
Totals
$05,885
000,085
000,1,000
010,000
008,000
006,000
000,400
001,500
1,600
$34,470
PROBLEM 3-8A
(a) Correct:
8
Incorrect: 1, 2, 3, 4, 5, 6, and 7
Credit
$01,500
006,000
020,000
006,800
000,170
000 000
$34,470
Credit
0,170
0,1,000
(b)
(1)
Error In Balance
1.
No
2.
Yes
3.
No
4.
Yes
5.
Yes
6.
No
7.
Yes
(2)
Difference
$90
Nil
$750
Nil
Nil
$500
Nil
(3)
Larger Column
Credit
N/A
Debit
N/A
N/A
Debit
N/A
PROBLEM 3-9A
SAGINAW LTD.
Trial Balance
May 31, 2004
Debit
Cash ($7,490 + $420)
Accounts Receivable ($2,570 $210)
Prepaid Insurance ($700 + $100)
Supplies
Equipment ($8,000 - $420)
Accounts Payable ($4,500 - $100 + $420)
Common Shares ($5,700 + $700)
Dividends
Retained Earnings
Service Revenue ($6,960 - $210)
Salaries Expense
Advertising Expense
Insurance Expense
Income Tax Expense ($200 + $100)
Totals
Credit
$ 7,910
2,360
040800
420
4207,580
$ 3,200
04,820
0 6,400
700
6,000
006,750
4,200
1,100
1,600
200
300 00 0000
$27,170 $27,170
PROBLEM 3-10A
(a)
HUDSONS BAY COMPANY

Trial Balance
January 31, 2003
(thousands)
Debit
Capital stock
Cash in stores
Credit card receivables
Dividends
Fixed assets
Goodwill
Income tax expense
Interest expense
Long-term debt
Long-term debt due within one year
Long-term receivables
Operating expenses
Other accounts payable and accrued
expenses
Other accounts receivables
Other assets
Other long-term liabilities
Other shareholders equity items
Prepaid expenses and other current assets
Retained earnings
Sales and revenue
Short-term borrowings
Short-term deposits
Trade accounts payable
Totals
7,308
559,151
38,912
1,205,333
152,294
42,421
45,428
12,105
1,551,104
7,184,503
117,412
496,702
122,860
Credit
$1,454,655
388,543
258,870
541,599
230,824
199,231
668,304
7,383,813
24,744
51,418
0000000000
436,368
$11,586,951 $11,586,951
Problem 3-10A (Continued)

(b)
HUDSONS BAY COMPANY

Year Ended January 31, 2004
(thousands)
Revenues
Sales and revenue
Expenses
Operating expenses
Interest expense
Total expenses
Income tax expense
Net earnings
$7,383,813
7,184,503
45,428
7,229,931
153,882
42,421
$ 111,461
HUDSONS BAY COMPANY

Year Ended January 31, 2004
(thousands)
Retained earnings, February 1, 2003
Add: Net earnings
Less: Dividends
Retained earnings, January 31, 2004
$ 668,304
111,461
779,765
38,912
$ 740,853

(b) (Continued)
HUDSONS BAY COMPANY
Balance Sheet
January 31, 2004
(thousands)
Assets
Current assets
Cash in stores
Short-term deposits
Credit card receivables
Other accounts receivable
Prepaid expenses and other current
assets
Long-term receivables
Goodwill
Other assets
Total assets
7,308
51,418
559,151
117,412
1,551,104
122,860
$2,409,253
12,105
1,205,333
152,294
496,702
$4,275,687

