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Accounting Principles Chapter 1 Solution Manual
Accounting Principles Chapter 1 Solution Manual
CHAPTER 1
Accounting in Action
Learning Objectives
1. Identify the use and users of accounting and the objective of
financial reporting.
2. Compare the different forms of business organization.
3. Explain the building blocks of accounting: ethics and the
concepts included in the conceptual framework.
4. Describe the components of the financial statements and
explain the accounting equation.
5. Analyze the effects of business transactions on the
accounting equation.
6. Prepare financial statements.
LO Learning objective
Bloom's
BT Taxonomy
K Knowledge
C Comprehension
AP Application
AN Analysis
S Synthesis
E Evaluation
Difficulty: Level of difficulty
S Simple
M Moderate
C Complex
Time: Estimated time to complete in minutes
AACSB Association to Advance Collegiate Schools of Business
Communication Communication
Ethics Ethics
Analytic Analytic
Tech. Technology
Diversity Diversity
Reflec. Thinking Reflective Thinking
CPA CM CPA Canada Competency Map
Ethics Professional and Ethical Behaviour
PS and DM Problem-Solving and Decision-Making
Comm. Communication
Self-Mgt. Self-Management
Team & Lead Teamwork and Leadership
Reporting Financial Reporting
Stat. & Gov. Strategy and Governance
Mgt. Accounting Management Accounting
Audit Audit and Assurance
Finance Finance
Tax Taxation
Evaluat
Learning Objective Knowledge Comprehension Application Analysis Synthesis ion
1. Identify the use and Q1.3 Q1.1 P1.1A
users of accounting BE1.1 Q1.2 P1.1B
and the objective of E1.5 E1.1
financial reporting. E1.2
Evaluat
Learning Objective Knowledge Comprehension Application Analysis Synthesis ion
5. Analyze the effects Q1.19 Q1.17 Q1.18
of business E1.5 Q1.20 BE1.12
transactions on the E1.8 BE1.13
accounting equation. E1.9 BE1.14
E1.10 E1.12
E1.11 E1.13
P1.5A P1.7A
P1.5B P1.7B
P1.8A
P1.8B
P1.11A
P1.11B
6. Prepare financial Q1.19 BE1.15 P1.10A
statements. Q1.20 BE1.16 P1.10B
E1.9 BE1.17
BE1.18
E1.14
E1.15
E1.16
E1.17
P1.6A
P1.6B
P1.7A
P1.7B
P1.8A
P1.8B
P1.9A
P1.9B
P1.11A
P1.11B
Broadening Your BYP1.1 Santé Saga BYP1.3 BYP1.4 BYP1.2
Perspective BYP1. 6 BYP1.5
ANSWERS TO QUESTIONS
LO 1 BT: C Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
2. Internal users are those who plan, organize, and run businesses and
include managers, supervisors, directors, and company officers. External
users work for other organizations but have reasons to be interested in the
company’s financial position and performance, and include current or
potential investors (owners), and creditors.
LO 1 BT: C Difficulty: M Time: 15 min. AACSB: None CPA: cpa-t001 CM: Reporting
LO 1 BT: C Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
QUESTIONS (Continued)
LO 2 BT: K Difficulty: M Time: 15 min. AACSB: None CPA: cpa-t001 CM: Reporting
LO 3 BT: C Difficulty: S Time: 5 min. AACSB: Ethics CPA: cpa-t001 cpa-e001 CM: Reporting
and Ethics
QUESTIONS (Continued)
LO 3 BT: K Difficulty: M Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting
7. The reporting entity concept states that economic events can be identified
with a particular unit of accountability. This concept requires that the
activities of the entity be kept separate and distinct from the activities of its
owners and all other economic entities.
LO 3 BT: K Difficulty: M Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
LO 3 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
9. Historical cost represents the amount paid in a transaction. The fair value
of an asset is generally the amount an asset could be sold for in the
market. On the date of purchase, fair value and cost are the same. As time
progresses, the fair value changes depending on the nature of the asset.
