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Accounting Workbook

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Student Workbook to Accompany
Introduction to
Financial Accounting
First US Edition
David Annand
Copyright © 2018 David Annand
Published by David Annand
Box 308, Rochester AB T0G 1Z0
ISBN 978‐1‐989263‐06‐8
Library and Archives Canada Cataloguing in Publication
Annand, David, 1954–
This material is licensed under a Creative Commons License,
Attribution–Non‐commercial–Share Alike 4.0 USA: see
www.creativecommons.org. This material may be reproduced for non‐
commercial purposes and changes may be used by others provided that
credit is given to the author.
To obtain permission for uses beyond those outlined in the Creative
Commons license, please contact David Annand at
[email protected]
Latest version available at http://business.athabascau.ca/faculty/david‐
annand‐edd/
Please forward suggested changes to [email protected]
First US Edition
July 31, 2018
TABLE OF CONTENTS
CHAPTER ONE
Introduction to Financial Accounting ......................................................... 1
CHAPTER TWO
The Accounting Process ............................................................................ 29
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries ............................ 89
CHAPTER FOUR
The Classified Balance Sheet and Related Disclosures ........................... 129
CHAPTER FIVE
Accounting for the Sale of Goods ........................................................... 141
CHAPTER SIX
Assigning Costs to Merchandise ............................................................. 193
CHAPTER SEVEN
Cash and Receivables .............................................................................. 253
CHAPTER EIGHT
Long‐lived Assets..................................................................................... 287
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities .............................. 331
CHAPTER TEN
Debt Financing: Bonds ............................................................................ 365
CHAPTER ELEVEN
Equity Financing ...................................................................................... 409
CHAPTER TWELVE
Proprietorships and Partnerships ........................................................... 453
CHAPTER THIRTEEN Financial Statements Analysis ................................................................. 483
CHAPTER FOURTEEN The Statement of Cash Flows ................................................................. 523
CHAPTER ONE
Introduction to Financial Accounting
Name
Concept Self‐check
CHAPTER ONE / Introduction to Financial Accounting First US Edition
1
CHAPTER ONE
Introduction to Financial Accounting
Name
Concept Self‐check (continued)
2
CHAPTER ONE / Introduction to Financial Accounting First US Edition
CHAPTER ONE
Introduction to Financial Accounting
Name
CP 1–1
A
=
L
+ S/E
Issued common stock for cash
Purchased a truck for cash
Received a bank loan to pay for equipment
Made a deposit for electricity service to be provided in the future
Paid rent for the month just ended
Signed a new union contract that provides for increased wages in the
future
Hired a messenger service to deliver letters during a mail strike
Received a parcel; paid the delivery service
Billed customers for services performed
Made a cash payment to satisfy an outstanding obligation
Received a payment of cash in satisfaction of an amount owed by a
customer
Collected cash from a customer for services rendered
Paid cash for truck expenses (gas, oil, etc.)
Made a monthly payment on the bank loan; this payment included a
payment on part of the loan and also an amount of interest expense.
issued stocks in the company to pay off a loan
Paid a dividend.
CHAPTER ONE / Introduction to Financial Accounting First US Edition
3
CHAPTER ONE
Introduction to Financial Accounting
Name
CP 1–2
Issued common stock for cash
Paid an account payable
Borrowed money from a bank
Collected an account receivable
Collected a commission on a sale made today
Paid for an advertisement in a newspaper
Repaid money borrowed from a bank
Signed a contract to purchase a computer
Received a bill for supplies used during the month
Received a cash payment in satisfaction of an amount owed by a
customer
Sent a bill to a customer for repairs made today
Sold equipment for cash
Purchased a truck on credit, to be paid in six months
Requested payment from a customer of an account receivable that is
overdue
Increased vacations for employees from four weeks to six weeks
Recorded the amount due to the landlord as rent
Received the monthly telephone answering service bill
4
CHAPTER ONE / Introduction to Financial Accounting First US Edition
CHAPTER ONE
Introduction to Financial Accounting
Name
CP 1–3
Cash
Equipment
Accounts payable
Common stock
Retained earnings
A
$3,000
8,000
4,000
2,000
B
$1,000
6,000
3,000
1,000
C
D
E
$6,000 $2,500
4,000 7,000
1,500 3,000 4,500
500
3,000 4,000
1,000
500
CHAPTER ONE / Introduction to Financial Accounting First US Edition
5
CHAPTER ONE
Introduction to Financial Accounting
Name
CP 1–4
6
CHAPTER ONE / Introduction to Financial Accounting First US Edition
CHAPTER ONE
Introduction to Financial Accounting
Name
CP 1–5
Accounts payable
Accounts receivable
Bank loan
Cash
Equipment
Insurance expense
Loan payable
Prepaid insurance
Rent expense
Repair revenue
Common stock
Truck operating expense
Unused office supplies
Dividends
CHAPTER ONE / Introduction to Financial Accounting First US Edition
7
CHAPTER ONE
Introduction to Financial Accounting
Name
CP 1–6
8
CHAPTER ONE / Introduction to Financial Accounting First US Edition
CHAPTER ONE
Introduction to Financial Accounting
Name
CP 1–7
Income Statement
CHAPTER ONE / Introduction to Financial Accounting First US Edition
9
CHAPTER ONE
Introduction to Financial Accounting
Name
CP 1–7 continued
Statement of Changes in Equity
Balance Sheet
10
CHAPTER ONE / Introduction to Financial Accounting First US Edition
CHAPTER ONE
Introduction to Financial Accounting
Name
CP 1–8
Income Statement
Statement of Changes in Equity
CHAPTER ONE / Introduction to Financial Accounting First US Edition
11
CHAPTER ONE
Introduction to Financial Accounting
Name
CP 1–8 continued
Balance Sheet
12
CHAPTER ONE / Introduction to Financial Accounting First US Edition
CHAPTER ONE
Introduction to Financial Accounting
Name
CP 1–9
a.
b.
c.
d.
e.
f.
g.
CHAPTER ONE / Introduction to Financial Accounting First US Edition
13
CHAPTER ONE
Introduction to Financial Accounting
Name
P 1–1
ASSETS
Cash
Opening
+
1,400
Acct.
Rec.
+
3,600
= LIABILITY
Ppd.
Exp.
+
1,000
Unused
Supp.
=
350
Acct.
Pay.
+
S/H EQUITY
Comm.
+ Stock
2,000
+
Ret.
Earn.
4,350
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
+
14
+
+
=
+
+
CHAPTER ONE / Introduction to Financial Accounting First US Edition
CHAPTER ONE
Introduction to Financial Accounting
Name
P 1–2
1.
Cash
ASSETS
=
Bank
Acct.
Ppd.
Unused
+ Rec. + Exp. + Supp. + Truck = Loan
LIABILITIES
+
S/H EQUITY
Acct.
Unearn.
Comm.
Retained
+ Pay
Rev.
+ Stock + Earnings
Aug. 1
1
1
4
5
7
9
12
15
16
20
25
28
29
31
31
+
+
+
+
=
CHAPTER ONE / Introduction to Financial Accounting First US Edition
+
+
+
+
15
CHAPTER ONE
Introduction to Financial Accounting
Name
P 1–2 continued
2.
Income Statement
Statement of Changes in Equity
16
CHAPTER ONE / Introduction to Financial Accounting First US Edition
CHAPTER ONE
Introduction to Financial Accounting
Name
P 1–2 continued
Balance Sheet
CHAPTER ONE / Introduction to Financial Accounting First US Edition
17
CHAPTER ONE
Introduction to Financial Accounting
Name
P 1–3
Income Statement
Statement of Changes in Equity
18
CHAPTER ONE / Introduction to Financial Accounting First US Edition
CHAPTER ONE
Introduction to Financial Accounting
Name
P 1–3 continued
Balance Sheet
CHAPTER ONE / Introduction to Financial Accounting First US Edition
19
CHAPTER ONE
Introduction to Financial Accounting
Name
P 1–4
Income Statement
Statement of Changes in Equity
20
CHAPTER ONE / Introduction to Financial Accounting First US Edition
CHAPTER ONE
Introduction to Financial Accounting
Name
P 1–4 continued
Balance Sheet
CHAPTER ONE / Introduction to Financial Accounting First US Edition
21
CHAPTER ONE
Introduction to Financial Accounting
Name
P 1–5
1.
2. and 3.
Income Statement
22
CHAPTER ONE / Introduction to Financial Accounting First US Edition
CHAPTER ONE
Introduction to Financial Accounting
Name
P 1–5 continued
Statement of Changes in Equity
Balance Sheet
CHAPTER ONE / Introduction to Financial Accounting First US Edition
23
CHAPTER ONE
Introduction to Financial Accounting
Name
P 1–6
1.
ASSETS
=
Accts.
Ppd.
Unused
Cash + Rec. + Exp. + Supp. + Equip. =
Acct.
Pay.
LIABILITIES +
S/H EQUITY
Loan
Comm.
Ret.
+ Pay. + Stock + Earn.
Jun. 1
1
2
3
4
5
8
10
15
18
20
22
23
25
27
30
30
30
30
24
CHAPTER ONE / Introduction to Financial Accounting First US Edition
CHAPTER ONE
Introduction to Financial Accounting
Name
P 1–6 continued
2.
Income Statement
Statement of Changes in Equity
CHAPTER ONE / Introduction to Financial Accounting First US Edition
25
CHAPTER ONE
Introduction to Financial Accounting
Name
P 1–6 continued
Balance Sheet
26
CHAPTER ONE / Introduction to Financial Accounting First US Edition
CHAPTER ONE
Introduction to Financial Accounting
Name
P 1–7
ASSETS
Cash
Sep
30
Oct.
2
+
Acct.
Rec.
Un.
+ Supp. + Land
+ Bldg. + Furn. + Equip. + Truck
LIABILITIES
S/H EQUITY
Acct.
Loans
Common
= Pay. + Payable + Stock
3
4
8
10
11
15
20a.
20b.
31
CHAPTER ONE / Introduction to Financial Accounting First US Edition
27
CHAPTER ONE
Introduction to Financial Accounting
28
Name
CHAPTER ONE / Introduction to Financial Accounting First US Edition
CHAPTER TWO
The Accounting Process
Name
Concept Self‐check
CHAPTER TWO / The Accounting Process First US Edition
29
CHAPTER TWO
The Accounting Process
Name
Concept Self‐check continued
30
CHAPTER TWO / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
CP 2–1
Trans.
Any Asset
Debit Credit
(inc.) (dec.)
Any Liability
Debit Credit
(dec.) (inc.)
Common Stock
Debit Credit
(dec.) (inc.)
Any Revenue
Debit Credit
(dec.) (inc.)
1
2
3
4
5
6
7
8
9
10
11
12
13
CHAPTER TWO / The Accounting Process First US Edition
31
Any Expense
Debit Credit
(inc.) (dec.)
CHAPTER TWO
The Accounting Process
Name
CP 2–2
Cash
Truck
Accounts payable
Bank loan
Common stock
Net income
32
A
$100
200
50
75
175
B
$ 72
130
10
50
20
C
$
71
5
25
100
6
D
$ 20
200
10
61
10
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
CP 2–3
Transaction
Any Asset
Debit Credit
(inc.) (dec.)
Any Liability
Debit Credit
(dec.) (inc.)
2. Borrowed $5,000 from the bank
3. Paid $2,000 of the bank loan
4. Paid $600 in advance for a one–year insurance
policy
5. Received $500 in advance for next month’s rental of
office space.
CHAPTER TWO / The Accounting Process First US Edition
33
Common Stock
Debit Credit
(dec.) (inc.)
CHAPTER TWO
The Accounting Process
Name
CP 2–4
Debit
Credit
2.
3.
4.
5.
6.
Purchased equipment on credit
Paid for a one–year insurance policy
Billed a customer for repairs completed today
Paid for this month’s rent
Collected the amount billed in transaction 4
above
7. Collected cash for repairs completed today
8. Paid for the equipment purchased in transaction
2 above
9. Signed a union contract
10. Collected cash for repairs to be made for
customers next month
11. Transferred this month’s portion of prepaid
insurance to expenses
34
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
CP 2–5
Cash
Accounts Receivable
Bank Loan
Accounts Payable
Prepaid Rent
Unused Supplies
CHAPTER TWO / The Accounting Process First US Edition
Common Stock
Repair Revenue
Electricity Expense
Rent Expense
Supplies Expense
35
CHAPTER TWO
The Accounting Process
Name
CP 2–6
Date
36
Description
PR
Debit
Credit
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
CP 2–6 continued
Date
Description
CHAPTER TWO / The Accounting Process First US Edition
PR
Debit
Credit
37
CHAPTER TWO
The Accounting Process
Name
CP 2–7
Date
38
Description
PR
Debit
Credit
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
CP 2–7 continued
Date
Description
CHAPTER TWO / The Accounting Process First US Edition
PR
Debit
Credit
39
CHAPTER TWO
The Accounting Process
Name
CP 2–8
Trial Balance
Acct.
No.
40
Account
Account balances
Debit
Credit
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
CP 2–9
Date
Description
CHAPTER TWO / The Accounting Process First US Edition
PR
Debit
Credit
41
CHAPTER TWO
The Accounting Process
Name
CP 2–9 continued
Date
42
Description
PR
Debit
Credit
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
CP 2‐9 continued
2.
Schulte Corporation
Cash
No. 101
Accounts Rec.
Accounts Payable
Service Revenue
No. 470
No. 110
Rent Expense
No. 654
Prepaid Rent
No. 162
Supplies Expense No. 668
Equipment
No. 183
Truck Operating
Expense
CHAPTER TWO / The Accounting Process First US Edition
No. 210
Common Stock
No. 320
43
No. 670
CHAPTER TWO
The Accounting Process
Name
CP 2–9 continued
3.
Trial Balance
Acct.
No.
44
Account
Account balances
Debit
Credit
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
CP 2–9 continued
4.
Income Statement
Statement of Changes in Equity
CHAPTER TWO / The Accounting Process First US Edition
45
CHAPTER TWO
The Accounting Process
Name
CP 2–9 continued
Balance Sheet
46
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
CP 2–10
Trial Balance
Acct.
No.
Account
CHAPTER TWO / The Accounting Process First US Edition
Account balances
Debit
Credit
47
CHAPTER TWO
The Accounting Process
Name
CP 2–11
Date
48
Description
PR
Debit
Credit
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
CP 2–11 continued
Date
Description
CHAPTER TWO / The Accounting Process First US Edition
PR
Debit
Credit
49
CHAPTER TWO
The Accounting Process
Name
CP 2–11 continued
2.
Trial Balance
Acct.
No.
50
Account
Account balances
Debit
Credit
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
CP 2–11 continued
3.
Income Statement
Statement of Changes in Equity
CHAPTER TWO / The Accounting Process First US Edition
51
CHAPTER TWO
The Accounting Process
Name
CP 2–11 continued
Balance Sheet
52
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
CP 2–12
1.
Trial Balance
Acct.
No.
Account
CHAPTER TWO / The Accounting Process First US Edition
Account balances
Debit
Credit
53
CHAPTER TWO
The Accounting Process
Name
CP 2–12 continued
2.
Income Statement
Statement of Changes in Equity
54
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
CP 2–12 continued
Balance Sheet
CHAPTER TWO / The Accounting Process First US Edition
55
CHAPTER TWO
The Accounting Process
Name
CP 2‐13
1.
Elgert Corporation
Cash
Accounts Payable
Common Stock
Service Revenue
Dividends
Rent Expense
Accounts Receivable
Truck Operating Expense
Unused Supplies
Salaries Expense
Supplies Expense
56
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
CP 2–13 continued
2.
Trial Balance
Acct.
No.