(b)
(Continued)
Liabilities
Trade accounts payable
$436,368
Other accounts payable and accrued
541,599
liabilities
Short-term borrowings
24,744
258,870
Total current liabilities
Long-term liabilities
Long-term debt
$388,543
Other long-term liabilities
230,824
Total long-term liabilities
Total liabilities
Capital stock
$1,454,655
Other shareholders equity items
199,231
Retained earnings
740,853
$1,261,581
619,367
1,880,948
2,394,739
$4,275,687
PROBLEM 3-1B
(a) and (b)
Transaction
1.
Cash Flow
Statement
F
2.
- 700
3.
- 2,500
Cash
+$20,000
Accounts
Receivabl
e
Supplies
Equipment
Common
Shares
+$20,000
+$2,500
+$300
5.
-600
6.
+1,000
7.
-400
8.
-300
9.
-1,200
10.
+8,000
11.
-2,000
$21,300
Retained
Earnings
-$700 (a)
4.
Total
Accounts
Payable
-300 (b)
+$600
+$8,000
+9,000 (c)
-400 (d)
-300
-1,200 (e)
-8,000
-2,000 (f)
$0
$600
$2,500
$0
$20,000
$4,400
PROBLEM 3-1B (Continued)

(a) (Continued)
(a)
(b)
(c)
(d)
(e)
(f )
Rent expense
Advertising expense
Service revenue
Dividends
Salaries expense
Income tax expense
(c)
Service revenue
Expenses
Salaries expense
Rent expense
Advertising expense
Income tax expense
Net earnings
$9,000
$1,200
700
300
2,000
4,200
$4,800
OR
Increase in retained earnings
Add: Dividends
Net earnings
$4,400
400
$4,800
PROBLEM 3-2B
(a)
IVAN IZO, INC.

Cash
Bal.
1.
2.
3.
4.
5.
$4,000
+2,000
2,700
+3,000
400
2,750
6.
7.
8.
9.
550
+2,000
0
-1,300
$3,300
Accounts
Office
Notes
Accounts
Common
Retained
+ Receivable + Supplies + Equipment = Payable + Payable + Shares + Earnings
$2,500
2,000
+3,400
$500
$5,000
, 00
00 0
$500
00
$7,000
$6,500
2,700
+1,600
+2,000
0
0000 0
$3,900
$4,200
+$2,000
+
0000 0
$2,000
$14,700 = $14,700
+300
00
$3,400
$1,300
+6,400 (a)
1,500
900
350
550
0000 0
$6,500
(b)
(c)
(d)
(e)
300 (f)
-1,300 (g)
$2,800

(a) Continued)
(b)
(a)
(b)
(c)
(d)
Service revenue
Salaries expense
Rent expense
Advertising expense
(e) Dividends
(f) Utilities expense
(g) Income tax expense
IVAN IZO, LLP.

Revenues
Service revenue
Expenses
Salaries expense
Rent expense
Utilities expense
Advertising expense
Total expenses
Income tax expense
Net earnings
$6,400
1,500
900
300
350
3,050
3,350
1,300
$ 2,050
IVAN IZO, LLP.

Add: Net earnings
Less: Dividends
$1,300
0 2,050
3,350
550
$2,800

(b) (Continued)
IVAN IZO, INC.
Balance Sheet
August 31, 2004
Assets
Current assets
Cash
Accounts receivable
Supplies
Office equipment
Total assets
$3,300
3,900
500
$ 7,700
7,000
$14,700

Liabilities
Notes payable
Accounts payable
Total liabilities
Common shares
Retained earnings
$2,000
3,400
$6,500
2,800
$ 5,400
9,300
$14,700
PROBLEM 3-3B
Account
Normal
Balance
Financial
Statement
Classification
Accounts receivable
Debit
Balance Sheet
Debit
Common shares
Credit
Balance Sheet
Cost of goods sold
Debit
Equipment
Debit
Balance Sheet
Income tax expense
Debit
Property, Plant and