LO 3 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
10. In order for an event to be recognized in the accounting records, the event
must change the entity’s financial position. Examples of events that are not
transactions include hiring of employees and signing a lease for premises.
LO 3 BT: C Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
QUESTIONS (Continued)
11. The monetary unit concept states that only transaction data that can be
expressed as an amount of money may be included in the accounting
records. Consequently, information that cannot be objectively measured in
dollars cannot be included as transactions of the business. It is also
assumed that the monetary unit is stable with respect to the value over
several years. In other words, inflation is ignored.
LO 3 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
12. The basic accounting equation is Assets = Liabilities + Owner's Equity and
the expanded accounting equation is Assets = Liabilities + Owner's Capital
− Owner’s Drawings + Revenue − Expenses. The equation is the basis for
recording and summarizing all the economic events and transactions of a
business.
LO 4 BT: K Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
LO 4 BT: K Difficulty: M Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting
LO 4 BT: K Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
15. Profit or loss is the result of the calculation: revenues less expenses. If
revenues exceed expenses, the business has experienced profit. If
expenses exceed revenues, a loss is experienced by the business.
LO 4 BT: C Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
QUESTIONS (Continued)
16. a. Accounts for assets, liabilities, and owner’s equity are reported on
the balance sheet.
b. Accounts for revenue and expenses are reported on the income
statement.
LO 4 BT: K Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
17. 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,
such as when equipment is purchased for cash (resulting in an increase
in the equipment asset account that is offset by a decrease in the cash
asset account).
LO 5 BT: C Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
18. No, this treatment is not proper. While the transaction does involve a
disbursement of cash, it does not represent an expense. Expenses are
decreases in owner's equity resulting from business activities entered into
for the purpose of earning profit. This transaction is a withdrawal of
capital from the business by the owner and should be recorded as a
decrease in both cash and owner’s equity.
LO 5 BT: AP Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
LO 6 BT: K Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
20. It is likely that the use of rounded figures would not change the decisions
made by the users of the financial statements. As well, presenting the
information in this manner makes the statements easier to read and
analyze, thereby increasing their usefulness to the users.
LO 6 BT: C Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
LO 1 BT: K Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
LO 3 BT: AN Difficulty: C Time: 5 min. AACSB: Ethics CPA: cpa-t001 cpa-e001 CM: Reporting
and Ethics
a. F
b. F
c. T
d. T
e. T
LO 3 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
a. F
b. F
c. T
d. T
LO 3 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
LO 3 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
LO 4 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
LO 4 BT: AP Difficulty: C Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
LO 4 BT: AP Difficulty: M Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
LO 4 BT: AP Difficulty: M Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
1. Accounts receivable A
2. Salaries payable L
3. Equipment A
4. Supplies A
5. Owner’s capital OE
6. Notes payable L
LO 4 BT: K Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
LO 5 BT: AP Difficulty: M Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting
LO 5 BT: AP Difficulty: M Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
E a. Advertising expense
R b. Commission fees earned
I c. Cash received from the company’s owner
E d. Amounts paid to employees
R e. Services performed on account
E f. Utilities incurred
D g. Cash distributed to company owner
LO 4,5 BT: AP Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t001 CM: Reporting
LO 4,6 BT: AP Difficulty: M Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting
PRAIRIE COMPANY
Income Statement
Month Ended October 31, 2021
Revenues
Service revenue................................................ $23,000
Expenses
Advertising expense......................................... $3,600
Rent expense.................................................... 2,600
Total expenses............................................. 6,200
Profit....................................................................... $16,800
LO 6 BT: AP Difficulty: S Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting
PRAIRIE COMPANY
Statement of Owner's Equity
Month Ended October 31, 2021
LO 6 BT: AP Difficulty: S Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting
PRAIRIE COMPANY
Balance Sheet
October 31, 2021
Assets
Liabilities
Accounts payable....................................................... $ 90,000
Owner's equity
N. Woods, capital....................................................... 46,800
Total liabilities and owner's equity................... $136,800
LO 6 BT: AP Difficulty: S Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting
SOLUTIONS TO EXERCISES
EXERCISE 1.1
a. Customers E - External
Store manager I - Internal
Canada Revenue Agency E - External
Supplier E - External
Labour unions E - External
Chief Financial Officer I - Internal
Marketing manager I - Internal
Loan officer E - External
b.