Account
CHAPTER TWO / The Accounting Process First US Edition
Account balances
Debit
Credit
57
CHAPTER TWO
The Accounting Process
Name
CP 2–13 continued
3.
Income Statement
Statement of Changes in Equity
58
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
CP 2–13 continued
Balance Sheet
CHAPTER TWO / The Accounting Process First US Edition
59
CHAPTER TWO
The Accounting Process
Name
P 2–1
1.
Trial Balance
Acct.
No.
60
Account
Account balances
Debit
Credit
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
P 2–1 continued
2.
Income Statement
Statement of Changes in Equity
CHAPTER TWO / The Accounting Process First US Edition
61
CHAPTER TWO
The Accounting Process
Name
P 2–1 continued
3.
Balance Sheet
62
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
P 2–2
1.
Date
Description
CHAPTER TWO / The Accounting Process First US Edition
PR
Debit
Credit
63
CHAPTER TWO
The Accounting Process
Name
P 2–2 continued
Date
64
Description
PR
Debit
Credit
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
P 2‐2 continued
Cash
No. 101
Accounts
Receivable
Prepaid
Advertising
Unused
Supplies
Equipment
Accounts
Payable
No. 110
No. 210
Common
Stock
No. 320
Advertising
Expense
No. 610
Service
Revenue
No. 460
Commissions
Expense
No. 615
Rent
Expense
No. 654
Salaries
Expense
No. 656
Supplies
Expense
No. 668
Telephone
Expense
No. 669
No. 160
No. 173
No. 183
CHAPTER TWO / The Accounting Process First US Edition
65
CHAPTER TWO
The Accounting Process
Name
P 2–2 continued
2.
Trial Balance
Acct.
No.
66
Account
Account balances
Debit
Credit
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
P 2–3
1.
Trial Balance
Acct.
No.
Account
CHAPTER TWO / The Accounting Process First US Edition
Account balances
Debit
Credit
67
CHAPTER TWO
The Accounting Process
Name
P 2–3 continued
2.
Income Statement
Statement of Changes in Equity
68
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
P 2–3 continued
3.
Balance Sheet
CHAPTER TWO / The Accounting Process First US Edition
69
CHAPTER TWO
The Accounting Process
Name
P 2–4
1. and 3.
Fenton Table Rentals Corporation
Accounts
Cash
No. 101
Payable No. 210
Common
Stock No. 320
DividendsNo. 350
Accounts
Receivable No. 110
Service
Revenue No. 470
Advertising
Exp.
No. 610
Rent
Exp.
Prepaid
Rent
No. 654
Salaries
Exp.
No. 656
No. 162
Supplies
Exp.
No. 668
Unused
Supplies No. 173
Telephone
Exp.
No. 669
Truck Operating
Exp.
No. 670
70
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
P 2‐4 continued
2.
Date
Description
CHAPTER TWO / The Accounting Process First US Edition
PR
Debit
Credit
71
CHAPTER TWO
The Accounting Process
Name
P 2–4 continued
4.
Trial Balance
Acct.
No.
72
Account
Account balances
Debit
Credit
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
P 2–4 continued
5.
Income Statement
Statement of Changes in Equity
CHAPTER TWO / The Accounting Process First US Edition
73
CHAPTER TWO
The Accounting Process
Name
P 2–4 continued
Balance Sheet
74
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
P 2–5
1. and 3.
Thorn Accounting Services Inc.
Cash
No. 101
Bank
Loan No. 201
Common
Stock No. 320
Fees
Earn. No. 420
Accounts
Payable No. 210
Accounts
Receivable
No. 110
Prepaid
Insurance
No. 161
Truck
No. 184
Unused
Supplies No. 173
CHAPTER TWO / The Accounting Process First US Edition
Salaries
Expense
No. 656
Supplies
Expense
No. 668
Advertising
Expense
No. 610
Telephone
Exp. No. 669
Insurance
Exp.
No. 631
Truck Operating
Expense No. 670
Rent
Expense
No. 654
75
CHAPTER TWO
The Accounting Process
Name
P 2–5 continued
2.
Date
76
Description
PR
Debit
Credit
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
P 2–5 continued
Date
Description
CHAPTER TWO / The Accounting Process First US Edition
PR
Debit
Credit
77
CHAPTER TWO
The Accounting Process
Name
P 2–5 continued
4.
Trial Balance
Acct.
No.
78
Account
Account balances
Debit
Credit
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
P 2‐5 continued
5.
Income Statement
Statement of Changes in Equity
CHAPTER TWO / The Accounting Process First US Edition
79
CHAPTER TWO
The Accounting Process
Name
P 2‐5 continued
Balance Sheet
80
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
P 2–6
1. and 3.
Cash
No. 101
Chan Renovations Corporation
Accounts
Common
Payable
No. 210
Stock No. 320
Repair
Revenue
No. 450
Telephone
Expense
No. 669
No. 610
Truck Operating
Expense
No. 670
No. 654
Utilities
Expense
No. 676
No. 668
Wages
Expenses
No. 677
Accounts
Receivable
No. 110
Advertising
Expense
Prepaid
Rent
No. 162
Rent
Expense
Unused
Supplies
No. 173
Supplies
Expense
Equipment
No. 183
CHAPTER TWO / The Accounting Process First US Edition
81
CHAPTER TWO
The Accounting Process
Name
P 2‐6 continued
2.
Date
82
Description
PR
Debit
Credit
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
P 2‐6 continued
Date
Description
CHAPTER TWO / The Accounting Process First US Edition
PR
Debit
Credit
83
CHAPTER TWO
The Accounting Process
Name
P 2‐6 continued
Date
84
Description
PR
Debit
Credit
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
P 2‐6 continued
4.
Trial Balance
Acct.
No.
Account
CHAPTER TWO / The Accounting Process First US Edition
Account balances
Debit
Credit
85
CHAPTER TWO
The Accounting Process
Name
P 2‐6 continued
5.
Income Statement
Statement of Changes in Equity
86
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER TWO
The Accounting Process
Name
P 2‐6 continued
Balance Sheet
CHAPTER TWO / The Accounting Process First US Edition
87
CHAPTER TWO
The Accounting Process
88
Name
CHAPTER 2 / The Accounting Process First US Edition
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
Concept Self‐check
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
89
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
Concept Self‐check continued
90
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
Concept Self‐check continued
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
91
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
Concept Self‐check continued
92
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
CP 3–1
A
a. Insurance Expense
b. Rent Earned
c. Prepaid Rent
d. Interest Payable
e. Interest Receivable
f. Fees Earned
g. Unused Supplies
h. Unearned Commissions Revenue
i. Salaries Payable
j. Depreciation Expense
B
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
93
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
CP 3–2
Date
94
Description
PR
Debit
Credit
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
CP 3–3
Date
Description
PR
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
Debit
Credit
95
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
CP 3–4
GENERAL JOURNAL
Date
96
Description
Page
PR
Debit
Credit
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
CP 3–5
1. and 3.
Graham Corporation
General Ledger
ASSETS
Rent Receivable
=
LIABILITIES
+
Interest Payable
STOCKHOLDERS’ EQUITY
Rent Earned
Prepaid Insurance
2.
GENERAL JOURNAL
Date
Description
Page
PR
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
Debit
Credit
97
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
CP 3–5 continued
4.
Account
98
Amount
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
CP 3–6
1.
GENERAL JOURNAL
Date
Description
Page
PR
Debit
Credit
2. Assets would be overstated by
Liabilities would be understated by
Revenue would be understated by
Expenses would be understated by
Stockholders’ equity would be overstated by
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
99
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
CP 3–7
GENERAL JOURNAL
Date
100
Description
Page
PR
Debit
Credit
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
CP 3–8
1.
Cash
101
750 50
950 150
90 50
24
20
70
Accounts
Receivable
228 90
Rent
Receivable
40
Accounts
Payable
70 145
210
Common
Stock
320
400
Unearned Repair
Revenue
247
500
400
Ret. Earn.
340
350
Repair Rev.
450
950
228
400
110
Interest Payable 222
12
Rent Earned
440
40
125
Prepaid Insurance
24 2
Unused Office
Supplies
50 25
Unused Repair
Supplies
145 80
Furniture
150
161
Income Taxes Pay.260
400
Insurance Exp.
2
621
631
170
Interest
Expense
12
Income Taxes
Expense
400
632
Office Supplies
Exp.
25
650
830
Rent
Expense
50
654
Repair Supplies
Expense
80
655
Telephone
Expense
20
669
171
182
Acc. Dep’n
– Furniture
Dep’n Exp.
‐ Furniture
2
191
2
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
101
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
CP 3‐8 continued
2.
GENERAL JOURNAL
Date
102
Description
Page
PR
Debit
Credit
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
CP 3–9
1.
Acct.
No.
101
110
161
162
184
194
210
222
226
248
320
440
610
615
624
631
632
654
656
Account
Cash
Accounts receivable
Prepaid insurance
Prepaid rent
Truck
Acc. dep. – truck
Accounts payable
Interest payable
Salaries payable
Unearned rent revenue
Common stock
Rent earned
Advertising expense
Commissions expense
Dep. expense – truck
Insurance expense
Interest expense
Rent expense
Salaries expense
Totals
Unadjusted
Trial Balance
Debit
Credit
$ 4,000
5,000
3,600
1,000
6,000
Adjustments
Debit
Credit
$7,000
1,200
2,700
25,000
700
2,000
100
5,500
8,000
$35,900
$35,900
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
Adjusted
Trial Balance
Debit
Credit
$ 4,000
5,000
3,300
500
6,000
$1,500
7,000
400
1,000
600
2,700
25,600
700
2,000
1,500
300
500
6,000
9,000
$38,800 $38,800
103
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
CP 3‐9 continued
2.
GENERAL JOURNAL
Date
104
Description
Page
PR
Debit
Credit
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
CP 3–10
1.
GENERAL JOURNAL
Date
Description
Page
PR
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
Debit
Credit
105
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
CP 3‐10 continued
2. and 4.
Wolfe Corporation
Cash
Bal. 2,700
Accounts
Receivable
Bal. 2,000
Prepaid
Insurance
Bal. 1,200
Unused
Supplies
Bal. 700
101
110
Accounts
Payable
210
Common
Stock
320
Bal. 3,800
Retained
Earnings
340
Repair
Revenue
Advertising
Expense
Bal. 200
610
161
Income
Summary
360
Insurance
Expense
631
173
Rent
Expense
Bal. 250
654
Salaries
Expense
Bal. 4,500
656
Supplies
Expense
106
450
Bal. 7,750
668
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
CP 3–10 continued
3.
GENERAL JOURNAL
Date
Description
Page
PR
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
Debit
Credit
107
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
P 3–1
GENERAL JOURNAL
Date
108
Description
Page
PR
Debit
Credit
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
P 3–2
GENERAL JOURNAL
Date
Description
Page
PR
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
Debit
Credit
109
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
P 3–3
GENERAL JOURNAL
Date
110
Description
Page
PR
Debit
Credit
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
P 3–4
GENERAL JOURNAL
Date
Description
Page
PR
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
Debit
Credit
111
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
P 3–5
1.
GENERAL JOURNAL
Date
112
Description
Page
PR
Debit
Credit
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
P 3–5 continued
2.
Acct.
No.
101
110
161
173
184
194
210
226
248
260
320
350
410
440
610
615
624
631
632
654
656
668
669
830
Account
Cash
Accounts receivable
Prepaid insurance
Unused supplies
Truck
Acc. dep. – truck
Accounts payable
Salaries payable
Unearned rent revenue
Income taxes payable
Common stock
Dividends
Commissions earned
Rent earned
Advertising expense
Commissions expense
Dep. expense – truck
Insurance expense
Interest expense
Rent expense
Salaries expense
Supplies expense
Telephone expense
Income taxes expense
Unadjusted
Trial Balance
Debit
Credit
3,300
4,000
1,200
500
8,000
‐0‐
5,000
‐0‐
2,400
‐0‐
7,000
1,000
16,100
‐0‐
200
1,000
‐0‐
‐0‐
400
3,600
7,000
‐0‐
300
‐0‐
30,500 30,500
Adjustments
Debit
Credit
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
Adjusted
Trial Balance
Debit
Credit
113
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
P 3–5 continued
3.
Income Statement
Statement of Changes in Equity
114
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
P 3–5 continued
Balance Sheet
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
115
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
P 3–5 continued
4.
GENERAL JOURNAL
Date
116
Description
Page
PR
Debit
Credit
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
P 3–5 continued
5.
Acct.
No.
101
110
161
173
184
194
210
226
248
260
320
340
350
360
410
440
610
615
624
631
632
654
656
668
669
830
Account
Adjusted
Trial Balance
Debit
Credit
Closing Entries
Debit
Credit
Post‐closing
Trial Balance
Debit
Credit
Cash
Accounts receivable
Prepaid insurance
Unused supplies
Truck
Acc. dep. – truck
Accounts payable
Salaries payable
Unearned rent revenue
Income taxes payable
Common stock
Retained earnings
Dividends
Income summary
Commissions earned
Rent earned
Advertising expense
Commissions expense
Dep. expense – truck
Insurance expense
Interest expense
Rent expense
Salaries expense
Supplies expense
Telephone expense
Income taxes expense
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
117
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
P 3–6
1., 3., 4., and 6.
Cash
Name
Roth Contractors Corporation
Accounts
Common
Payable
Stock
Repair
Revenue
Rent
Expense
Supplies
Expense
Accounts
Receivable
Wages
Payable
Advertising
Expense
Telephone
Expense
Unearned Repair
Revenue
Truck Operating
Expense
Prepaid
Insurance
Income Taxes
Payable
Prepaid Rent
Unused
Supplies
Truck
118
Accum. Dep’n
Truck
Depreciation
Expense‐Truck
Insurance
Expense
Utilities
Expense
Interest
Expense
Wages
Expense
Income Taxes
Expense
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
P 3–6 continued
2.
GENERAL JOURNAL
Date
Description
Page
PR
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
Debit
Credit
119
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
P 3–6 continued
GENERAL JOURNAL
Date
120
Description
Page
PR
Debit
Credit
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
P 3–6 continued
7 and 9.
Account
Cash
Accounts receivable
Prepaid insurance
Prepaid rent
Unused supplies
Truck
Acc. dep. – truck
Accounts payable
Wages payable
Unearned revenue
Common stock
Retained earnings
Income summary
Repair revenue
Advertising expense
Dep. expense – truck
Insurance expense
Interest expense
Rent expense
Supplies expense
Telephone expense
Truck operating
expense
Utilities expense
Wages expense
Income taxes expense
Adjusted
Trial Balance
Debit
Credit
Closing Entries
Debit
Credit
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
Post‐closing
Trial Balance
Debit
Credit
121
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
P 3–6 continued
8.
Income Statement
Statement of Changes in Equity
122
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
P 3–6 continued
Balance Sheet
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
123
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
P 3–6 continued
9.
GENERAL JOURNAL
Date
124
Description
Page
PR
Debit
Credit
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
P 3–7
1., 3., 4., and 6.
Cash
Accounts
Payable
Snow Services Corporation
Common
Other
Stock
Revenue
Wages
Payable
Short‐term
Investments
Interest
Receivable
Prepaid
Insurance
Interest
Earned
Unearned Advertising
Revenue
Unearned Fees
Revenue
Unearned Interest
Revenue
Depreciation Expense ‐
Equipment
Depreciation Expense‐
Truck
Insurance
Expense
Rent
Earned
Supplies
Expense
Service
Revenue
Wages
Expense
Unearned Rent
Revenue
Unused
Supplies
Acc. Dep’n. ‐
Equip.
Equipment
Truck
Acc. Dep’n ‐
Truck
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
125
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
P 3–7 continued
2.