Equipment
Income tax payable
Credit
Balance Sheet
Insurance expense
Debit
Interest revenue
Credit
Statement of Earnings Revenue
Inventories
Debit
Balance Sheet
Current Assets
Long-term debt
Credit
Balance Sheet
Long-term Liabilities
Notes payable
Credit
Balance Sheet
Short or Long-term
Liabilities
Prepaid insurance
Debit
Balance Sheet
Current Assets
Retained earnings
Credit
Balance Sheet
Shareholders Equity
Sales revenue
Credit
Statement of Earnings Revenues
Unearned sales revenue Credit
Balance Sheet
Current Assets
Shareholders Equity
Current Liabilities
Current Liabilities
PROBLEM 3-4B
(a)
(1)
TransBasic
action
Type
1. Asset
Account Debited
(2)
(3)
(4)
Specific
Dr./Cr.
Effect
Account
Supplies
Increase Debit
(1)
Basic
Type
Liability
Liability
Increase Debit
Account Credited
(2)
(3)
(4)
Specific
Dr./Cr.
Effect
Account
Accounts Increase Credit
Payable
2.
Asset
Furniture
Note
Increase Credit
Payable
3.
Asset
Cash and Increase Debit

Accounts
Receivable
4.
Shareholders Dividends
Equity
(Capital)
Increase Debit
Asset
Cash
Decrease Credit
5.
Liability
Accounts
Payable
Decrease Debit
Asset
Cash
Decrease Credit
6.
Asset
Cash
Increase Debit
Asset
Accounts Decrease Credit

Receivable
7.
Shareholders Operating
Equity
Expenses
(Expense)
Increase Debit
Asset
Cash
8.
Shareholders Wages or
Equity
Operating
(Expense)
Expenses
Increase Debit
Liability
Wages Increase Credit

Payable
Shareholders Revenue Increase Credit

Equity
(Revenue)
Decrease Credit

(b)
Cash Flow
Cash sales
Paid dividends
Payment on supplies accounts payable
Collection from customers
Payment of operating expenses
Ending cash
$30,000
(1,000)
(600)
20,000
(12,000)
$36,400
Net Earnings
Fees earned
Operating expenses
Wages expense
Net earnings
$90,000
(12,000)
(4,000)
$74,000
PROBLEM 3-5B
Date
Mar. 1 Cash
Common Shares
Debit
60,000
3 Land
Building
Equipment
Cash
(Purchased Lee's Golf Land)
43,000
19,000
06,000
Cash
(Paid for advertising)
01,600
6 Prepaid Insurance
Cash
(Paid for one-year insurance policy)
01,800
10 Equipment
Accounts Payable
(Purchased equipment on account)
04,900
18 Cash
Golf Revenue
, 1,200
19 Cash
Unearned Golf Revenue
(Received cash for coupon books
sold)
05,000
Credit
60,000
68,000
01,600
01,800
04,900
01,200
05,000

Date
Mar. 25 Dividends
Cash
(Payment of cash dividend)
Debit
00
, 500
30 Salaries Expense
Cash
0,700
30 Accounts Payable
Cash
4,900
31 Cash
Golf Revenue
0,500
Credit
00,
500
0,700
4,900
0,500
PROBLEM 3-6B
(a)
Date
Apr. 1 Cash
Common Shares
Debit
16,000
Credit
16,000
1 No entry. Not a transaction.

2 Rent Expense
Cash
(Paid monthly office rent)
00,800
3 Supplies
Accounts Payable
01,500
10 Accounts Receivable
Service Revenue
(Billed clients for services
rendered)
0,1,100
11 Cash
Unearned Revenue
(Received cash advance for
future service)
00,500
20 Cash
Service Revenue
(Received cash for revenue
earned)
01,500
30 Salaries Expense
Cash
(Paid monthly salary)
01,200

(a)
(Continued)
00,800
0 1,500
01,100
00,500
01,500
01,200
Date
Apr. 30 Accounts Payable