LO 1 BT: C Difficulty: M Time: 15 min. AACSB: None CPA: cpa-t001 CM: Reporting
EXERCISE 1.2
LO 1 BT: C Difficulty: M Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting
EXERCISE 1.3
Publicly
Traded
Proprietorship Partnership Corporation
a. F F T
b. F F F
c. F F T
d. F F T
e. F F T
f. F T T
g. T T F
h. F F T
LO 2 BT: C Difficulty: M Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting
EXERCISE 1.4
a. 2 Faithful representation
b. 1 Relevance
c. 5 Neutrality
d. 6 Understandability
e. 4 Verifiability
f. 3 Comparability
LO 3 BT: C Difficulty: C Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting
EXERCISE 1.5
a. 8 Corporation
b. 10 Generally accepted accounting principles (GAAP)
c. 1 Accounts payable
d. 11 Accounts receivable
e. 12 Owner’s equity
f. 5 Prepaid expense
g. 3 Creditor
h. 7 Assets
i. 4 International Financial Reporting Standards (IFRS)
j. 6 Profit
k. 2 Expenses
l. 9 Unearned revenue
LO 1,3,5 BT: K Difficulty: M Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting
EXERCISE 1.6
LO 4 BT: AP Difficulty: S Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting
EXERCISE 1.7
LO 4 BT: AP Difficulty: C Time: 15 min. AACSB: None CPA: cpa-t001 CM: Reporting
EXERCISE 1.8
a. b.
1. Accounts payable L BS
2. Accounts receivable A BS
3. Cash A BS
4. Equipment A BS
5. Interest payable L BS
6. Interest revenue Eq IS
7. Interest expense Eq IS
8. Investment by the owner Eq OE
9. Service revenue Eq IS
10. Prepaid rent A BS
11. P. Zizler, capital
(opening balance) Eq OE
12. P. Zizler, drawings Eq OE
13. Salaries expense Eq IS
14. Supplies A BS
15. Supplies expense Eq IS
16. Unearned revenue L BS
LO 5 BT: CP Difficulty: S Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting
EXERCISE 1.9
a. and b.
EXERCISE 1.10
a. and b.
LO 3,5 BT: C Difficulty: M Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting
EXERCISE 1.11
LO 5 BT: C Difficulty: S Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting
EXERCISE 1.12
+
+ + + + - + -
Accounts Equip- Accounts Note G. Brister, G. Brister, Revenues Expenses
Trans. Cash Rec. ment Payable Payable Capital Drawings
Bal. $12,000 $18,000 $4,000 $26,000
1 –3,000 +$23,000 +$20,000
2 +12,000 –12,000
3 –3,000 –$3,000
4 –2,500 –2,500
5 +7,000 +$7,000
6 –1,000 –1,000
7 –5,000 –$5,000
8 –2,100 –2,000 –100
9 No entry
10 +1,500 –1,500
Total $14,400 +$6,000 +$23,000 +$3,000 +$18,000 +$26,000 –$5,000 +$7,000 –$5,600
$43,400 = $ 43,400
LO 5 BT: AP Difficulty: M Time: 15 min. AACSB: None CPA: cpa-t001 CM: Reporting
EXERCISE 1.13
b. Revenues..................................................................... $8,300
Rent expense............................................................... (800)
Salaries expense......................................................... (2,700)
Utilities expense.......................................................... (420)
Profit............................................................................. $4,380
c. Investment................................................................... $24,000
Profit............................................................................. 4,380
Drawings...................................................................... (3,300)
Increase in owner’s equity.......................................... $25,080
LO 4,5 BT: AP Difficulty: M Time: 25 min. AACSB: None CPA: cpa-t001 CM: Reporting
EXERCISE 1.14
Revenues
Service revenue................................................ $8,300
Expenses
Salaries expense............................................... $2,700
Rent expense.................................................... 800
Utilities expense............................................... 420
Total expenses............................................. 3,920