GENERAL JOURNAL
Date
126
Description
Page
PR
Debit
Credit
CHAPTER 3 / Financial Accounting and the Use of Adjusting Entries First US Edition
P 3–7 continued
5.
GENERAL JOURNAL
Date
Description
Page
PR
CHAPTER THREE / Financial Accounting and the Use of Adjusting Entries First US Edition
Debit
Credit
127
CHAPTER THREE
Financial Accounting and the Use of Adjusting Entries
Name
P 3–7 continued
7.
Snow Services Corporation
Adjusted Trial Balance
January 31, 2019
Account Balances
Debit
Credit
Cash
Short‐term investments
Interest receivable
Prepaid insurance
Unused supplies
Equipment
Truck
Accumulated depreciation—equipment
Accumulated depreciation—truck
Accounts payable
Wages payable
Unearned advertising revenue
Unearned fees revenue
Unearned interest revenue
Unearned rent revenue
Common stock
Other revenue
Interest earned
Rent earned
Service revenue
Depreciation expense—equipment
Depreciation expense—truck
Insurance expense
Supplies expense
Wages expense
128
CHAPTER 3 / Financial Accounting and the Use of Adjusting Entries First US Edition
CHAPTER FOUR
The Classified Balance Sheet and Related Disclosures
Name
Concept Self‐check
CHAPTER FOUR/ The Classified Balance Sheet and Related Disclosures First US Edition
129
CHAPTER FOUR
The Classified Balance Sheet and Related Disclosures
Name
Concept Self‐check continued
130
CHAPTER FOUR/ The Classified Balance Sheet and Related Disclosures First US Edition
CHAPTER FOUR
The Classified Balance Sheet and Related Disclosures
Name
Concept Self‐check continued
CHAPTER FOUR/ The Classified Balance Sheet and Related Disclosures First US Edition
131
CHAPTER FOUR
The Classified Balance Sheet and Related Disclosures
Name
Concept Self‐check continued
132
CHAPTER FOUR/ The Classified Balance Sheet and Related Disclosures First US Edition
CHAPTER FOUR
The Classified Balance Sheet and Related Disclosures
Name
CP 4–1
Balance Sheet
CHAPTER FOUR/ The Classified Balance Sheet and Related Disclosures First US Edition
133
CHAPTER FOUR
The Classified Balance Sheet and Related Disclosures
Name
CP 4–2
Balance Sheet
134
CHAPTER FOUR/ The Classified Balance Sheet and Related Disclosures First US Edition
CHAPTER FOUR
The Classified Balance Sheet and Related Disclosures
Name
P 4–1
1. and 3.
CHAPTER FOUR/ The Classified Balance Sheet and Related Disclosures First US Edition
135
CHAPTER FOUR
The Classified Balance Sheet and Related Disclosures
Name
P 4‐1 continued
2.
Balance Sheet
136
CHAPTER FOUR/ The Classified Balance Sheet and Related Disclosures First US Edition
CHAPTER FOUR
The Classified Balance Sheet and Related Disclosures
Name
P 4–2
1. Calculation of net income
2020
2019
Notes (if any)
CHAPTER FOUR/ The Classified Balance Sheet and Related Disclosures First US Edition
137
CHAPTER FOUR
The Classified Balance Sheet and Related Disclosures
Name
P 4‐2 continued
2.
Balance Sheet
138
CHAPTER FOUR/ The Classified Balance Sheet and Related Disclosures First US Edition
CHAPTER FOUR
The Classified Balance Sheet and Related Disclosures
Name
P 4‐2 continued
3.
4. The balance sheet would show:
Note X might state:
2020
Land
Bldg.
Equip.
CHAPTER FOUR/ The Classified Balance Sheet and Related Disclosures First US Edition
2019
Total
Total
139
CHAPTER FOUR
The Classified Balance Sheet and Related Disclosures
Name
P 4–3
b 1. The significant accounting policies, which management believes are appropriate for the
company, are described in Note X to the financial statements.
2. Revenue arises from the rendering of service. It is measured by reference to the fair
value of consideration received or receivable.
3. These financial statements are the responsibility of the Company’s management.
4. Management has established systems of internal control that are designed to provide
reasonable assurance that assets are safeguarded from loss or unauthorized use [. . .]
5. The board of directors is responsible for ensuring that management fulfils its
responsibilities for financial reporting and internal control.
6. The mortgage is payable to Last Chance Bank. It bears interest at 5% per year and is
amortized over 20 years. It is secured by real estate of the company.
7. […] includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements.
8. The audit committee reviews the annual financial statements and reporting to the board,
and makes recommendations with respect to their acceptance.
9. The estimated useful lives of the company’s depreciable assets are as follows:
10. […] standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material
misstatement.
11. Land held for use in production or administration is stated at cost. Other plant assets
are initially recognized at acquisition cost plus any costs directly attributable to
bringing the assets to the locations and conditions necessary to be employed in
operations. They are subsequently measured using the cost model: cost less
subsequent depreciation.
12. Management recognizes its responsibility for conducting the company’s affairs in
compliance with established financial standards and applicable laws, and maintains
proper standards of conduct for its activities.
13. The common stock of Acme Supplies Ltd. consists of fully‐paid common stock with a
stated value of $1 each.
14. The principal activity of Acme Supplies Ltd. is the retail sale of merchandise.
140
CHAPTER FOUR/ The Classified Balance Sheet and Related Disclosures First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
Concept Self‐check
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
141
CHAPTER FIVE
Accounting for the Sale of Goods
Name
Concept Self‐check continued
142
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
Concept Self‐check continued
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
143
CHAPTER FIVE
Accounting for the Sale of Goods
Name
Concept Self‐check continued
144
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
CP 5–1
1.
Sales
Cost of goods sold
Gross profit
Gross profit percentage
2022
2021
$10,000
$9,000
6,840
2,500
2020
2019
$7,000
6,160
1,840
22%
2.
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
145
CHAPTER FIVE
Accounting for the Sale of Goods
Name
CP 5–2
GENERAL JOURNAL
Date
146
Description
Page
PR
Debit
Credit
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
CP 5–3
GENERAL JOURNAL
Date
Description
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
Page
PR
Debit
Credit
147
CHAPTER FIVE
Accounting for the Sale of Goods
Name
CP 5–4
GENERAL JOURNAL
Date
148
Description
Page
PR
Debit
Credit
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
CP 5–5
1.
Income Statement
2.
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
149
CHAPTER FIVE
Accounting for the Sale of Goods
Name
CP 5–6
GENERAL JOURNAL
Date
150
Description
Page
PR
Debit
Credit
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
CP 5–7
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
151
CHAPTER FIVE
Accounting for the Sale of Goods
Name
CP 5–8
152
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
CP 5–9
1.
2.
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
153
CHAPTER FIVE
Accounting for the Sale of Goods
Name
CP 5–10
1.
Income Statement
2.
154
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
CP 5–11
1.
Income Statement
2.
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
155
CHAPTER FIVE
Accounting for the Sale of Goods
Name
CP 5–12
GENERAL JOURNAL
Date
156
Description
Page
PR
Debit
Credit
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
CP 5–13
1. Sherman Stores Ltd:
GENERAL JOURNAL
Date
Description
Page
PR
Debit
Credit
2. Morris Wholesalers Corp.:
GENERAL JOURNAL
Date
Description
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
Page
PR
Debit
Credit
157
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–1
1.
GENERAL JOURNAL
Date
158
Description
Page
PR
Debit
Credit
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–1 continued
GENERAL JOURNAL
Date
Description
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
Page
PR
Debit
Credit
159
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–1 continued
GENERAL JOURNAL
Date
160
Description
Page
PR
Debit
Credit
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–1 continued
2. The unadjusted ending inventory balance at July 31 is _____________, calculated as follows:
Merchandise Inventory
GENERAL JOURNAL
Date
Description
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
Page
PR
Debit
Credit
161
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–2
1.
GENERAL JOURNAL
Date
162
Description
Page
PR
Debit
Credit
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–2 continued
GENERAL JOURNAL
Date
Description
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
Page
PR
Debit
Credit
163
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–2 continued
GENERAL JOURNAL
Date
164
Description
Page
PR
Debit
Credit
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–2 continued
GENERAL JOURNAL
Date
Description
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
Page
PR
Debit
Credit
165
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–2 continued
GENERAL JOURNAL
Date
166
Description
Page
PR
Debit
Credit
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–3
1.
Whirlybird Products Inc.
General Ledger
Retained
Earnings
No. 340
Sales
No. 510
37,800
Income
Summary
No. 360
Sales Returns
& Allowances
No. 508
690
Sales Discounts
No. 509
310
Cost of Goods Sold
No. 570
26,800
Salaries Expense
No. 656
5,000
2.
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
167
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–4
1.
Income Statement
168
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–4 continued
GENERAL JOURNAL
Date
Description
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
Page
PR
Debit
Credit
169
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–5
1.
GENERAL JOURNAL
Date
170
Description
Page
PR
Debit
Credit
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–5 continued
2.
Income Statement
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
171
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–5 continued
Statement of Changes in Equity
172
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–5 continued
Balance Sheet
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
173
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–5 continued
3.
GENERAL JOURNAL
Date
174
Description
Page
PR
Debit
Credit
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–5 continued
GENERAL JOURNAL
Date
Description
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
Page
PR
Debit
Credit
175
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–6
GENERAL JOURNAL
Date
176
Description
Page
PR
Debit
Credit
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–6 continued
GENERAL JOURNAL
Date
Description
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
Page
PR
Debit
Credit
177
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–6 continued
GENERAL JOURNAL
Date
178
Description
Page
PR
Debit
Credit
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–7
GENERAL JOURNAL
Date
Description
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
Page
PR
Debit
Credit
179
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–7 continued
GENERAL JOURNAL
Date
180
Description
Page
PR
Debit
Credit
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–7 continued
GENERAL JOURNAL
Date
Description
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
Page
PR
Debit
Credit
181
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–7 continued
GENERAL JOURNAL
Date
182
Description
Page
PR
Debit
Credit
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–7 continued
GENERAL JOURNAL
Date
Description
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
Page
PR
Debit
Credit
183
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–8
1.
Zenith Products Inc.
General Ledger
Merchandise
Inventory
Op. Bal. 4,000
No. 150
Retained
Earnings
No. 340
Purchases
22,500
Income
Summary
No. 360
Purchase Returns
& Allowances
Sales
No. 510
Purchase Discounts
31,000
Sales Returns &
Allowances
690
Sales Discounts
310
184
No. 550
No. 558
575
No. 559
225
No. 508
Transportation –
In
300
No. 560
No. 509
Salaries Expense
No. 656
5,000
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–8 continued
2.
Partial Income Statement
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
185
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–9
1.
Partial Income Statement
186
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–9 continued
2.
GENERAL JOURNAL
Date
Description
Page
PR
Debit
Credit
3.
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
187
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–10
1.
GENERAL JOURNAL
Date
188
Description
Page
PR
Debit
Credit
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–10 continued
2.
Income Statement
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
189
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–10 continued
Statement of Changes in Equity
190
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–10 continued
Balance Sheet
CHAPTER FIVE/ Accounting for the Sale of Goods First US Edition
191
CHAPTER FIVE
Accounting for the Sale of Goods
Name
P 5–10 continued
3.
GENERAL JOURNAL
Date
192
Description
Page
PR
Debit
Credit
CHAPTER FIVE / Accounting for the Sale of Goods First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
Concept Self‐check
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
193
CHAPTER SIX
Assigning Costs to Merchandise
Name
Concept Self‐check continued
194
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
Concept Self‐check continued
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
195
CHAPTER SIX
Assigning Costs to Merchandise
Name
Concept Self‐check continued
196
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–1
1. FIFO
Date
Units
Purchased
Unit
Cost
Units
Purchased
Unit
Cost
Total
$
Units
Sold
Unit
Cost
Units
Sold
Unit
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
2. LIFO
Date
Total
$
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
197
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–1 continued
3. Weighted average
Date
Units
Purchased
Unit
Cost
Total
$
Units
Sold
Unit
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
Weighted average calculations:
198
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–2
1. FIFO
Date
Units
Purchased
Unit
Cost
Total
$
Units
Sold
Unit
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
a. January 5 sale
GENERAL JOURNAL
Page
Date
Description
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
PR
Debit
Credit
199
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–2 continued
b. January 16 sale
GENERAL JOURNAL
Page
Date
Description
PR
Debit
Credit
c. Ending inventory calculations
2. LIFO
Date
200
Units
Purchased
Unit
Cost
Total
$
Units
Sold
Unit
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–2 continued
a. January 5 sale
GENERAL JOURNAL
Page
Date
Description
PR
Debit
Credit
b. January 16 sale
GENERAL JOURNAL
Page
Date
Description
PR
Debit
Credit
c. Ending inventory calculations
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
201
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–2 continued
3. Weighted average
Date
Units
Purchased
Unit
Cost
Total
$
Units
Sold
Unit
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
Weighted average calculations:
a. January 5 sale
GENERAL JOURNAL
Page
Date
Description
202
PR
Debit
Credit
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–2 continued
b. January 16 sale
GENERAL JOURNAL
Page
Date
Description
PR
Debit
Credit
c. Ending inventory
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
203
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–3
1. a. FIFO
Date
204
Units
Purchased
Unit
Cost
Total
$
Units
Sold
Unit
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–3 continued
b. LIFO
Date
Units
Purchased
Unit
Cost
Total
$
Units
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
Sold
Unit
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
205
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–3 continued
c. Specific identification
Date
206
Units
Purchased
Unit
Cost
Total
$
Units
Sold
Unit
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–3 continued
d. Weighted average
Date
Units
Purchased
Unit
Cost
Total
$
Units
Sold
Unit
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
Weighted average calculations:
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
207
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–3 continued
2.
FIFO
LIFO
Spec.
ident.
Wtd.
avg.
Sales
Cost of goods sold
Gross profit
3.
208
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–4
Matches actual flow of goods with actual flow of costs in all cases
Matches old costs with new sales prices
Results in the lowest net income in periods of falling prices
____
Matches recent costs with new sales prices
Does not assume any particular flow of goods
Best suited for situations in which inventory consists of perishable goods
Values inventory at approximate replacement cost
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
209
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–5
2019 Statements
Errors
Open.
invent.
End.
invent.
2019
Total
assets
2020 Statements
2019
Net
Open.
End.
income invent. invent.
2020
Total
assets
1. Goods purchased in 2019
were included in December
31 inventory, but the
transaction was not
recorded until early 2020.
2. Goods purchased in 2020
were included in December
31, 2019 inventory, and the
transaction was recorded
in 2019.
3. Goods were purchased in
2019 and the transaction
recorded in that year;
however, the goods were
not included in the
December 31 inventory as
they should have been.
4. Goods purchased in 2019
were excluded from
December 31 inventory,
and the transaction was
recorded early in 2020.
210
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
2020
Net
income
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–6
1. a.
b.
2.
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
211
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–7
1. LCNRV on a unit–by–unit basis:
2. LCNRV on a group inventory basis:
Conclusion:
212
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–8
1.
$
$
%
Sales
Cost of goods sold
Opening inventory
Purchases
Cost of goods available
Ending inventory
Cost of goods sold
Gross profit
(a) Gross profit calculation
(b) Cost of goods sold calculation
(c) Estimated ending inventory calculation
2.
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
213
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–9
1.
At retail
At cost
At retail
At cost
Sales
Cost of goods sold
Opening inventory
Purchases
Transportation‐in
Cost of cost of goods available
Less: Ending inventory
Cost of goods sold
Gross Profit
2.