Cash
(Paid Halo Company on account)
Debit
600
Credit
600

(b)
Cash
Apr. 1
Apr. 11
Apr. 20
Bal.
16,000 Apr. 2
500 Apr. 30
1,500 Apr. 30
Service Revenue
800
1,200
600
Apr. 10
Apr. 20
1,100
1,500
Bal.
2,600
15,400
Salaries Expense
Accounts Receivable
Apr. 10
Bal.
Apr. 30
1,200
Bal.
1,200
1,100
1,100
Rent Expense
Supplies
Apr. 3
Bal.
800
Bal.
800
1,500
1,500
Accounts Payable
Apr. 30
Apr. 2
600 Apr. 3
Bal.
1,500
900
Unearned Revenue
Apr. 11
500
Bal.
500
Common Shares
Apr. 1
16,000
Bal.
16,000

(c)
VIRMANI ARCHITECTS INC.
Trial Balance
April 30, 2004
Debit
Cash
Accounts Receivable
Supplies
Accounts Payable
Unearned Revenue
Common Shares
Service Revenue
Salaries Expense
Rent Expense
Totals
$15,400
001,100
001,500
001,200
800
$20,000
Credit
$00,900
000,500
016,000
002,600
______
$20,000
PROBLEM 3-7B
(a) and (c)
Mar. 10
Cash
Mar. 1 Bal.
Mar. 9
Mar. 20
Mar. 31
Mar. 31
16,000
6,500
7,500
600
20,000
Bal.
27,400
Mar. 2
Mar. 10
Mar. 12
Mar. 20
Mar. 31
10,600
4,000
10,600
800
4,000
3,800
Mar. 1 Bal. 12,000

Mar. 2
8,000
Bal.
9,400
Common Shares
Mar. 1 Bal. 80,000
Bal.
80,000
Accounts Receivable
Mar. 31
600
Bal.
600
Admission Revenue
Land
Mar. 1 Bal.
42,000
Bal.
42,000
18,000
Bal.
18,000
Equipment
6,500
7,500
20,000
Bal.
34,000
Concession Revenue
Buildings
Mar. 1 Bal.
Mar. 9
Mar. 20
Mar. 31
Mar. 31
1,200
Bal.
1,200
Advertising Expense
Mar. 12
800
Bal.
800
Mar. 1 Bal.
16,000
Bal.
16,000
(a) (Continued)
Accounts Payable
Film Rental Expense
Mar. 2
Mar. 20
12,000
4,000
Bal.
16,000
Salaries Expense
Mar. 31
3,800
Bal.
3,800

(b)
Date
Mar. 2

Film Rental Expense
Accounts Payable
Cash
(Rented films for cash and on account)
Debit
12,000
No entry.
Cash
Admission Revenue
06,500
10
Accounts Payable ($8,000 + $2,600)

Cash
(Paid creditors on account)
10,600
11
No entry.
12
Advertising Expense
Cash
(Paid advertising expenses)
00,800
0
7,500
20
Cash
Admission Revenue
20
Film Rental Expense

Cash
(Paid film rental)
04,000
31
Salaries Expense
Cash
03,800

(b) (Continued)
Credit
08,000
04,000
06,500
10,600
00,800
0
7,500
04,000
03,800
Date
Debit
Mar. 31 Cash
Accounts Receivable
Concession Revenue (15% X $8,000)
(Received cash and balance on
account for concession revenue)
31
00,600
00,600
Cash
Admission Revenue
(d)
20,000
01,200
20,000
THE STAR THEATRE, INC.

Trial Balance
March 31, 2004
Debit
Cash
Accounts Receivable
Land
Buildings
Equipment
Accounts Payable
Common Shares
Admission Revenue
Concession Revenue
Advertising Expense
Film Rental Expense
Salaries Expense
Totals
Credit
$ 27,400
0000,600
0042,000
0018,000
0016,000
0000,800
0016,000
3,800
$124,600
Credit
$09,400
0080,000
0034,000
0001,200
0 000000
$124,600

Edition
Financial Accounting, Second Canadian
PROBLEM 3-8B
Error
1.
2.
3.
4.
5.
6.
7.
8.
(a) In Balance
No
Yes
Yes
Yes
No
Yes
Yes
Yes
(b) Difference
$600
Nil
Nil
Nil
$250
Nil
Nil
Nil
(c) Larger Column