Profit....................................................................... $4,380
Assets
Liabilities
Accounts payable....................................................... $02,420
Owner's equity
B. Star, capital............................................................ 25,080
Total liabilities and owner's equity................... $27,500
LO 6 BT: AP Difficulty: S Time: 20 min. AACSB: None CPA: cpa-t001 CM: Reporting
EXERCISE 1.15
Revenue............................................................. $350,640
Expenses
Salaries expense.......................................... $126,950
Maintenance expense.................................. 82,870
Other expenses............................................ 66,500
Interest expense........................................... 20,960
Advertising expense.................................... 3,640
Insurance expense....................................... 2,566
Total expenses........................................ 303,486
Profit.................................................................. $ 47,154
LO 6 BT: AP Difficulty: S Time: 20 min. AACSB: None CPA: cpa-t001 CM: Reporting
EXERCISE 1.16
Assets
Liabilities
Notes payable.................................................... $379,000
Accounts payable.............................................. 47,750
Total liabilities............................................... 426,750
Owner's equity
I. Temelkova, capital.......................................... 330,233
Total liabilities and owner's equity.............. $756,983
LO 6 BT: AP Difficulty: M Time: 20 min. AACSB: None CPA: cpa-t001 CM: Reporting
EXERCISE 1.17
c.
DEER PARK
Balance Sheet
March 31, 2021
Assets
Liabilities
Notes payable.........................................................$070,000
Accounts payable................................................... 11,500
Unearned revenue.................................................. 10,000
Total liabilities.................................................... 91,500
Owner's equity
J. Cumby, capital.................................................... 52,000
Total liabilities and owner's equity...................$143,500
LO 6 BT: AP Difficulty: M Time: 20 min. AACSB: None CPA: cpa-t001 CM: Reporting
SOLUTIONS TO PROBLEMS
PROBLEM 1.1A
Taking It Further:
LO 1 BT: S Difficulty: S Time: 20 min. AACSB: None CPA: cpa-t001 CM: Reporting
PROBLEM 1.2A
Taking It Further:
PROBLEM 1.3A
i. Profit.......................................................................... $40,000
Total expenses.......................................................... 95,000
Total revenues.......................................................... $135,000
Taking It Further:
LO 4 BT: AP Difficulty: C Time: 25 min. AACSB: None CPA: cpa-t001 CM: Reporting
PROBLEM 1.4A
a. and b.
($ in thousands)
c. (in thousands)
Revenue – Expenses = Profit
Revenue = $15,730
Expenses ($4,800 + $790 +$3,200 + $350) = $9,140
Profit ($15,730 - $9,140) = $6,590
Taking It Further:
LO 4 BT: AP Difficulty: S Time: 30 min. AACSB: None CPA: cpa-t001 CM: Reporting
PROBLEM 1.5A
Taking It Further:
LO 3,5 BT: C Difficulty: M Time: 25 min. AACSB: None CPA: cpa-t001 CM: Reporting
PROBLEM 1.6A
+ + + + + – + –
F. F.
Transac- Acc. Sup- Furni- Acc. Petronick, Petronick, Rev- Exp-
tion Cash Rec. plies ture Payable Capital Drawings enues enses
June 4 +$4,376 +$4,376
6 -1,050 -$1,050
8 +$3,160 +$3,160
15 +$1,865 +$1,865
15 -1,580 -1,580
18 +$344 +344
26 -49 -49
28 +900 -900
30 -128 -$128
Total $2,469 $965 $344 $3,160 $1,924 +$4,376 -$128 +$1,865 –$1,099
$6,938 = $6,938
Note: Events at other dates than the transactions above are either not transactions or are
personal transactions of F. Petronick.