CP 6–10
Sales
Cost of goods sold
Opening inventory
Purchases
Transportation‐in
Cost of cost of goods available
Less: Ending inventory
Cost of goods sold
Gross Profit
214
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–11
1
2
3
4
Opening inventory
Purchases
(Ending inventory)
Cost of goods sold
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
215
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–12
FIFO
LIFO
Spec. ident.
Wtd. Avg.
Sales
Cost of goods sold
Opening inventory
Purchases
Cost of goods available
Less: Ending inv.
Cost of goods sold
Gross profit
Calculations
216
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–13
1. Specific identification ending Inventory
2. FIFO ending inventory
3. LIFO ending inventory
4. Weighted average ending inventory
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
217
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–13 continued
5. Specific identification cost of goods sold
6. FIFO cost of goods sold
7. LIFO cost of goods sold
218
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–13 continued
8. Weighted average cost of goods sold
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
219
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–14
1. a. FIFO ending inventory
b. LIFO ending inventory
220
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
CP 6–14 continued
c. Specific identification ending inventory
d. Weighted average ending inventory
2.
FIFO
LIFO
Spec. Ident.
Wtd. Avg.
Sales
Cost of goods sold
Opening inventory
Purchases
Cost of goods available
Less: Ending inv.
Cost of goods sold
Gross profit
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
221
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–1
1. COGS calculation
a. FIFO
Date
Units
Purchased
Unit
Cost
Total
$
Units
Sold
Unit
Cost
Units
Sold
Unit
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
b. LIFO
Date
222
Units
Purchased
Unit
Cost
Total
$
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–1 continued
c. Specific identification
Date
Units
Purchased
Unit
Cost
Total
$
Units
Sold
Unit
Cost
Units
Sold
Unit
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
d. Weighted average
Date
Units
Purchased
Unit
Cost
Total
$
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
223
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–1 continued
2.
3.
224
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–2
1. a. FIFO
Date
Units
Purchased
Unit
Cost
Total
$
Units
Sold
Unit
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
The journal entry would be
GENERAL JOURNAL
Page
Date
Description
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
PR
Debit
Credit
225
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–2 continued
b. LIFO
Date
Units
Purchased
Unit
Cost
Total
$
Units
Sold
Unit
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
The journal entry would be
GENERAL JOURNAL
Page
Date
Description
226
PR
Debit
Credit
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–2 continued
c. Weighted average
Date
Units
Purchased
Unit
Cost
Total
$
Units
Sold
Unit
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
Weighted average calculations
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
227
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–2 continued
The journal entry would be
GENERAL JOURNAL
Page
Date
Description
PR
Debit
Credit
2.
FIFO
LIFO
Wtd.
avg.
Sales
COGS
Gross profit
Weighted average calculations
Observation
228
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–2 continued
3.
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
229
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–3
1.
Date
Units
Purchased
Unit
Cost
Total
$
Product A
Sold
Unit
Units
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
Weighted average calculations
230
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–3 continued
1. (continued)
Date
Units
Purchased
Unit
Cost
Total
$
Product B
Sold
Unit
Units
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
Weighted average calculations
2. Total ending inventory at December 31, 2018:
Product A
Product B
Total
3.
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
231
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–4
1. a. FIFO
Date
232
Units
Purchased
Unit
Cost
Total
$
Units
Sold
Unit
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–4 continued
1. b. LIFO
Date
Units
Purchased
Unit
Cost
Total
$
Units
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
Sold
Unit
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
233
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–4 continued
1. c. Specific identification
Date
234
Units
Purchased
Unit
Cost
Total
$
Units
Sold
Unit
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–4 continued
1. d. Weighted Average
Date
Units
Purchased
Unit
Cost
Total
$
Units
Sold
Unit
Cost
Total
$
Balance in Inventory
Unit
Total
Units
Cost
$
Weighted average calculations
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
235
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–4 continued
2.
FIFO journal entries
GENERAL JOURNAL
Page
Date
Description
236
PR
Debit
Credit
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–4 continued
3.
FIFO
LIFO
Spec.
ident.
Wtd.
Avg.
COGS
Ending inventory
Total
Observation
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
237
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–5
1.
2.
238
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–6
Item
Cost
Market
Unit
LCNRV
Group
LCNRV
A
B
C
D
Conclusion
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
239
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–7
1.
Item
Product X
Product Y
Product Z
Total
Cost
2019
Net
realizable
value
Unit basis
(LCNRV)
Cost
2020
Nets
realizable
value
Unit basis
(LCNRV)
Calculations
2. 2019
Unit basis
(LCNRV)
Group basis
(LCNRV)
Cost basis
Sales
Cost of goods sold
Opening inventory
Purchases
Cost of goods available
Less: Ending inv.
Cost of goods sold
Gross profit
240
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–7 continued
3. 2020
Unit basis
(LCNRV)
Group basis
(LCNRV)
Cost basis
Sales
Cost of goods sold
Opening inventory
Purchases
Cost of goods available
Less: Ending inv.
Cost of goods sold
Gross profit
4.
5.
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
241
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–8
1.
Sales
Less: Sales returns
Net sales
Cost of goods sold:
Opening inventory
Purchases
Less: Purchase returns
Transportation – in
Cost of goods available
Less: Ending inventory
Cost of goods sold
Gross profit
Calculations
2.
242
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–9
1.
Sales
Less: Sales returns
Net sales
Cost of goods sold:
Opening inventory
Purchases
Less: Purchase returns
Transportation – in
Cost of goods available
Less: Ending inventory
Cost of goods sold
Gross profit
Retail inventory method
At retail
At cost, should be
Calculations
2.
3.
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
243
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–9 continued
4.
244
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–10
a. Specific identification
2019
2020
2021
2019
2020
2021
2019
2020
2021
Sales
Cost of goods sold
Opening inventory
Purchases
(Ending inventory)
Cost of goods sold
Gross profit/net income
b. FIFO
Sales
Cost of goods sold
Opening inventory
Purchases
(Ending inventory)
Cost of goods sold
Gross profit/net income
c. LIFO
Sales
Cost of goods sold
Opening inventory
Purchases
(Ending inventory)
Cost of goods sold
Gross profit/net income
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
245
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–10 continued
d. Weighted average
2019
2020
2021
Sales
Cost of goods sold
Opening inventory
Purchases
(Ending inventory)
Cost of goods sold
Gross profit/net income
246
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–11
1.
Units
FIFO
LIFO
Spec.
ident.
Weighted
average
Opening inventory
Purchases
Cost of goods available
2.
FIFO
=
LIFO
=
Specific identification
=
Weighted average
=
Calculations
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
247
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–11 continued
3.
Units
FIFO
LIFO
Spec.
ident.
Weighted
average
Cost of goods available
(Ending inventory)
Cost of goods sold
Calculations
4. Observations based on response 3 above:
5.
248
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–12
1.
2.
3.
FIFO
Weighted average
Sales
Cost of goods sold
Opening inventory
Purchases
Cost of goods available
Less: Ending inventory
Cost of goods sold
Gross profit
Observation
4.
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
249
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–13
1. Total purchases
Jan.
Mar.
May
Jul.
Sept.
Dec.
7
3
0
1
0
4
2
1
4
8,000 units @ $12.00
9,000 units @ $12.40
12,000 units @ $12.00
16,000 units @ $12.60
6,000 units @ $12.80
7,000 units @ $12.70
96,000
111,600
144,000
201,600
76,800
88,900
Total
Items remaining in ending inventory:
Quantity
FIFO
Unit cost
Total cost
Date
Quantity
LIFO
Unit cost
Total cost
Date
Specific identification
Quantity
Unit cost
Total cost
Date
250
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–13 continued
Weighted average calculations:
Weighted average
Date
Quantity
Unit cost
Total cost
Jan. 1
Jan. 7
Mar. 30
May 10
July 4
Sept. 2
Dec. 14
Totals
Per‐unit weighted average, and total cost in ending inventory:
2. Based on the above calculations as appropriate, the gross profit would be:
FIFO
LIFO
Spec. Ident.
Wtd. Avg.
Sales
Cost of goods sold
Opening inventory
Purchases
Cost of goods available
Less: Ending inventory
Cost of goods sold
Gross profit
3. Observations
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
251
CHAPTER SIX
Assigning Costs to Merchandise
Name
P 6–14
1. to 3.
Rising prices
Wtd.
avg.
FIFO
Sales
Cost of goods sold
Opening inventory
Purchases
Cost of goods avail.
Ending inventory
Cost of goods sold
Gross profit
Falling prices
$5,000
$5,00
0
FIFO
$5,000
Wtd.
avg.
$1,000
6,000
7,000
3,000
4,000
$1,000
$
$
Calculations
4.
252
$5,00
0
CHAPTER SIX / Assigning Costs to Merchandise First US Edition
$
CHAPTER SEVEN
Cash and Receivables
Name
Concept Self‐check
CHAPTER SEVEN / Cash and Receivables First US Edition
253
CHAPTER SEVEN
Cash and Receivables
Name
Concept Self‐check continued
254
CHAPTER SEVEN / Cash and Receivables First US Edition
CHAPTER SEVEN
Cash and Receivables
Name
Concept Self‐check continued
CHAPTER SEVEN / Cash and Receivables First US Edition
255
CHAPTER SEVEN
Cash and Receivables
Name
CP 7–1
GENERAL JOURNAL
Date
256
Description
Page
PR
Debit
Credit
CHAPTER SEVEN / Cash and Receivables First US Edition
CHAPTER SEVEN
Cash and Receivables
Name
CP 7–2
Bank Reconciliation
Cash per general ledger, Dec. 31
Add:
Cash per bank statement, Dec. 31
Add:
Less:
Less:
Adjusted Cash balance, Dec. 31
Adjusted Cash balance, Dec. 31
GENERAL JOURNAL
Date
Description
CHAPTER SEVEN / Cash and Receivables First US Edition
Page
PR
Debit
Credit
257
CHAPTER SEVEN
Cash and Receivables
Name
CP 7–3
Bank Reconciliation
Cash per general ledger, Dec. 31
Add:
Cash per bank statement, Dec. 31
Add:
Less:
Less:
Adjusted Cash balance, Dec. 31
Adjusted Cash balance, Dec. 31
GENERAL JOURNAL
Date
258
Description
Page
PR
Debit
Credit
CHAPTER SEVEN / Cash and Receivables First US Edition
CHAPTER SEVEN
Cash and Receivables
Name
CP 7–4
1.
GENERAL JOURNAL
Date
Description
Page
PR
Debit
Credit
2.
CHAPTER SEVEN / Cash and Receivables First US Edition
259
CHAPTER SEVEN
Cash and Receivables
Name
CP 7–5
1.
2.
3.
Partial Statement of Financial Position
260
CHAPTER SEVEN / Cash and Receivables First US Edition
CHAPTER SEVEN
Cash and Receivables
Name
CP 7–6
1.
2.
CHAPTER SEVEN / Cash and Receivables First US Edition
261
CHAPTER SEVEN
Cash and Receivables
Name
CP 7–7
1.
a.
GENERAL JOURNAL
Date
Description
Page
PR
Debit
Credit
b.
2.
a.
GENERAL JOURNAL
Date
Description
Page
PR
Debit
Credit
b.
3.
262
CHAPTER SEVEN / Cash and Receivables First US Edition
CHAPTER SEVEN
Cash and Receivables
Name
CP 7–8
1.
a.
b.
2.
a.
b.
3.
CHAPTER SEVEN / Cash and Receivables First US Edition
263
CHAPTER SEVEN
Cash and Receivables
Name
CP 7–9
1. November 30, 2019
GENERAL JOURNAL
Date
Description
Page
PR
Debit
Credit
2. December 31, 2019
GENERAL JOURNAL
Date
Description
Page
PR
Debit
Credit
3. February 1, 2020
GENERAL JOURNAL
Page
Date
Description
264
PR
Debit
Credit
CHAPTER SEVEN / Cash and Receivables First US Edition
CHAPTER SEVEN
Cash and Receivables
Name
P 7–1
1. 2019
GENERAL JOURNAL
Date
Description
Page
PR
Debit
Credit
2.
CHAPTER SEVEN / Cash and Receivables First US Edition
265
CHAPTER SEVEN
Cash and Receivables
Name
P 7–2
1. ____ The company has received a $3,000 loan from the bank, that was deposited into its
bank account but was not recorded in the books of the company.
____ A $250 check was not returned with the bank statement though it was paid by the
bank.
____ Cheques amounting to $4,290 shown as outstanding on the November reconciliation
still have not been returned by the bank.
____ A collection of a note receivable for $1,000 made by the bank has not been previously
reported to Goertzen. This includes interest earned of $50.
____ The bank has erroneously charged Goertzen with an $1,100 check which should have
been charged to Gagetown Ltd.
____ A $350 check made out by Fynn Company and deposited by Goertzen has been
returned by the bank marked NSF; this is the first knowledge Goertzen has of this
action.
____ A check for $840 was erroneously recorded as $730 in the company records.
____ A $600 bank deposit of December 31 does not appear on the bank statement.
____ Bank service charges amounting to $75 were deducted from the bank statement but
not yet from the company records.
266
CHAPTER SEVEN / Cash and Receivables First US Edition
CHAPTER SEVEN
Cash and Receivables
Name
P 7–2 continued
2.
Bank Reconciliation
Cash per general ledger, Dec. 31
Add:
Cash per bank statement, Dec. 31
Add:
Less:
Less:
Adjusted Cash balance, Dec. 31
Adjusted Cash balance, Dec. 31
CHAPTER SEVEN / Cash and Receivables First US Edition
267
CHAPTER SEVEN
Cash and Receivables
Name
P 7–2 continued
3.
GENERAL JOURNAL
Date
268
Description
Page
PR
Debit
Credit
CHAPTER SEVEN / Cash and Receivables First US Edition
CHAPTER SEVEN
Cash and Receivables
Name
P 7–3
1.
Bank Reconciliation
Cash per general ledger, Dec. 31
Add:
Cash per bank statement, Dec. 31
Add:
Less:
Less:
Adjusted Cash balance, Dec. 31
Adjusted Cash balance, Dec. 31
2.
GENERAL JOURNAL
Date
Description
CHAPTER SEVEN / Cash and Receivables First US Edition
PR
Debit
Credit
269
CHAPTER SEVEN
Cash and Receivables
Name
P 7–4
1.
2.
270
CHAPTER SEVEN / Cash and Receivables First US Edition
CHAPTER SEVEN
Cash and Receivables
Name
P 7–5
1.
2019
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
2020 a.
Date
2020 b.
Date
2020 c.
Date
CHAPTER SEVEN / Cash and Receivables First US Edition
271
CHAPTER SEVEN
Cash and Receivables
Name
P 7–5 continued
2020 d.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
2020 e.
Date
Calculations
272
CHAPTER SEVEN / Cash and Receivables First US Edition
CHAPTER SEVEN
Cash and Receivables
Name
P 7–5 continued
2.
Allowance for Doubtful Accounts
CHAPTER SEVEN / Cash and Receivables First US Edition
273
CHAPTER SEVEN
Cash and Receivables
Name
P 7–6
Part A: 2019
1.
Date
274
Description
PR
Debit
Credit
CHAPTER SEVEN / Cash and Receivables First US Edition
CHAPTER SEVEN
Cash and Receivables
Name
P 7–6 continued
2.
Calculation of uncollectible amount at December 31, 2019
Age (days)
1‐30
31‐60
61‐90
91‐120
Over 120
Date
Accounts
Receivable
Est. loss
Percentage
Description
CHAPTER SEVEN / Cash and Receivables First US Edition
Est.