Credit
N/A
N/A
N/A
Credit
N/A
N/A
N/A

Edition
PROBLEM 3-9B
WARGO LTD.
Trial Balance
June 30, 2004
Debit
Cash ($5,652 + $180)
Accounts Receivable ($3,230 - $180 + $54)
Supplies ($800 - $340)
Equipment ($3,000 + $340)
Accumulated amortization
Accounts Payable
Unearned Revenue
Common Shares
Dividends ($800 + $600)
Service Revenue ($4,380 + $801)
Salaries Expense ($3,400 - $600)
Office Expense
Income Tax Expense
Totals
$ 5,832
3,104
460
3,340
1,400
2,800
910
50
200
$18,096
Credit
$
50
02,665
001,200
009,000
005,181
______
$18,096

Edition
PROBLEM 3-10B
(a)
TAGGAR ENTERPRISES INC.

Trial Balance
June 30, 2004
Accounts Receivable
Cash
Common Shares
Cost of Goods Sold
Equipment
Income Tax Expense
Income Tax Payable
Insurance Expense
Interest Expense
Inventories
Land
Long-Term Debt
Long-Term Investment
Notes Payable, due 2008
Prepaid Insurance
Retained Earnings, July 1, 2003
Sales Revenue
Totals
Debit
$ 500
150
180
870
1,500
160
130
225
510
800
495
90
_____
$5,610
Credit
$ 300
550
160
1,200
1,000
400
2,000
$5,610

Edition
Problem 3-10B (Continued)

(b)
Year Ended June 30, 2004
Sales revenue
Expenses
Cost of goods sold
Insurance expense
Interest expense
Total expenses
Earnings before income taxes
Income tax expense
Net earnings
$2,000
870
130
150
225
1,375
625
160
$ 465

Year Ended June 30, 2004
Retained earnings, July 1
Add: Net earnings
Retained earnings, June 30
$0,400
0__ 465
$ 865

Edition

(b) (Continued)
Balance Sheet
June 30, 2004
Assets
Current assets
Cash
Accounts receivable
Inventories
Prepaid insurance
Long-term investment
Land
Equipment
$1,500
Less: accumulated amortization,
equipment
300
Total property, plant and equipment
Total assets
$180
500
510
90
$1,280
495
$ 800
1,200
2,000
$3,775
Liabilities and Shareholders Equity

Current liabilities
Income tax payable
Long-term liabilities
Notes payable
Long-term debt
Total long-term liabilities
Total liabilities
Shareholders equity
Common shares
Retained earnings
Total shareholders' equity
$ 160
$1,000
1,200
$550
865
2,200
2,360
1,415
$ 3,775

Edition
BYP 3-1 FINANCIAL REPORTING PROBLEM

(a)
Account
Accounts payable and accrued
liabilities
Accounts receivable
Depreciation expense
Fixed assets
Interest expense
Sales
Increase
Side
Decrease
Side
Normal
Balance
Credit
Debit
Credit
Debit
Debit
Debit
Debit
Credit
Credit
Credit
Credit
Credit
Debit
Debit
Debit
Debit
Debit
Credit
(b)
1.
2.
3.
4.
5.
6.
Cash is decreased.
Cash is increased.
Accumulated depreciation is increased.
Accounts payable is increased.
Interest payable is increased.
Accounts receivable is increased.

Edition
BYP 3-2 COMPARATIVE ANALYSIS PROBLEM

(a)
LOBLAW COMPANIES LIMITED
Trial Balance
December 28, 2002
(in millions)
Cash and cash equivalents
Short-term investments
Accounts receivable
Inventories
Future income taxes
Prepaid expenses and other assets
Fixed assets
Goodwill
Future income taxes, long-term
Other assets
Commercial paper
Accounts payable and accrued liabilities
Income taxes
Long-term debt
Future income taxes
Other liabilities
Share capital
Retained earnings (note 1)
Impact of implementing new accounting standard
Premium on common stock purchased for cancellation
Dividendscommon shares
Sales
Cost of sales, selling and administrative
Depreciation
Interest expense
Income taxes
Totals
Debit
$ 823
304
605
1,702
68
24
5,587
1,599
15
383
Credit
533
2,336
179
106
3,420
68
344
1,195
2,375
25
16
133
23,082
21,425
354
161
____414
$ 33,638
______
$33,638