Taking It Further:
LO 4,6 BT: AP Difficulty: S Time: 45 min. AACSB: None CPA: cpa-t001 CM: Reporting
PROBLEM 1.7A
+ + + + + + + – + –
Un-
earned
A. LeTour- A. LeTour- Rev- Exp-
Tran-
sac- Acc. Sup- Equip- Acc. Rev-
Note neau, neau, enues enses
tion Cash Rec. plies ment Payable enue
Payable Capital Drawings
1
2
3 +$50,000 +$50,000
4
5 –2,500 –$2,500
6
7 –10,000 +$10,000
8 +$400 +$400
9 –3,000 +6,500 +$3,500
10 +$3,500 +$3,500
11 +2,500 +$2,500
12 –500 -500
13 –400 –400
Total $36,100 $3,500 $400 $16,500 $0 $2,500 $3,500 $50,000 0 $3,500 –$3,000
$56,500 = $56,500
a. (Continued)
Notes: Items 1 (March 4), 2 (March 7), and 4 (March 14) are not
relevant to the business entity. They are personal
transactions.
c.
LETOURNEAU LEGAL SERVICES
Balance Sheet
March 31, 2021
Assets
Cash............................................................................ $36,100
Accounts receivable.................................................. 3,500
Supplies...................................................................... 400
Equipment.................................................................. 16,500
Owner’s Equity
A. LeTourneau, capital.......................................... 50,500
Taking It Further:
LO 3,4,5,6 BT: AP Difficulty: S Time: 50 min. AACSB: None CPA: cpa-t001 CM: Reporting
PROBLEM 1.8A
a. Izabela Jach, MD
$28,725 = $28,725
Note that the September 28 transaction is not recorded because the work will not commence
until October.
b.
IZABELA JACH, MD
Income Statement
Month Ended September 30, 2021
Revenues
Service revenue........................................................
$20,500
Expenses
Advertising expense..................................... $ 275
Rent expense................................................. 1,900
Salaries expense........................................... 2,800
Utilities expense............................................ 325
Total expenses..................................................... 5,300
Profit............................................................................. $15,200
IZABELA JACH, MD
Statement of Owner's Equity
Month Ended September 30, 2021
b. (Continued)
IZABELA JACH, MD
Balance Sheet
September 30, 2021
Assets
Cash............................................................................. $ 5,525
Accounts receivable................................................... 12,800
Supplies....................................................................... 600
Equipment................................................................... 9,800
Liabilities
Accounts payable................................................... $ 4,425
Notes payable......................................................... 6,000
Total liabilities.................................................... 10,425
Owner's Equity
I. Jach, capital......................................................... 18,300
Taking It Further:
PROBLEM 1.9A
Revenues
Service revenue............................................................ $153,750
Expenses
Interest expense............................................ $ 1,195
Insurance expense........................................ 3,375
Supplies expense.......................................... 20,095
Salaries expense........................................... 88,230
Operating expenses...................................... 3,545
Total expenses.......................................... 116,440
Profit.................................................................................. $ 37,310
Assets
Cash..................................................................................... $ 8,250
Accounts receivable........................................................... 10,080
Supplies............................................................................... 595
Prepaid insurance............................................................... 1,685
Equipment............................................................................ 29,400
Vehicles................................................................................ 42,000
Liabilities
Notes payable................................................................. $30,800
Accounts payable........................................................... 7,850
Unearned revenue.......................................................... 15,000
Total liabilities............................................................ 53,650
Owner's equity
J. Pavlov, capital............................................................. 38,360
Taking It Further:
PROBLEM 1.10A
Taking It Further:
LO 6 AN: AP Difficulty: M Time: 45 min. AACSB: Analytic CPA: cpa-t001 CM: Reporting
PROBLEM 1.11A
a.
b.