Uncollectible
Amount
PR
Debit
Credit
275
CHAPTER SEVEN
Cash and Receivables
Name
P 7–6 continued
Part B: 2020
Date
Age (days)
1‐30
31‐60
61‐90
91‐120
Over 120
276
Description
Accounts
Receivable
Est. loss
Percentage
PR
Debit
Credit
Est.
Uncollectible
Amount
CHAPTER SEVEN / Cash and Receivables First US Edition
CHAPTER SEVEN
Cash and Receivables
Name
P 7–7
1.
a.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
b.
Date
2.
3.
Date
a.
CHAPTER SEVEN / Cash and Receivables First US Edition
277
CHAPTER SEVEN
Cash and Receivables
Name
P 7–7 continued
3.
b.
Date
Description
PR
Debit
Credit
Debit
Credit
c. Calculation of uncollectible amount at December 31, 2020
Age (days)
1‐30
31‐60
61‐90
91‐120
Over 120
Date
278
Accounts
Receivable
Est. loss
Percentage
Description
Est.
Uncollectible
Amount
PR
CHAPTER SEVEN / Cash and Receivables First US Edition
CHAPTER SEVEN
Cash and Receivables
Name
P 7–8
1.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
2.
Date
3.
Date
CHAPTER SEVEN / Cash and Receivables First US Edition
279
CHAPTER SEVEN
Cash and Receivables
Name
P 7–9
1.
Date
280
Description
PR
Debit
Credit
CHAPTER SEVEN / Cash and Receivables First US Edition
CHAPTER SEVEN
Cash and Receivables
Name
P 7–9 continued
2.a
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
b.
Date
3.
4.
CHAPTER SEVEN / Cash and Receivables First US Edition
281
CHAPTER SEVEN
Cash and Receivables
Name
P 7–10
1.
Name
1‐30
31‐60
61‐90
91‐120
121‐150
2.
Age (days)
1‐30
31‐60
61‐90
91‐120
121‐150
Over 150
282
Accounts
Receivable
Est. loss
Percentage
Est.
Uncollectible
Amount
CHAPTER SEVEN / Cash and Receivables First US Edition
+150
CHAPTER SEVEN
Cash and Receivables
Name
P 7–10 continued
3.
Date
Description
CHAPTER SEVEN / Cash and Receivables First US Edition
PR
Debit
Credit
283
CHAPTER SEVEN
Cash and Receivables
Name
P 7–11
1.
Date
Description
PR
Debit
Credit
2.
Age (days)
1‐30
31‐60
61‐90
91‐120
Over 120
284
Accounts
Receivable
Est. loss
Percentage
Est.
Uncollectible
Amount
CHAPTER SEVEN / Cash and Receivables First US Edition
CHAPTER SEVEN
Cash and Receivables
Name
P 7–11 continued
Allowance for Doubtful Accounts
Date
Description
CHAPTER SEVEN / Cash and Receivables First US Edition
PR
Debit
Credit
285
CHAPTER SEVEN
Cash and Receivables
Name
P 7–12
1.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
2.
Date
3.
Date
286
CHAPTER SEVEN / Cash and Receivables First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
Concept Self‐check
CHAPTER EIGHT / Long‐lived Assets First US Edition
287
CHAPTER EIGHT
Long‐lived Assets
Name
Concept Self‐check continued
288
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
Concept Self‐check continued
CHAPTER EIGHT / Long‐lived Assets First US Edition
289
CHAPTER EIGHT
Long‐lived Assets
Name
Concept Self‐check continued
290
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
Concept Self‐check continued
CHAPTER EIGHT / Long‐lived Assets First US Edition
291
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–1
____Battery purchased for truck
____Cash discount received on payment for equipment
____Commission paid to real estate agent to purchase land
____Cost of equipment test runs
____Cost to remodel building
____Cost to replace manual elevator with automatic elevator
____Cost of sewage system
____Equipment assembly expenditure
____Expenditures for debugging equipment
____Installation of air–conditioner in automobile
____Insurance paid during construction of building
____Legal fees associated with court case to defend title to land purchased
____Oil change for truck
Payment for paving parking lot
Proceeds from sale of old building on purchased land
Expenditures for removal of derelict structures on purchased land
Repair made to building after moving in
Repair of collision damage to truck
Repair of torn seats in automobile
Replacement of rusted fender on automobile
Replacement of transmission in automobile
Special reinforced floor foundations for installed equipment
Tires purchased for truck
Transportation expenditures to bring equipment to plant.
Assumptions
292
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–2
1.
2.
Year
Straight‐line
DDB
1
2
3
4
5
Conclusion
CHAPTER EIGHT / Long‐lived Assets First US Edition
293
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–3
1.
Journal entries to record the sale on the books of:
a.
Freeman:
Date
b.
Description
Folio
Debit
Credit
Description
Folio
Debit
Credit
The developer:
Date
Calculation of gain/loss
2.
294
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–4
1. Straight–line method:
2. Double–declining balance method:
CHAPTER EIGHT / Long‐lived Assets First US Edition
295
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–5
1. Straight–line method:
2. Usage method:
3. Double–declining balance method:
296
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–6
1. Jan. 31, 2019
Date
Description
Folio
Debit
Credit
Description
Folio
Debit
Credit
Description
Folio
Debit
Credit
2. Dec. 31, 2019
Date
Dec. 31, 2020
Date
CHAPTER EIGHT / Long‐lived Assets First US Edition
297
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–7
1. Straight–line method:
2. Double–declining balance method:
298
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–8
1. Equipment sold for $50,000:
Date
Description
Folio
Debit
Credit
Folio
Debit
Credit
2. Equipment sold for $85,000:
Date
Description
CHAPTER EIGHT / Long‐lived Assets First US Edition
299
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–8 continued
3. Equipment sold for $59,375:
Date
300
Description
Folio
Debit
Credit
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–9
Date
Description
CHAPTER EIGHT / Long‐lived Assets First US Edition
Folio
Debit
Credit
301
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–10
1.
Depreciation
Method
A. Straight‐line
Calculation
Year 1
Year 2
Year 3
B. Declining balance
2.
3.
302
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–11
1. 2020
Date
Description
Folio
Debit
Credit
Description
Folio
Debit
Credit
2. 2020
Date
CHAPTER EIGHT / Long‐lived Assets First US Edition
303
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–11 continued
3. 2020
Date
304
Description
Folio
Debit
Credit
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–12
1.
2.
Date
2019
Description
CHAPTER EIGHT / Long‐lived Assets First US Edition
Folio
Debit
Credit
305
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–12 continued
3.
Accumulated Depreciation – Equipment
Date
Description
Balance forward
Folio
Acct. No. 193
Debit
Credit
DR
CR
CR
Balance
2,250
4.
5.
306
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–13
1. a. Jan. 1, 2018
Date
Description
Folio
Debit
Credit
Description
Folio
Debit
Credit
Description
Folio
Debit
Credit
b. Dec. 31, 2018
Date
c. March 1, 2019
Date
CHAPTER EIGHT / Long‐lived Assets First US Edition
307
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–13 continued
d. Dec. 31, 2019
Date
Description
Folio
Debit
Credit
Description
Folio
Debit
Credit
2.a. March 3, 2020
Date
308
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–13 continued
b. March 3, 2020
Date
Description
CHAPTER EIGHT / Long‐lived Assets First US Edition
Folio
Debit
Credit
309
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–14
1. Jan. 1, 2019
Date
Description
Folio
Debit
Credit
Description
Folio
Debit
Credit
2. Dec. 31, 2019
Date
310
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–14 continued
3. Dec. 31, 2020
Date
Description
Folio
Debit
Credit
Description
Folio
Debit
Credit
4.a. Dec. 2, 2021
Date
CHAPTER EIGHT / Long‐lived Assets First US Edition
311
CHAPTER EIGHT
Long‐lived Assets
Name
CP 8–14 continued
4. b. Dec. 2, 2021
Date
Description
Folio
Debit
Credit
P 8–1
Cost of lots:
312
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
P 8–2
Invoice price of new machine, net of cash discount offered
Cash discount on the above, which has not yet been taken (assumes the company
follows this treatment)
Anticipated first year’s savings in operating costs from use of new machine
Two–year service contract on operations of new machine paid in full
Cost of materials used while testing new machine
Cost of installing sound insulation in wall near machine so that nearby office
employees will not be disturbed by it
Cost of removing machine that new machine replaces.
Explanations/assumptions
CHAPTER EIGHT / Long‐lived Assets First US Edition
313
CHAPTER EIGHT
Long‐lived Assets
Name
P 8–3
1.
Date
314
Description
Folio
Debit
Credit
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
P 8–3 continued
1. continued
Date
Description
Folio
Debit
Credit
2.
CHAPTER EIGHT / Long‐lived Assets First US Edition
315
CHAPTER EIGHT
Long‐lived Assets
Name
P 8–4
1.
2.
3.
4.
Partial Balance Sheet
316
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
P 8–5
1.
Depreciation expense
Year
2018
2019
2020
2021
Totals
Straight‐line
DDB
Usage
Calculations
Double‐declining balance calculations
Carrying
DDB
Year
Amount
Rate
2018
2019
2020
2021
CHAPTER EIGHT / Long‐lived Assets First US Edition
Dep’n
Expense
317
CHAPTER EIGHT
Long‐lived Assets
Name
P 8–5 continued
2.
3.
318
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
P 8–6
1. a. Usage
b. Straight–line
c. Double–declining balance
P 8–6 continued
2.
Depreciation
expense
Carrying
amount
a. Usage
b. Straight–line
c. Double–declining balance
3.
CHAPTER EIGHT / Long‐lived Assets First US Edition
319
CHAPTER EIGHT
Long‐lived Assets
Name
P 8–7
1. a. Straight‐line method
b. Double‐declining balance method
2. a. Straight‐line depreciation
Date
320
Description
Folio
Debit
Credit
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
P 8–7 continued
b. Declining balance method
Date
Description
Folio
Debit
Credit
3.
CHAPTER EIGHT / Long‐lived Assets First US Edition
321
CHAPTER EIGHT
Long‐lived Assets
Name
P 8–8
1.
2.
3.
Date
322
Description
Folio
Debit
Credit
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
P 8–8 continued
4.
Date
Description
Folio
Debit
Credit
Calculations
CHAPTER EIGHT / Long‐lived Assets First US Edition
323
CHAPTER EIGHT
Long‐lived Assets
Name
P 8–9
Part A
1.
Date
Description
Folio
Debit
Credit
Description
Folio
Debit
Credit
2.
Date
324
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
P 8–9
Part B
1.
Date
Description
Folio
Debit
Credit
Description
Folio
Debit
Credit
2.
Date
CHAPTER EIGHT / Long‐lived Assets First US Edition
325
CHAPTER EIGHT
Long‐lived Assets
Name
P 8–10
1. a.
Date
Description
Folio
Debit
Credit
Description
Folio
Debit
Credit
b.
Date
326
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
P 8–10 continued
c.
Date
Description
Folio
Debit
Credit
Description
Folio
Debit
Credit
d.
Date
CHAPTER EIGHT / Long‐lived Assets First US Edition
327
CHAPTER EIGHT
Long‐lived Assets
Name
P 8–10 continued
1.d. continued
Date
Description
Folio
Debit
Credit
2.
328
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER EIGHT
Long‐lived Assets
Name
P 8–11
1. 2019 depreciation expense
2. Loss on disposal of electric motor
3. 2020 depreciation expense
CHAPTER EIGHT / Long‐lived Assets First US Edition
329
CHAPTER EIGHT
Long‐lived Assets
Name
P 8–11 continued
4. Carrying amount of locomotive at December 31, 2020
Component
Cost
Wheel assemblies
Diesel engine
Electric motors
Original (3)
New motor (½ yr.)
Other
Totals
$1,200,000
1,000,000
Accumulated Depreciation
2018
2019
2020
2017
Total
Carrying
amount
450,000
180,000
200,000
$3,030,000
5. Gain on sale of locomotive in 2021:
Component
Cost
Wheel assemblies
Diesel engine
Electric motors
Original (3)
New motor
Other
Totals
Proceeds on disposal
Gain on disposal
$1,200,000
1,000,000
330
Accumulated Depreciation
To 2020 per
2021
Total
above
( ½ yr.)
Carrying
amount
450,000
180,000
200,000
$3,030,000
CHAPTER EIGHT / Long‐lived Assets First US Edition
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
Concept Self‐check
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
331
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
Concept Self‐check continued
332
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
CP 9–1
Date
Description
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
PR
Debit
Credit
333
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
CP 9–2
Date
334
Description
PR
Debit
Credit
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
CP 9–3
1. 2019
Date
Description
PR
Debit
Credit
Calculations
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
335
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
CP 9–3 continued
2. 2020
Date
336
Description
PR
Debit
Credit
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
CP 9–4
1.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
2.
Date
3.
Date
4.
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
337
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
CP 9–5
1.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
2.
Date
3.
Date
338
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
CP 9–6
1.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
2.
Date
3.
Date
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
339
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
CP 9–6 continued
4. a.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
b.
Date
c.
Date
340
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
CP 9–7
1.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
2.
Date
3.
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
341
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
CP 9–8
342
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
CP 9–9
1. a. 2019
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
b.
Date
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
343
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
CP 9–9 continued
2.
Year
ended
Dec.
31
2019
2020
2021
A
B
Beginning
loan
balance
(A x
6%)
Interest
expense
$50,000
C
(D – B)
Reduction
of loan
payable
D
Total
loan
payment
E
(A – C)
Ending
loan
balance
$18,705
18,705
18,705
‐0‐
3.
Date
344
Description
PR
Debit
Credit
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
CP 9–10
1.
Date
Description
PR
Debit
Credit
2.
Year
ended
Dec. 31
2019
2020
2021
2022
A
B
Beginning
lease
balance
$80,000
(A x 8%)
Interest
expense
C
(D – B)
Reduction
of finance
lease
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
D
Total
lease
payment
$24,154
24,154
24,154
24,154
E
(A – C)
Ending
lease
balance
‐0‐
345
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
CP 9–10 continued
3.
Balance Sheet
346
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
P 9–1
1. a. 2019
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
b.
Date
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
347
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
P 9–1 continued
c.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
d.
Date
e.
Date
348
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
P 9–1 continued
2. f. 2019
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
g.
Date
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
349
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
P 9–1 continued
h.
Date
Description
PR
Debit
Credit
3. Current liabilities at January 31:
350
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
P 9–2
1.
ASSETS
Cash
LIABILITIES
Corp. Inc. Tax. Pay.
Bank Loan
STOCKHOLDERS’
EQUITY
Common Stock
Sales
Accounts
Receivable
Merchandise
Inventory
Accounts Payable
Interest Payable
Cost of Goods Sold
Salaries Payable
Emp’ee Inc. Tax
Pay.
Salaries Expense
FICA Soc. Sec. Pay.
FICA Medicare Pay.
FICA Soc. Sec. Exp.
GST Payable
FICA Medicare Exp.
Interest Expense
Corp. Taxes Exp.
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
351
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
P 9–2 continued
2.
Income Statement
Statement of Changes in Equity
352
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
P 9–2 continued
Balance Sheet
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
353
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
P 9–3
1.a.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
b.
Date
c.
Date
d.
Date
354
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
P 9–3 continued
e.
Date
Description
PR
Debit
Credit
To record salaries payable as follows:
Gross
pay
Income
taxes
FICA Soc.
Sec.
Deductions
FICA
Comp.
Medicare
health
Total.
deduct.
Net
pay
Employee
Employer
f.
Date
Description
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
PR
Debit
Credit
355
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
P 9–3 continued
g.
Date
356
Description
PR
Debit
Credit
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
P 9–3 continued
2.
No
Account
101
110
150
151
210
212
213
Cash
Accounts receivable
Merch. inventory
Parts inventory
Accounts payable
Est. current liab.