Edition
BYP 3-2 (Continued)

(b)
SOBEYS INC.
Trial Balance
May 3, 2003
(in thousands)
Account
Cash
Temporary investments
Receivables
Inventories
Prepaid expenses
Current future tax assets
Current portion mortgage and loans receivable
Current assets of discontinued operations
Mortgage and loans receivable
Property and equipment
Goodwill
Non-current future tax assets
Deferred costs
Accounts payable and accrued liabilities
Income taxes payable
Future tax liabilities
Long-term debt
Employee future benefit obligations
Non-current future tax liabilities
Deferred revenue
Capital stock
Retained earnings (note 1)
Dividends paid
Excess of purchase price over average paid up capital of
common shares purchased for cancellation
Sales
Cost of sales, selling and administrative expenses
Depreciation and amortization
Interest expense-long-term debt
Income taxes
Totals
Debit
$ 123.1
191.4
285.4
444.0
30.5
2.7
15.4
1.9
134.6
1,243.9
555.6
28.5
135.5
Credit
$ 971.9
37.4
21.1
150.1
435.3
75.5
57.7
6.7
903.4
382.0
23.8
3.8
10,414.5
9,964.4
124.0
41.7
105.4
$13,455.6
00000000
$13,455.6

Edition
BYP 3-2 (Continued)

Note 1Replace retained earnings on the balance sheet with opening retained earnings from
the statement of retained earnings and include the dividends paidby including the income
statement accounts the net earnings is included.

Edition
BYP 3-3 RESEARCH CASE

(a) NAICS industries are identified by a 6-digit code. The longer code accommodates a larger
number of sectors and allows more flexibility in designating subsectors. It also provides for
additional detail not necessarily appropriate for all three NAICS countries. The
international NAICS agreement fixes only the first five digits of the code. The sixth digit,
where used, identifies subdivisions of NAICS industries that accommodate user needs in
individual countries. Thus, 6-digit Canadian codes may differ from counterparts in U.S. or
Mexico, but at the 5-digit level they are standardized. The first two digits identify the
sector, the fourth digit identifies the industry group, and the sixth digit identifies special
national subdivisions of NAICS industries on a country-by-country basis when necessary.
(b) The NAICS industry 517210 is Cellular and Other Wireless Telecommunications. This
industry is in:
51
517
5172
Information and cultural industries sector sector

Telecommunications subsector
Wireless telecommunications carriers
51721
NAICS industry Wireless Telecommunications Carriers
(except satellite)
517210
Canadian
specific
industry
Cellular
and
Other
Wireless
Telecommunications.
(c) 1.
2.
3.
4.
5.
11
51
52
55
71
(d) Answer will depend on the company chosen. Some answers could include 71112 dance
companies; 711211 sports teams and clubs; and, 71111 theatre companies and dinner
theatres.

Edition
BYP 3-4 INTERPRETING FINANCIAL STATEMENTS

(a)
Account
Accounts receivables and prepaid expenses
Inventories
Other assets
Bank and other payables
Accounts payable and accrued expenses
Dividends payable
Long-term debt
Share capital
Retained earnings
Dividends
Sales and revenues from services
Gain on disposal of assets
Cost of goods sold
Operating, general and administrative expense
Interest expense
Other expenses
Income tax recovery
Totals
Debit
$ 39,117
212,454
469,172
724,926
138,305
Credit
$ 388,722
344,836
4,728
338,342
460,688
74,919
4,728
4,130,154
17,221
3,669,961
82,958
382,420
48,408
4,236
000000000
$5,776,685
00017,075
$5,776,685