REFLECTIONS BOOK SHOP
Balance Sheet
April 30, 2021
Assets
Cash.................................................................................. $ 10,000
Accounts receivable ($5,000 + $2,000)........................... 7,000
Supplies............................................................................. 1,000
Land................................................................................... 36,000
Equipment......................................................................... 58,000
Building............................................................................. 110,000
Total assets.................................................................. $222,000
Liabilities and Owner's Equity
Liabilities
Notes payable............................................................... $120,000
Accounts payable........................................................ 15,000
Total liabilities.......................................................... 135,000
Owner's equity:
C. Dryfuss, capital........................................................ 87,000
Taking It Further:
LO 3,4,5,6 BT: AP Difficulty: M Time: 55 min. AACSB: None CPA: cpa-t001 CM: Reporting
PROBLEM 1.1B
Taking It Further:
LO 1 BT: S Difficulty: S Time: 20 min. AACSB: None CPA: cpa-t001 CM: Reporting
PROBLEM 1.2B
Taking It Further:
LO 2,3 BT: AP Difficulty: S Time: 20 min. AACSB: None CPA: cpa-t001 CM: Reporting
PROBLEM 1.3B
j. Profit.......................................................................... $ 35,000
Add: Total expenses................................................. 95,000
Total revenues.......................................................... $130,000
Taking It Further:
LO 4 BT: AP Difficulty: C Time: 25 min. AACSB: None CPA: cpa-t001 CM: Reporting
PROBLEM 1.4B
a. and b. ($ in thousands)
c. ($ in thousands)
Revenue – Expenses = Profit
Revenue ($1,295 + $52) = $1,347
Expenses ($15 + $45 +$871) = $931
Profit ($1,347 - $931) = $416
Taking It Further:
LO 4 BT: AP Difficulty: S Time: 30 min. AACSB: None CPA: cpa-t001 CM: Reporting
PROBLEM 1.5B
Taking It Further:
LO 3,5 BT: C Difficulty: M Time: 25 min. AACSB: None CPA: cpa-t001 CM: Reporting
PROBLEM 1.6B
a.
KENSINGTON BIKE REPAIR SHOP
$31,910 = $31,910
Taking It Further:
LO 4,6 BT: AP Difficulty: S Time: 45 min. AACSB: None CPA: cpa-t001 CM: Reporting
PROBLEM 1.7B
a. BARRY CONSULTING
Unearn
ed
Trans- Cash + Acc. + Sup- + Equip. = Acc. + Notes + Reve- + L. Barry, – L. Barry, + Revenue – Ex-
action Rec. plies Payable Pay. nue Capital Drawings penses
$14,035 + $2,000 + $545 + $2,150 = $ 0 + $ 5,500 + $2,500 + $6,000 – $600 + $8,275 – $2,945
$18,730 = $18,730
a. (Continued)
Note: The first June 1 transaction is not relevant to the business entity. It
is a personal transaction.
Assets
Cash............................................................................. $14,035
Accounts receivable................................................... 2,000
Supplies....................................................................... 545
Equipment................................................................... 2,150
Total assets............................................................. $18,730
Owner’s equity
L. Barry, capital (see part b.)................................. 10,730
Taking It Further:
LO 3,4,5,6 BT: AP Difficulty: S Time: 50 min. AACSB: None CPA: cpa-t001 CM: Reporting
PROBLEM 1.8B
a. BAKER’S ACCOUNTING SERVICE
+ + + = + + + + + – + –
Un- F. F.