Est. warranty liab.
226
227
228
Salaries payable
Emp’ee inc. tax pay.
FICA Soc. Sec. pay.
229
FICA Medicare pay.
230
Co. health ins. pay.
238
248
260
320
340
440
500
570
653
656
658
659
660
678
830
GST payable
Unearn. rent rev.
Corp. inc. tax pay.
Common stock
Retained earnings
Rent earned
Sales
Cost of goods sold
Professional fees
Salaries expense
FICA Soc. Sec. exp.
FICA Medicare exp.
Co. health plan exp.
Warranty exp.
Corp. inc. tax exp.
Unadjusted TB
Debit
Credit
12,000
30,000
70,000
10,000
40,000
Adjustments
Debit
Credit
Adjusted TB
Debit
Credit
3,000
1,000
100
3,000
13,000
791,900
263,500
400,000
8,000
20,000
12,000
4,000
16,500
849,000
849,000
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
357
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
P 9–3 continued
Income Statement
Statement of Changes in Equity
358
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
P 9–3 continued
Balance Sheet
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
359
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
P 9–4
1.a.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
b.
Date
2.
Zinc Corp.
Loan Repayment Schedule
A
Year
ended
Dec. 31
2020
2021
2022
2023
360
Beginning
loan
balance
B
Interest
expense
C
(D – B)
Reduction
of loan
payable
D
Total
loan
payment
E
(A – C)
Ending
loan
balance
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
P 9–4 continued
3.
Date
Description
PR
Debit
Credit
4.
Partial Balance Sheet
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
361
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
P 9–5
1. 2019
Date
Description
PR
Debit
Credit
2.
Year ended
March 31
2021
2022
2023
362
A
Beginning
lease
balance
East Corp.
Lease Repayment Schedule
B
C
D
(A x 6%)
(D – B)
Total
interest
Reduction of
lease
expense
finance lease
payment
E
(A – C)
Ending lease
balance
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
Name
P 9–5 continued
3.
Balance Sheet
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
363
CHAPTER NINE
Debt Financing: Current and Non‐current Liabilities
364
Name
CHAPTER NINE / Debt Financing: Current and Non‐current Liabilities First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
Concept Self‐check
CHAPTER TEN / Debt Financing: Bonds First US Edition
365
CHAPTER TEN
Debt Financing: Bonds
Name
Concept Self‐check continued
366
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
Concept Self‐check continued
CHAPTER TEN / Debt Financing: Bonds First US Edition
367
CHAPTER TEN
Debt Financing: Bonds
Name
Concept Self‐check continued
368
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
Concept Self‐check continued
CHAPTER TEN / Debt Financing: Bonds First US Edition
369
CHAPTER TEN
Debt Financing: Bonds
Name
Concept Self‐check continued
370
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
CP 10–1
1. If the market rate of interest is 15% and the bond interest rate is 10%, the
bonds will sell at a ______________.
2. If a bond’s interest rate is 10% and the market rate of interest is 8%, the bonds
will sell at a ______________.
3. In computing the carrying amount of a bond, unamortized ______________ is
subtracted from the face value of the bond.
4. In computing the carrying amount of a bond, unamortized ______________ is
added to the face value of the bond.
5. If a bond sells at a ______________, an amount in excess of the face value of
the bond is received on the date of issuance.
6. If a bond sells at a ______________, an amount less than the face value of the
bond is received on the date of issuance.
CHAPTER TEN / Debt Financing: Bonds First US Edition
371
CHAPTER TEN
Debt Financing: Bonds
Name
CP 10–2
1.
a. The issuance of bonds:
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
PR
Debit
Credit
b. The interest payment:
Date
c.
Date
372
The amortization of the discount:
Description
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
CP 10–2 continued
2.
3.
Partial Balance Sheet
CHAPTER TEN / Debt Financing: Bonds First US Edition
373
CHAPTER TEN
Debt Financing: Bonds
Name
CP 10–2 continued
4.
Retirement of the bonds:
Date
5.
Date
374
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Calling of the bonds:
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
CP 10–3
1.
a. The issuance of the bonds:
Date
b.
Date
c.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
PR
Debit
Credit
The interest payment:
The amortization of the premium:
Description
2.
CHAPTER TEN / Debt Financing: Bonds First US Edition
375
CHAPTER TEN
Debt Financing: Bonds
Name
CP 10–3 continued
3.
Partial Balance Sheet
4.
Date
376
Calling of the bonds:
Description
PR
Debit
Credit
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
CP 10–4
Date
Description
CHAPTER TEN / Debt Financing: Bonds First US Edition
PR
Debit
Credit
377
CHAPTER TEN
Debt Financing: Bonds
Name
CP 10–5
Date
378
Description
PR
Debit
Credit
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
CP 10–6
Case A
1.
2.
3.
4.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
5.
Date
CHAPTER TEN / Debt Financing: Bonds First US Edition
379
CHAPTER TEN
Debt Financing: Bonds
Name
CP 10–6 continued
Case B
1.
2.
3.
4.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
5.
Date
380
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
CP 10–6 continued
Case C
1.
2.
3.
4.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
5.
Date
CHAPTER TEN / Debt Financing: Bonds First US Edition
381
CHAPTER TEN
Debt Financing: Bonds
Name
CP 10–7
1.
2.
382
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
CP 10–8 (Appendix)
1.
2.
Year
Issue of $200,000 Bonds Payable for $210,152
Six month
period
ending
Jun. 30
Amortization Table
Using Market Interest Rate of ____ Per Cent
A
B
C
Beginning
Actual
bond
cash
6‐month
interest
carrying
paid
amount
interest expense
D
Periodic
prem./disc.
amort.
E
Ending
bond
carrying
amount
Dec. 31
Jun. 30
Dec. 31
Jun. 30
Dec. 31
CHAPTER TEN / Debt Financing: Bonds First US Edition
383
CHAPTER TEN
Debt Financing: Bonds
Name
CP 10–8 (Appendix) continued
3.
Year
Calculation of Effective Interest Rate
A
B
Using ___%
market rate to
Six month
Bond
calculate periodic
period
carrying
ending
amount
interest expense
Jun. 30
Dec. 31
(B/A)
Jun. 30
Dec. 31
Jun. 30
Dec. 31
4.
384
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–1
1.
a.
b.
2.
3.
Date
Description
CHAPTER TEN / Debt Financing: Bonds First US Edition
PR
Debit
Credit
385
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–1 continued
4.
Partial Balance Sheet
386
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–2
1.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
2.
Date
3.
Date
CHAPTER TEN / Debt Financing: Bonds First US Edition
387
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–2 continued
4.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
5.a.
Date
388
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–2 continued
b
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
6.a.
Date
b.
Date
CHAPTER TEN / Debt Financing: Bonds First US Edition
389
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–2 continued
c.
Date
390
Description
PR
Debit
Credit
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–3
1.a.
Amount of interest paid every 6 months:
b.
Amount of amortization every 6 months:
2.
a.
Issue of the bonds
Case A
Debit
Credit
CHAPTER TEN / Debt Financing: Bonds First US Edition
Debit
Case B
Credit
Debit
Case C
Credit
391
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–3 continued
b.
Payment of interest
c.
Amortization
392
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–3 continued
d.
Payment of interest
e.
Amortization
f.
Payment of interest
g.
Amortization
h.
Redemption of bonds
Case A
Debit
Credit
CHAPTER TEN / Debt Financing: Bonds First US Edition
Case B
Debit
Credit
Case C
Debit
Credit
393
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–3 continued
3.
Calculation of interest expense
4.
Exercise of a call option at Dec. 31, 2020
Case A
Debit
Credit
394
Case B
Debit
Credit
Case C
Debit
Credit
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–4
1.
a.
b.
2.
Year
Six month
period
ending
Jun. 30
Amortization Table
Using Market Interest Rate of ____ Per Cent
A
B
C
Beginning
Actual
bond
cash
carrying
6‐month
interest
amount
interest expense
paid
D
E
Ending
bond
carrying
amount
Periodic
prem./disc.
amort.
Dec. 31
Jun. 30
Dec. 31
Jun. 30
Dec. 31
CHAPTER TEN / Debt Financing: Bonds First US Edition
395
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–4 continued
3.
Calculation of Effective Interest Rate
Six month
period
ending
Year
A
B
Bond
carrying
amount
Using ___% market rate to
calculate periodic interest
expense
(B/A)
Jun. 30
Dec. 31
Jun. 30
Dec. 31
Jun. 30
Dec. 31
4.
396
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–4 continued
5.
Partial Balance Sheet
CHAPTER TEN / Debt Financing: Bonds First US Edition
397
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–5
1.
a. Difference between the premiums from 2019 to 2020
b.
Total premium/yearly amortization
2.
Date
398
Description
PR
Debit
Credit
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–5 continued
3.
2021 unadjusted interest expense
The following journal entry is needed:
Date
Description
PR
Debit
Credit
4.
CHAPTER TEN / Debt Financing: Bonds First US Edition
399
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–6
1.
Date
400
Description
PR
Debit
Credit
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–6 continued
2.
Date
Description
CHAPTER TEN / Debt Financing: Bonds First US Edition
PR
Debit
Credit
401
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–6 continued
3.
Date
Description
402
PR
Debit
Credit
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–7 (Appendices)
1.a. Interest payment every 6 months
Calculation
Case A
Case B
Case C
Case A
Case B
Case C
b. Issue price computation
Calculation
CHAPTER TEN / Debt Financing: Bonds First US Edition
403
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–7 (Appendices) continued
c. i. Bonds issued when market rate is 1%
ii. Bonds issued when market rate is 16%
Year
Six month
period
ending
Jun. 30
Amortization Table
Using Market Interest Rate of ____ Per Cent
A
B
C
Beginning
Actual
bond
cash
carrying
6‐month
interest
amount
interest expense
paid
D
Periodic
prem./disc.
amort.
Dec. 31
Jun. 30
Dec. 31
Jun. 30
Dec. 31
404
CHAPTER TEN / Debt Financing: Bonds First US Edition
E
Ending
bond
carrying
amount
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–7 (Appendices) continued
iii. Bonds issued when market rate is 8%
Year
Six month
period
ending
Jun. 30
Amortization Table
Using Market Interest Rate of ____ Per Cent
A
B
C
Actual
Beginning
cash
bond
carrying
6‐month
interest
amount
interest expense
paid
D
E
Ending
bond
carrying
amount
Periodic
prem./disc.
amort.
Dec. 31
Jun. 30
Dec. 31
Jun. 30
Dec. 31
d.
The carrying value of the bonds at December 31, 2021:
CHAPTER TEN / Debt Financing: Bonds First US Edition
405
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–7 (Appendices) continued
2.
Case A
Debit
Credit
406
Case B
Debit
Credit
Case C
Debit
Credit
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–8 (Appendices)
1.
Issue price computation:
2.
Year
Six month
period
ending
Jun. 30
Amortization Table
Using Market Interest Rate of ____ Per Cent
A
B
C
Beginning
Actual
bond
cash
carrying
6‐month
interest
amount
interest expense
paid
D
E
Ending
bond
carrying
amount
Periodic
prem./disc.
amort.
Dec. 31
Jun. 30
Dec. 31
Jun. 30
Dec. 31
CHAPTER TEN / Debt Financing: Bonds First US Edition
407
CHAPTER TEN
Debt Financing: Bonds
Name
P 10–8 (Appendices) continued
3.
Year
Calculation of Effective Interest Rate
A
B
Using ___%
market rate to
Six month
Bond
calculate periodic
period
carrying
ending
amount
interest expense
Jun. 30
Dec. 31
(B/A)
Jun. 30
Dec. 31
Jun. 30
Dec. 31
4.
408
CHAPTER TEN / Debt Financing: Bonds First US Edition
CHAPTER ELEVEN
Equity Financing
Name
Concept Self‐check
CHAPTER ELEVEN / Equity Financing First US Edition
409
CHAPTER ELEVEN
Equity Financing
Name
Concept Self‐check continued
410
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
Concept Self‐check continued
CHAPTER ELEVEN / Equity Financing First US Edition
411
CHAPTER ELEVEN
Equity Financing
Name
Concept Self‐check continued
412
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
Concept Self‐check continued
CHAPTER ELEVEN / Equity Financing First US Edition
413
CHAPTER ELEVEN
Equity Financing
Name
Concept Self‐check continued
414
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
Concept Self‐check continued
CHAPTER ELEVEN / Equity Financing First US Edition
415
CHAPTER ELEVEN
Equity Financing
Name
Concept Self‐check continued
416
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
Concept Self‐check continued
CHAPTER ELEVEN / Equity Financing First US Edition
417
CHAPTER ELEVEN
Equity Financing
Name
CP 11–1
Total capital
stock
Retained
earnings
1. Company is incorporated
2. Issued shares of common stock with a stated value of $1
3. Split the common stock 2 for 1
4. Recorded net income for the year
5. Reacquired some shares of common stock previously
outstanding
6. Declared a cash dividend
7. Paid a cash dividend
8. Declared a stock dividend
9. Created a restriction on retained earnings
418
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
CP 11–2
1.
12%
bonds
Preferred
stock
Common
stock
Income before interest and inc. taxes
Less: Interest expense
Income before income taxes
Less: Income taxes
Less: Preferred dividends
Net available to common s/h (a)
No. common shares outstanding (b)
Earnings per share of common stock
(a/b)
2
2.
CHAPTER ELEVEN / Equity Financing First US Edition
419
CHAPTER ELEVEN
Equity Financing
Name
CP 11–3
1.
Date
2.
Date
3.
Date
420
Authorization of stock issue:
Description
PR
Debit
Credit
PR
Debit
Credit
PR
Debit
Credit
Issue of 10,000 shares of common stock:
Description
Issue of 1,000 shares of preferred stock:
Description
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
CP 11–4
1.
Date
Description
PR
Debit
Credit
2.
CHAPTER ELEVEN / Equity Financing First US Edition
421
CHAPTER ELEVEN
Equity Financing
Name
CP 11–5
1.
2.
3.
422
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
CP 11–6
Date
Description
CHAPTER ELEVEN / Equity Financing First US Edition
PR
Debit
Credit
423
CHAPTER ELEVEN
Equity Financing
Name
CP 11–7
1.
2019
Date
2.
Date
424
Description
PR
Debit
Credit
Description
PR
Debit
Credit
2019
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
CP 11–8
1.
2.
CHAPTER ELEVEN / Equity Financing First US Edition
425
CHAPTER ELEVEN
Equity Financing
Name
CP 11–9
426
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
CP 11–10
1.
a. Book value per preferred share
b.
Book value per common share
2.
Book value per common share after split
CHAPTER ELEVEN / Equity Financing First US Edition
427
CHAPTER ELEVEN
Equity Financing
Name
CP 11–11
1.
2.
3.
428
Amount available for all dividends
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
CP 11–12
Date
Description
CHAPTER ELEVEN / Equity Financing First US Edition
PR
Debit
Credit
429
CHAPTER ELEVEN
Equity Financing
Name
CP 11–13
Date
430
Description
PR
Debit
Credit
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
CP 11–14
1.
Date
Description
CHAPTER ELEVEN / Equity Financing First US Edition
PR
Debit
Credit
431
CHAPTER ELEVEN
Equity Financing
Name
CP 11–14 continued
2.
a.
Partial Balance Sheet
b.
Partial Balance Sheet
432
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
CP 11–14 continued
c.
Partial Balance Sheet
CHAPTER ELEVEN / Equity Financing First US Edition
433
CHAPTER ELEVEN
Equity Financing
Name
CP 11–15
1.
Date
Description
PR
Debit
Credit
PR
Debit
Credit
Partial Balance Sheet
2.