Edition
BYP 3-4 (Continued)

(b)
Account
Assets
Liabilities

$ 39,117
Accounts receivables and prepaid
212,454
expenses
Inventories
469,172
724,926
Other assets
138,305
Bank and other payables
$ 388,722
Accounts payable and accrued
344,836
expenses
Dividends payable
4,728
Long-term debt
338,342
Share capital
Retained earnings
Dividends
Sales and revenues from services
Gain on disposal of assets
Cost of goods sold
Operating, general and administrative
expense
Interest expense
Other expenses
Income tax recovery
000000000
000000000
Totals
$1,583,974 = $1,076,628 +
Shareholders
Equity
$ 460,688
74,919
(4,728)
4,130,154
17,221
(3,669,961)
(82,958)
(382,420)
(48,408)
(4,236)
17,075
$ 507,346

Edition
BYP 3-5 A GLOBAL FOCUS

Order
Trial balances in Canada vary in format. Some companies organize them in financial
statement order; others in alphabetical order. The trial balance as presented for Holmen AB is
in neither of these formats it is arranged by type of asset, liability and equity. The assets are
in order of longevity not currency.
Specific differences
1.
2.
3.
4.
5.
6.
7.
Goodwill, leases and similar rights these items are not generally grouped together.
Short-term placements would be called short-term investments.
Shares and participations would be called common and preferred shares.
Restricted and non restricted equity are not terms used in Canada but they are similar in
intent (i.e. limited liability for share capital doesnt allow this amount to be distributed to
shareholders).
Financial liabilities would be called long-term liabilities (from financing sources).
Revenues net turnover would be sales.
Depreciation would be called amortization.

Edition
BYP 3-6 FINANCIAL ANALYSIS ON THE WEB

Due to the frequency of change with regard to information available on the world wide web, the
Accounting on the Web cases are updated as required. Their suggested solutions are also
updated whenever necessary, and can be found online in the Instructor Resources section of
our home page (www.wiley.com/canada/kimmel).

Edition
BYP 3-7 COLLABORATIVE LEARNING ACTIVITY

(a) May
Correct.
Cash
Lesson Revenue
Cash
Unearned Revenue
9
14
15
20
Hay and Feed Supplies

Accounts Payable
500
500
1,700
800
Dividends
Cash
400
Cash
250
1,700
Office Equipment
Cash
Riding Revenue
31
250
800
400
154
154
Correct.
(b) The error in the entries of May 14 and May 20 would prevent the trial balance from
balancing.
(c)
Net earnings as reported
Add: May 9, Hay and feed expense
May 15, Salaries expense (Dividends
declared and paid)
$4,500
$1,700
4002,100
6,600
500
$6,100
Less: May 7, Boarding revenue unearned

Correct net earnings
(d)
Cash as reported
Add: May 9, Purchase on account
May 20, Transposition error
$12,475
$1,700
9
1,709
$14,184

Edition
BYP 3-8 COMMUNICATION ACTIVITY

To:
Accounting Instructor
From: Accounting Student

Re:
Steps in Recording Process
In the first transaction, bills totaling $6,000 were sent to customers for services rendered.
Therefore, the asset Accounts Receivable is increased $6,000 and the revenue Service
Revenue is increased $6,000. Debits increase assets and credits increase revenues, so the
journal entry is:
Accounts Receivable
Service Revenue
(Bill customer for services rendered)
6,000
6,000
The $6,000 amount is then posted to the debit side of the general ledger account Accounts
Receivable and to the credit side of the general ledger account Service Revenue.
In the second transaction, $2,000 was paid in salaries to employees. There fore, the expense
Salaries Expense is increased $2,000 and the asset Cash is decreased $2,000. Debits
increase expenses and credits decrease assets, so the journal entry is:
Salaries Expense
Cash
(Salaries paid)
2,000
2,000
The $2,000 amount is then posted to the debit side of the general ledger ac count Salaries
Expense and to the credit side of the general ledger account Cash.