Acc. Sup- Equip- Acc. earned Notes Baker, Baker, Rev- Exp-
Trans. Cash Rec. plies ment Pay. Revenue Payable Capital Drawings enues enses
Oct. 1 $5,700 $2,100 $350 $7,600 $4,300 $11,450
1 -3,800 -3,800
1 -900 -$900
4 +1,550 -1,550
8 -500 +4,000 +$3,500
14 +900 +$900
15 -300 -300
18 +400 -400
20 -500 -$500
25 +8,000 +8,000
28 +3,100 +2,300 +5,400
29 -720 -720
29 +2,800 +$2,800
30 +205 -205
30 -1,200 -1,200
Total $13,630 $3,350 $350 $11,600 = $ 705 $ 2,800 $11,500 + $11,450 -$ 1,700 $ 6,300 -$2,125
$28,930 = $28,930
a. (Continued)
Revenues
Service revenue........................................................ $6,300
Expenses
Advertising expense..................................... $300
Rent expense................................................. 900
Salaries expense........................................... 720
Telephone expense....................................... 205
Total expenses..................................................... 2,125
Profit............................................................................... $4,175
BAKER’S ACCOUNTING SERVICE
Statement of Owner's Equity
Month Ended October 31, 2021
b. (Continued)
Assets
Cash.............................................................................. $13,630
Accounts receivable.................................................... 3,350
Supplies........................................................................ 350
Equipment..................................................................... 11,600
Liabilities
Notes payable.......................................................... $11,500
Accounts payable.................................................... 705
Unearned revenue................................................... 2,800
Total liabilities..................................................... 15,005
Owner's Equity
F. Baker, capital.....................................................0 13,925
b. (Continued)
Taking It Further:
LO 4,5,6 BT: AP Difficulty: M Time: 50 min. AACSB: None CPA: cpa-t001 CM: Reporting
PROBLEM 1.9B
JOHANSEN DESIGNS
Income Statement
Year Ended December 31, 2021
Revenues
Service revenue............................................................. $132,900
Expenses
Salaries expense................................................ $70,500
Rent expense..................................................... 18,000
Supplies expense.............................................. 3,225
Telephone expense............................................ 3,000
Utilities expense................................................ 2,400
Insurance expense............................................ 1,800
Interest expense................................................ 350
Total expenses........................................................... 99,275
Profit..................................................................................... $33,625
JOHANSEN DESIGNS
Statement of Owner's Equity
Year Ended December 31, 2021
JOHANSEN DESIGNS
Balance Sheet
December 31, 2021
Assets
Cash..................................................................................... $ 11,895
Accounts receivable........................................................... 6,745
Supplies............................................................................... 675
Prepaid insurance............................................................... 600
Furniture.............................................................................. 15,750
Equipment............................................................................ 9,850
Total assets..................................................................... $45,515
Owner's equity
J. Johansen, capital....................................................... 29,425
Total liabilities and owner's equity........................... $45,515
Taking It Further:
LO 6 BT: AP Difficulty: S Time: 45 min. AACSB: None CPA: cpa-t001 CM: Reporting
PROBLEM 1.10B
Taking It Further:
LO 6 AN: AP Difficulty: M Time: 45 min. AACSB: Analytic CPA: cpa-t001 CM: Reporting
PROBLEM 1.11B
b.
GG Company
Balance Sheet
December 31, 2021
Taking It Further:
LO 3,4,5,6 BT: AP Difficulty: M Time: 55 min. AACSB: None CPA: cpa-t001 CM: Reporting
e. Total assets as at
February 25, 2018: $567,678,000
February 26, 2017: $486,845,000
f. Total liabilities as at
February 25, 2018: $281,977,000
February 26, 2017: $285,237,000
Date:
To: Robert Joote
From: Student
Subject: Balance Sheet Correction
b. (Continued)
PEAK COMPANY
Balance Sheet
December 31, 2021
Assets
Cash..................................................................................... $10,500
Accounts receivable........................................................... 3,000
Supplies............................................................................... 2,000
Prepaid insurance............................................................... 2,500
Equipment............................................................................ 20,500
Total assets..................................................................... $38,500
Owner's equity
R. Joote, capital.............................................................. 21,500
Total liabilities and owner's equity........................... $38,500
2. a. (Continued)
Revenue: Revenue
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