Date
434
Description
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
CP 11–16
Partial Balance Sheet
Statement of Changes in Equity
CHAPTER ELEVEN / Equity Financing First US Edition
435
CHAPTER ELEVEN
Equity Financing
Name
P 11–1
1.
12%
bonds
Preferred
stock
Common
stock
Income before interest and inc. taxes
Less: Interest expense
Income before income taxes
Less: Income taxes
Less: Preferred dividends
Net available to common s/h (a)
No. common shares outstanding (b)
Earnings per common share (a/b)
2.
3.
436
Other factors to be considered by board of directors:
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
P 11–2
1. a.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
b.
Date
c.
Date
d.
Date
CHAPTER ELEVEN / Equity Financing First US Edition
437
CHAPTER ELEVEN
Equity Financing
Name
P 11–2 continued
e.
Date
Description
PR
Debit
Credit
2.
Partial Balance Sheet
438
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
P 11–2 continued
3.
Statement of Changes in Equity
CHAPTER ELEVEN / Equity Financing First US Edition
439
CHAPTER ELEVEN
Equity Financing
Name
P 11–3
1. Before Split
Partial Balance Sheet
After Split
Partial Balance Sheet
2.
Date
Description
PR
Debit
Credit
DR/
CR
Balance
3.
440
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
P 11–4
Statement of Changes in Equity
CHAPTER ELEVEN / Equity Financing First US Edition
441
CHAPTER ELEVEN
Equity Financing
Name
P 11–5
Assets
Liabilities
Stockholders’
Equity
1. Common stock was issued for cash
2. Declared a cash dividend
3. Common stock split 3:1
4. Calculated book value of common stock
5. Paid cash dividend related to item 2 above
6. Recorded restriction of retained earnings
442
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
P 11–6
1. a.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
b.
Date
CHAPTER ELEVEN / Equity Financing First US Edition
443
CHAPTER ELEVEN
Equity Financing
Name
P 11–6 continued
c.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
d.
Date
e.
Date
444
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
P 11–6 continued
2.
Statement of Changes in Equity
If appendix 2 is not covered, only four columns above will be needed.
CHAPTER ELEVEN / Equity Financing First US Edition
445
CHAPTER ELEVEN
Equity Financing
Name
P 11–7
1.
2.
446
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
P 11–8
1.
Date
Description
CHAPTER ELEVEN / Equity Financing First US Edition
PR
Debit
Credit
447
CHAPTER ELEVEN
Equity Financing
Name
P 11–8 continued
2.
Statement of Changes in Equity
448
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
P 11–9
1.
CHAPTER ELEVEN / Equity Financing First US Edition
449
CHAPTER ELEVEN
Equity Financing
Name
P 11–9 continued
2.
Date
450
Description
PR
Debit
Credit
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER ELEVEN
Equity Financing
Name
P 11–9 continued
3.
Statement of Changes in Equity
If appendix 2 is not covered, only four columns above will be needed.
CHAPTER ELEVEN / Equity Financing First US Edition
451
CHAPTER ELEVEN
Equity Financing
452
Name
CHAPTER ELEVEN / Equity Financing First US Edition
CHAPTER TWELVE
Proprietorships and Partnerships
Name
Concept Self‐check
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
453
CHAPTER TWELVE
Proprietorships and Partnerships
Name
Concept Self‐check continued
454
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
CHAPTER TWELVE
Proprietorships and Partnerships
Name
Concept Self‐check continued
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
455
CHAPTER TWELVE
Proprietorships and Partnerships
Name
Concept Self‐check continued
456
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
CHAPTER TWELVE
Proprietorships and Partnerships
Name
Concept Self‐check continued
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
457
CHAPTER TWELVE
Proprietorships and Partnerships
Name
Concept Self‐check continued
458
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
CHAPTER TWELVE
Proprietorships and Partnerships
Name
CP 12–1
1.
Income Statement
2.
Statement of Proprietor’s Capital
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
459
CHAPTER TWELVE
Proprietorships and Partnerships
Name
CP 12–1 continued
3.
Balance Sheet
460
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
CHAPTER TWELVE
Proprietorships and Partnerships
Name
CP 12–1 continued
4.
Date
Description
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
PR
Debit
Credit
461
CHAPTER TWELVE
Proprietorships and Partnerships
Name
CP 12–2
1.
Income Statement
2.
Statement of Proprietor’s Capital
462
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
CHAPTER TWELVE
Proprietorships and Partnerships
Name
CP 12–2 continued
3.
Balance Sheet
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
463
CHAPTER TWELVE
Proprietorships and Partnerships
Name
CP 12–2 continued
4.
Date
464
Description
PR
Debit
Credit
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
CHAPTER TWELVE
Proprietorships and Partnerships
Name
CP 12–3
1.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
2.
Date
Calculations
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
465
CHAPTER TWELVE
Proprietorships and Partnerships
Name
CP 12–3 continued
3.
Date
Description
PR
Debit
Credit
Calculations
466
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
CHAPTER TWELVE
Proprietorships and Partnerships
Name
CP 12–4
1.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
2.
Date
3.
Date
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
467
CHAPTER TWELVE
Proprietorships and Partnerships
Name
CP 12–5
1.
Statement of Partnership Liquidation
Cash
468
Other
assets
Liabilities
Partners’ capital
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
CHAPTER TWELVE
Proprietorships and Partnerships
Name
CP 12–5 continued
2. a.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
b.
Date
c.
Date
d.
Date
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
469
CHAPTER TWELVE
Proprietorships and Partnerships
Name
P 12–1
1.
Income Statement
2.
Statement of Proprietor’s Capital
470
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
CHAPTER TWELVE
Proprietorships and Partnerships
Name
P 12–1 continued
3.
Balance Sheet
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
471
CHAPTER TWELVE
Proprietorships and Partnerships
Name
P 12–1 continued
4.
Date
472
Description
PR
Debit
Credit
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
CHAPTER TWELVE
Proprietorships and Partnerships
Name
P 12–2
1.
Statement of Proprietor’s Capital
2.
Statement of Changes in Equity
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
473
CHAPTER TWELVE
Proprietorships and Partnerships
Name
P 12–3
1.
Date
474
Description
PR
Debit
Credit
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
CHAPTER TWELVE
Proprietorships and Partnerships
Name
P 12–3 continued
2.
Date
Description
PR
Debit
Credit
To allocate net income as follows:
Partner
Total
Profit to be allocated
Interest allocation:
Balance
Salary allocation:
Balance
Balance allocated in profit and
loss sharing ratio:
Balance
Total allocated to partners
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
475
CHAPTER TWELVE
Proprietorships and Partnerships
Name
P 12–4
1.
Partner
Total
Profit to be allocated
Interest allocation:
Balance
Salary allocation:
Balance
Balance allocated in profit and
loss sharing ratio:
Balance
Total allocated to partners
2.
Date
476
Description
PR
Debit
Credit
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
CHAPTER TWELVE
Proprietorships and Partnerships
Name
P 12–5
1.
Profit and loss
sharing plan
(a) Division with profit of
$60,000
Bo
Diddley
(b) Division with loss of
$30,000
Bo
Diddley
Plan A
1
Plan B
1
Calculations
2.
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
477
CHAPTER TWELVE
Proprietorships and Partnerships
Name
P 12–6
1.
The new partner’s bonus is recorded as:
Date
478
Description
PR
Debit
Credit
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
CHAPTER TWELVE
Proprietorships and Partnerships
Name
P 12–6 continued
2.
The bonus to existing partners is recorded as:
Date
Description
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
PR
Debit
Credit
479
CHAPTER TWELVE
Proprietorships and Partnerships
Name
P 12–7
1.
Statement of Partnership Liquidation
Cash
2.a.
Date
480
Other
assets
Liabilities
Partners’ capital
Loss on Sale of Other Assets
Description
PR
Debit
Credit
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
CHAPTER TWELVE
Proprietorships and Partnerships
Name
P 12–7 continued
b.
Date
Description
PR
Debit
Credit
Description
PR
Debit
Credit
Description
PR
Debit
Credit
c.
Date
d.
Date
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
481
CHAPTER TWELVE
Proprietorships and Partnerships
Name
P 12–7 continued
e.
Date
482
Description
PR
Debit
Credit
CHAPTER TWELVE / Proprietorships and Partnerships First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
Concept Self‐check
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
483
CHAPTER THIRTEEN
Financial Statement Analysis
Name
Concept Self‐check continued
484
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
Concept Self‐check continued
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
485
CHAPTER THIRTEEN
Financial Statement Analysis
Name
Concept Self‐check continued
486
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
Concept Self‐check continued
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
487
CHAPTER THIRTEEN
Financial Statement Analysis
Name
Concept Self‐check continued
488
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–1
Acid–test ratio
Current ratio
Return on stockholders’ equity
Times interest earned
Earnings per share
Accounts receivable collection period
Sales to total assets
Dividend yield
Price–to–earnings ratio
Number of days of sales in inventory
Debt to stockholders’ equity ratio
Net profit ratio
Accounts receivable collection period
Return on total assets
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
489
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–2
1. Current ratio
Year
Calculations
Definition/interpretation
2. Acid–test ratio
Year
Calculations
Definition/interpretation
490
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–2 continued
3.
4.
Balance Sheet
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
491
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–3
Gross profit ratio
Year
Calculations
Analysis
Net profit ratio
Year
Calculations
Analysis
492
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–4
Price‐earnings ratio
Company
Calculations
A
B
C
Analysis
Dividend yield
Company
Calculations
Analysis
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
493
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–5
Sales
Cost of goods sold
Gross profit
Other expenses
Net income
(a)
2019
$2,520
1,890
630
510
$ 120
(b)
2018
$1,440
960
480
430
$ 50
(a) – (b)
% change
Analysis
494
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–6
Effect on ratio
Transaction
Declared a cash dividend
Wrote‐off an uncollectible account
receivable
Purchased inventory on account
Issued 10–year bonds to acquire capital
assets
Issued additional shares for cash
Declared a stock dividend on common
shares
Restricted part of retained earnings
Purchased supplies on account
Paid a short–term creditor in full
Paid an account payable, taking the cash
discount
Ratio
Current ratio
Accounts receivable collection
period
Acid–test ratio
Return on total assets
Inc.
No
change
Dec.
Debt to stockholders’ equity
ratio
Earnings per share
Return on stockholders’ equity
Current ratio
Acid–test ratio
Number of days sales in
inventory
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
495
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–7
1.a. Return on total assets
b. Return on stockholders’ equity
c. Times interest earned ratio
d. Earnings per share
496
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–7 continued
e. Number of days of sales in inventory
f. Accounts receivable collection period
g. Sales to total assets ratio
h. Current ratio
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
497
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–7 continued
i. Acid‐test ratio
j. Debt to stockholders’ equity ratio
2. The following ratios are measures of liquidity:
498
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–7 continued
3.
Balance Sheet
Income Statement
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
499
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–7 continued
4. Scott formula
Year
Return on operating
capital
(1)
x
(2)
=
=
500
+
+
Return on leveraging
(3)
x
x
+
–
x
+
+
(4)
Return on
= stockholders’
equity
=
(5)
x
=
x
=
=
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–8
1. Current ratio
2. Return on total assets
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
501
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–8 continued
3. Sales to total assets ratio
4. Acid‐test ratio
5. Times interest earned ratio
6. Earnings per common share
502
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–8 continued
7. Accounts receivable collection period
8. Return on stockholders’ equity
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
503
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–8 continued
9. Scott formula
Year
Return on operating
capital
(1)
x
(2)
=
=
+
+
Return on leveraging
(3)
x
x
+
–
x
+
+
(4)
Return on
= stockholders’
equity
=
(5)
x
=
x
=
=
Calculations
504
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–9
1. Current liabilities
2. Inventory
3. Accounts receivable collection period
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
505
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–9 continued
4. Number of days of sales in inventory
5. Revenue operating
506
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–10
1.
Effect on current ratio
Transaction
Inc.
Dec.
No
change
a. Bought $20,000 of merchandise on account (the company
uses a perpetual inventory system)
b. Sold for $10,000 cash, merchandise that cost $5,000
c. Collected a $2,500 account receivable
d. Paid a $10,000 account payable
e. Wrote off a $1,500 bad debt against the allowance for
doubtful accounts
f. Declared a $1 per–share cash dividend on the 10,000
outstanding common shares
g. Paid the dividend declared above
h. Borrowed $10,000 from a bank by assuming a 60–day, 10
per cent loan
i.
Borrowed $25,000 from a bank by placing a 10–year
mortgage on the plant
j.
Used the $25,000 proceeds of the mortgage to buy
additional machinery
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
507
CHAPTER THIRTEEN
Financial Statement Analysis
Name
CP 13–10 continued
2. a. Current ratio
Transaction effects
Current assets
X
May 1
bal.
$200
Current liabilities
y
$80
Current ratio
x/y
2.5
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
May 31
bal.
(j)
May 31
bal.
b. Acid–test ratio
Transaction effects
Quick assets
X
May 1
bal.
$200
Current liabilities
y
$80
Acid test ratio
x/y
2.5
508
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
P 13–1
1. a. Current ratio
b. Acid‐test ratio
c. Debt to stockholders’ equity ratio
2.
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
509
CHAPTER THIRTEEN
Financial Statement Analysis
Name
P 13–1 continued
3.
510
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
P 13–2
1. a. Current ratio
b. Acid‐test ratio
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
511
CHAPTER THIRTEEN
Financial Statement Analysis
Name
P 13–2 continued
c. Accounts receivable collection period
d. Number of days of sales in inventory
e. Debt to stockholders’ equity ratio
512
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
P 13–2 continued
f. Return on stockholders’ equity
g. Earnings per share
2. Dividends paid on common shares
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
513
CHAPTER THIRTEEN
Financial Statement Analysis
Name
P 13–2 continued
3.Observations
514
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
P 13–2 continued
4. Restatement for Scott formula analysis
Balance Sheet
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
515
CHAPTER THIRTEEN
Financial Statement Analysis
Name
P 13–2 continued
Income Statement
5. Scott Formula
Year
Return on operating
capital
(1)
x
(2)
=
516
+
+
Return on leveraging
(3)
x
x
+
–
x
+
(4)
Return on
= stockholders’
equity
=
(5)
x
=
x
=
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
P 13–2 continued
Analysis
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
517
CHAPTER THIRTEEN
Financial Statement Analysis
Name
P 13–3
Balance Sheet
Calculations
518
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
P 13–4
1.
2020
Common Size Percentages
2019
2018
Sales
Cost of goods sold
Gross profit
Other expenses
Net income
2. Analysis
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
519
CHAPTER THIRTEEN
Financial Statement Analysis
Name
P 13–5
Balance Sheet
520
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER THIRTEEN
Financial Statement Analysis
Name
P 13–5 continued
Calculations
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
521
CHAPTER THIRTEEN
Financial Statement Analysis
522
Name
CHAPTER THIRTEEN / Financial Statement Analysis First US Edition
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
Concept Self‐check
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
517
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
Concept Self‐check continued
518
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
Concept Self‐check continued
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
519
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
Concept Self‐check continued
520
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
CP 14–1
A payment of $5,000 was made on a non‐current bank loan.
Depreciation expense for equipment was $1,000.
$10,000 of share capital was issued for cash.
Cash dividends of $2,500 were declared and paid to shareholders.
A non‐current bank loan was assumed in exchange for
equipment costing $7,000.
Land was purchased for $25,000 cash.
$750 of accrued salaries was paid.
A $5,000 operating loan was obtained. The loan is due on
demand and is an integral part of the company’s cash
management strategy.
$10,000 of accounts receivable was collected.
A building was purchased for $80,000. $30,000 was paid
in cash and the rest was borrowed.