Edition
BYP 3-9 ETHICS CASE

(a) The stakeholders in this situation are:
Vu Hung, assistant chief accountant;
Users of the company's financial statements such as shareholders and regulators
(b) By adding $1,000 to the Equipment account, the account total is intentionally misstated.
By not locating the error causing the imbalance, some other account may also be
misstated by $1,000. If the amount of $1,000 is determined to be immaterial, and the intent
is not to commit fraud (cover up an embezzlement or other misappropriation of assets),
Vu's action might not be considered unethical in the preparation of interim financial
statements. However, if Vu is violating a company accounting policy by her action, then
she is acting unethically.
(c) Vu's alternatives are:
1.
Miss the deadline but find the error causing the imbalance.
2.
Tell her supervisor of the imbalance and suffer the consequences.
3.
Do as she did and locate the error later, making the adjustment in the next quarter.

Edition
Legal Notice
Copyright
Copyright 2004 by John Wiley & Sons Canada, Ltd. or related companies. All rights reserved.
The data contained in these files are protected by copyright. This manual is furnished under licence and may be
used only in accordance with the terms of such licence.
The material provided herein may not be downloaded, reproduced, stored in a retrieval system, modified, made
available on a network, used to create derivative works, or transmitted in any form or by any means, electronic,
mechanical, photocopying, recording, scanning, or otherwise without the prior written permission of John Wiley &
Sons Canada, Ltd.

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Kimmel, Weygandt, Kieso, Trenholm

Financial Accounting, Second Canadian Edition

Analyse the effect of

Define debits and

Identify the basic steps

Explain what a journal

5A, 6A, 7A 5B, 6B, 7B

Explain what a ledger

Explain what posting

10, 11, 12,

Explain the purposes of

10, 11, 12,

Kimmel, Weygandt, Kieso, Trenholm

Financial Accounting, Second Canadian Edition

ASSIGNMENT CHARACTERISTICS TABLE

Analyse transactions, classify cash flows, and

Analyse transactions and prepare financial

Identify normal account balance and associated

Identify debits, credits, and normal balances;

Journalize transactions, post, and prepare trial

Journalize transactions, post, and prepare trial

Analyse errors and their effects on trial balance.

Prepare corrected trial balance.

Prepare trial balance and financial statements.

Analyse transactions, classify cash flows, and

Analyse transactions and prepare financial

Identify normal account balance and associated

Identify debits, credits, and normal balances;

Kimmel, Weygandt, Kieso, Trenholm

Financial Accounting, Second Canadian Edition

Journalize transactions, post, and prepare trial

Journalize transactions, post, and prepare trial

Analyse errors and their effects on trial balance.

Prepare corrected trial balance.

Prepare trial balance and financial statements.

Kimmel, Weygandt, Kieso, Trenholm

Financial Accounting, Second Canadian Edition

Accounting transactions are the economic events of the enterprise recorded by

Decrease assets and decrease shareholders' equity.

Asset accounts are increased by debits and decreased by credits.

Kimmel, Weygandt, Kieso, Trenholm

Financial Accounting, Second Canadian Edition

Debit Supplies and credit Accounts Payable.

both debit and credit entries

Kimmel, Weygandt, Kieso, Trenholm

Financial Accounting, Second Canadian Edition

The general ledger is the entire group of accounts maintained by a company,

Kimmel, Weygandt, Kieso, Trenholm

Financial Accounting, Second Canadian Edition

Kimmel, Weygandt, Kieso, Trenholm

Financial Accounting, Second Canadian Edition

SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 3-2

BRIEF EXERCISE 3-3

Kimmel, Weygandt, Kieso, Trenholm

Financial Accounting, Second Canadian Edition

BRIEF EXERCISE 3-4

Income Tax Expense

BRIEF EXERCISE 3-5

Kimmel, Weygandt, Kieso, Trenholm

Financial Accounting, Second Canadian Edition

BRIEF EXERCISE 3-6

The shareholders' equity