Land was sold for $50,000 cash.
Equipment was sold for $6,000. The original cost was $10,000. The
accumulated depreciation was $3,000.
$1,200 was paid for a 14–month insurance policy to take
effect next year.
A patent was amortized for $500.
Shares were redeemed for $50,000 cash, their original issue price.
Notes, if any:
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
521
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
CP 14–2
Operating
activities
In (out)
1.
Retired $100 of non‐current debt with cash
2.
Purchased a building for $90; $60 was loaned by a
bank and the rest was paid in cash
3.
Declared and paid cash dividends of $12 during the
year
4.
Purchased equipment by issuing $20 of common
shares with the proceeds
5.
Paid $50 in cash to pay off a non‐current bank loan
6.
Sold land for $30 cash
7.
Earned net income of $75
8.
Purchased equipment costing $15; of this, $5 was
paid in cash and the rest with a 90–day note payable
9.
Amortized a patent by $2
Financing
activities
In (out)
Investing
activities
In (out)
10. Assumed $100 of non‐current debt and repurchased
common shares
11. Purchased short‐term investments for $5 cash
12. Sold a machine that cost $20 for $7 cash; the
accumulated depreciation on it was $10
13. Depreciation expense for building and equipment
amounted to $8
14. Paid in cash the note payable from transaction 8
above.
15. Issued $20 of preferred shares for cash
16. Purchased a patent for $25 cash
17. Prepaid $20 for the next two months of advertising
18. Purchased land for $60 cash.
522
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
CP 14–2 continued
Notes, if any:
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
523
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
CP 14–3
Cash Flow
No
Effect
1. Earning net income for the year
2. Redemption of preferred shares at face value
3. Purchase of inventory
4. Issuing common shares for equipment
5. Assuming non‐current debt
6. Declaring a cash dividend
7. Collection of an account receivable
8. Payment of an account payable
9. Purchase of land for cash
10. Issuing common shares for cash
11. Reclassifying non‐current liabilities as current liabilities
for the amount to be repaid in cash next year
12. Payment of a cash dividend declared last year
13. Decrease in market value of short‐term investments
14. Calculation of amount owing for income taxes.
524
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
CP 14–4
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
525
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
CP 14–5
526
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
CP 14–6
1. Cash flow from operating activities:
2020
Dr. (Cr.)
2019
Dr. (Cr.)
Change
Debit
(Credit)
Non‐cash current assets
Accounts receivable
Inventory
Prepaid rent
The journal entries used to construct the SCF would be:
Date
Description
Debit
Credit
Cash flow from operating activities:
Net income
Changes in non‐cash working capital
Cash flow from operating activities
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
527
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
CP 14–6 continued
2. (Appendix) Cash flow table:
Account
Balance
2020
2019
Dr(Cr)
Dr(Cr)
Change
Dr
Cash Effect
Cr
Inflow
$
528
Outflow
net cash flow
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
Activity
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
CP 14–7
1.
Calculation of cash received for sale of equipment:
2.
The journal entry to record the sale of the equipment would have been:
Date
Description
Debit
Credit
3.
Operating activities
Net income
Items not affecting cash flow
Cash flow from operating activities
Investing activities
Cash flow from investing activities
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
529
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
CP 14–8
1.
Adjustments to net income:
2.
The statement of changes in equity would show:
Common
shares
3.
Retained
earnings
Total
equity
Analysis of borrowings:
The journal entry to construct the SCF would be:
Date
530
Description
Debit
Credit
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
CP 14–8 continued
Cash used by financing activities:
4. (Appendix) Cash flow table:
Account
Balance
2020
2019
Dr(Cr)
Dr(Cr)
Change
Dr
Cash Effect
Cr
Inflow
$
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
Outflow
Activity
net cash flow
531
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
CP 14–9
1. Dividends paid:
Retained earnings at January 1, 2020
The journal entry to construct the SCF would be
Date
Description
Debit
Credit
2. Construct the SCF:
Step 1: Convert net income to cash flow from operations
a. Net income to be added on SCF
b. Depreciation to be added back
c. Losses to be added back
Gains to be deducted
d. Analysis of changes in non‐cash working capital accounts:
2020
Dr. (Cr.)
2019
Dr. (Cr.)
Change
Debit
(Credit)
Non‐cash current assets
Non‐cash current liabilities
532
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
CP 14–9 continued
Journal entries to record operating activity effects on the SCF:
Date
Description
Debit
Credit
Analysis
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
533
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
CP 14–9 continued
Step 2: Record investing activities
Analysis of changes in long‐term assets accounts:
2020
Dr. (Cr.)
2019
Dr. (Cr.)
Change
Debit
(Credit)
Long‐term assets
Equipment sale:
Cost (given)
Acc. dep’n (derived)
Carrying amount
Proceeds (given)
Loss (gain) on sale (given)
534
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
CP 14–9 continued
Journal entries to record investing activity effects on the SCF:
Date
Description
Debit
Credit
Analysis
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
535
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
CP 14–9 continued
Step 3: Record non‐current liabilities and shareholders’ equity account
activities
Analysis of changes in non‐current liabilities and shareholders’ equity
accounts:
2020
Dr. (Cr.)
Change
Debit
(Credit)
2019
Dr. (Cr.)
Non‐current liabilities
Shareholders’ equity
Journal entries to record financing activity effects on the SCF:
Date
Description
Debit
Credit
Analysis
536
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
CP 14–9 continued
2. Statement of cash flows:
Glacier Corporation
Statement of Cash Flows
For the Year Ended December 31, 2020
Operating activities
Net income
Items not affecting cash flow
Cash flow from operating activities
Investing activities
Cash flow used by investing activities
Financing activities
Cash flow from financing activities
Net increase in cash
Cash at beginning of year
Cash at end of year
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
537
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
CP 14–9 continued
3.
Account
Analysis:
4. (Appendix) Cash flow table:
Balance
Change
2020
2019
Dr(Cr)
Dr(Cr)
Dr
Cr
Cash Effect
Inflow
Outflow
$
538
Activity
net cash flow
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
CP 14–9 continued
The journal entry to record the sale of the land would be:
Date
Description
Debit
Credit
Debit
Credit
Calculation of cost of equipment sold :
The journal entry to record the disposal of machinery would be:
Date
Description
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
539
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–1
1. Journal entry to record disposal of equipment:
Date
Description
Debit
Credit
Analysis
2. a. Cash flow from operating activities:
Net income
Items not affecting cash flow
Cash flow from operating activities
b. Cash flow from investing activities:
Cash flow from investing activities
540
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–2
1. Construct the SCF:
Step 1: Convert net income to cash flow from operations
a. Net income to be added on SCF
b. Depreciation to be added back
c. Losses to be added back
Gains to be deducted
d. Analysis of changes in non‐cash working capital accounts:
2020
Dr. (Cr.)
2019
Dr. (Cr.)
Change
Debit
(Credit)
Non‐cash current liabilities
Journal entries to record effects on SCF:
Date
Description
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
Debit
Credit
541
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–2 continued
Operating activities:
Net income
Changes in non‐cash working capital
Cash flow from operating activities
2. (Appendix) Cash flow table:
Account
Balance
2020
2019
Dr(Cr)
Dr(Cr)
Change
Dr
Cash Effect
Cr
Inflow
$
542
Outflow
net cash flow
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
Activity
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–2 continued
Revised cash flow from operating activities:
Income before income taxes
Items not affecting cash flow
Cash flow from operating activities
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
543
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–3
1. Depreciation adjusting entry:
Date
Description
Debit
Credit
Description
Debit
Credit
Analysis
2. Purchase of machinery:
Date
Analysis
544
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–3 continued
3.
Statement of Cash Flows
For the Year Ended December 31, 2020
Operating activities
Item not affecting cash flow
Cash flow from operating activities
Investing activities
Net decrease in cash
Cash at beginning of year
Cash at end of year
4. (Appendix) Cash flow table:
Account
Balance
2020
2019
Dr(Cr)
Dr(Cr)
Change
Dr
Cash Effect
Cr
Inflow
$
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
Outflow
Activity
net cash flow
545
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–4
1.
Hubris Corporation
Statement of Cash Flows
For the Year Ended December 31, 2020
Operating activities
Items not affecting cash flow
Cash flow from operating activities
Financing activities
Cash flow from financing activities
Net increase in cash
Cash at beginning of year*
Cash at end of year
*Calculation of cash on hand at beginning of year:
Cash at beginning of year (derived)
Change in cash
Cash at end of year (given)
546
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–4 continued
2. (Appendix) Partial cash flow table:
Account
Balance
2020
2019
Dr(Cr)
Dr(Cr)
Change
Dr
Cash Effect
Cr
Inflow
$
Outflow
Activity
net cash flow
Notes (if any)
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
547
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–5
1.
Wheaton Co. Ltd.
Statement of Cash Flows
For the Year Ended December 31, 2020
Operating activities
Items not affecting cash flow
Cash flow from operating activities
Investing activities
Financing activities
Cash flow from financing activities
Net increase in cash
Cash at beginning of year
Cash at end of year
Notes:
548
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–5 continued
2. Analysis:
3. (Appendix) Partial cash flow table:
Account
Balance
2020
2019
Dr(Cr)
Dr(Cr)
Change
Dr
Cash Effect
Cr
Inflow
$
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
Outflow
Activity
net cash flow
549
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–5 continued
Notes (if any)
The revised operating activities section would show:
Operating activities
Items not affecting cash flow
Cash flow from operating activities
550
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–6
1. Cash flow from operating activities:
Step 1: Convert net income to cash flow from operations
a. Net income to be added on SCF
b. Depreciation to be added back
c. Losses to be added back
Gains to be deducted
d. Analysis of changes in non‐cash working capital accounts:
2020
Dr. (Cr.)
2019
Dr. (Cr.)
Change
Debit
(Credit)
Non‐cash current assets
Non‐cash current liabilities
Journal entries to record SCF effects:
Date
Description
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
Debit
Credit
551
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–6 continued
Step 2: Record investing activities
Analysis of changes in long‐term assets accounts:
2020
Dr. (Cr.)
2019
Dr. (Cr.)
Change
Debit
(Credit)
Long‐term assets
The journal entries to record the land transactions would be:
Date
Description
Debit
Credit
Analysis
552
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–6 continued
Changes in Equipment account:
Bal. at Jan. 1 (given)
Additions for cash (given)
Additions for shares (given)
Bal. at Dec. 31 (given)
Analysis
The journal entries to record the equipment transactions would be:
Date
Description
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
Debit
Credit
553
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–6 continued
Step 3: Record non‐current liabilities and shareholders’ equity account
activities
Analysis of changes in non‐current liabilities and shareholders’ equity
accounts:
2020
Dr. (Cr.)
2019
Dr. (Cr.)
Change
Debit
(Credit)
Non‐current liabilities and
dividends payable
Shareholders’ equity
Journal entries to record borrowing transaction effects on the SCF:
Date
Description
Debit
Credit
Analysis
554
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–6 continued
Changes in Common Shares account:
Bal. at Jan. 1 (given)
Shares for building (given)
Additional shares (derived)
Bal. at Dec. 31 (given)
Analysis
Journal entries to record common share transaction effects on the SCF:
Date
Description
Debit
Credit
Changes in Retained Earnings account:
Bal. at Jan. 1 (given)
Bal. at Dec. 31 (given)
Analysis
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
555
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–6 continued
Journal entries to record retained earnings transaction effects on the
SCF:
Date
556
Description
Debit
Credit
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–6 continued
Step 4: Calculate the net change in cash and ending cash balance, and prepare
the statement of cash flows
Operating activities
Items not affecting cash flow
Cash flow from (used by) operating activities
Investing activities
Cash flow from (used by) investing activities
Financing activities
Cash flow from (used by) financing activities
Net increase in cash and cash at end of year
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
557
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–6 continued
2. Analysis:
558
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–6 continued
3. (Appendix) Cash flow table:
Account
Balance
2020
2019
Dr(Cr)
Dr(Cr)
Change
Dr
Cash Effect
Cr
Inflow
Outflow
$
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
Activity
net cash flow
559
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–6 continued
Notes (if any)
560
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–6 continued
Revised operating activities section of SCF:
Items not affecting cash flow
Net changes in non‐cash working capital
Cash flow used by operating activities
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
561
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–7
1. Construct the SCF:
Step 1: Convert net income to cash flow from operations
a. Net income to be added on SCF
b. Depreciation to be added back
Amortization to be added back
c. Losses to be added back
Gains to be deducted
d. Analysis of changes in non‐cash working capital accounts:
2020
Dr. (Cr.)
2019
Dr. (Cr.)
Change
Debit
(Credit)
Non‐cash current assets
Non‐cash current liabilities
562
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–7 continued
Journal entries to record SCF effects:
Date
Description
Debit
Credit
Step 2: Record investing activities
Analysis of changes in long‐term assets accounts:
2020
Dr. (Cr.)
2019
Dr. (Cr.)
Change
Debit
(Credit)
Long‐term assets
Analysis of land sale:
Cost of land
Cash proceeds
Loss (gain) on disposal
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
563
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–7 continued
Journal entry to record land sale:
Date
Description
Debit
Credit
Debit
Credit
Analysis
Journal entry to record building transactions:
Date
Description
Changes in Machinery account:
Bal. at Jan. 1 (given)
Purchase for part loan (given)
Purchase for shares (given)
Disposal
Bal. at Dec. 31 (given)
Analysis
Analysis of machinery disposal:
Bal. at Jan
Cash proceeds
Loss (gain) on disposal
564
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–7 continued
Journal entry to record machinery transactions:
Date
Description
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
Debit
Credit
565
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–7 continued
Step 3: Record non‐current liabilities and shareholders’ equity account
activities
Analysis of changes in non‐current liabilities and shareholders’ equity
accounts:
2020
Dr. (Cr.)
2019
Dr. (Cr.)
Change
Debit
(Credit)
Non‐current liabilities
Shareholders’ equity
Changes in Borrowings account:
Bal. at Jan. 1 (given)
Proceeds from mach. finance (given)
Repayments (derived)
Bal. at Dec. 31 (given)
Analysis
Journal entries to record borrowing transactions effects on the SCF:
Date
566
Description
Debit
Credit
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–7 continued
Changes in Common Shares account:
Bal. at Jan. 1 (given)
Shares issued for machine (given)
Additional shares issued (derived)
Bal. at Dec. 31 (given)
Analysis
Journal entries to record common shares transactions effects on the
SCF:
Date
Description
Debit
Credit
Changes in Retained Earnings account:
Bal. at Jan. 1 (given)
Net income (given)
Dividends declared (given)
Bal. at Dec. 31 (given)
Analysis
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
567
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–7 continued
Journal entries to record dividends paid on the SCF:
Date
568
Description
Debit
Credit
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–7 continued
Step 4: Calculate the net change in cash and ending cash balance, and prepare
the statement of cash flows
Statement of Cash Flows
Operating activities
Items not affecting cash flow
Cash flow from (used by) operating activities
Investing activities
Cash flow from (used by) investing activities
Financing activities
Cash flow from (used by) financing activities
Net increase in cash
Cash at beginning of year
Cash at end of year
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
569
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–7 continued
2. Analysis:
570
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
ccount
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–7 continued
3. (Appendix) Cash flow table:
Balance
2020
2019
Dr(Cr)
Dr(Cr)
Change
Dr
Cash Effect
Cr
Inflow
$
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
Outflow
Activity
net cash flow
571
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–7 continued
Notes (if any)
572
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–7 continued
Revised operating activities section of the SCF :
Operating activities
Items not affecting cash flow
Cash flow from (used by) operating activities
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
573
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–8
1a. Construct the 2022 SCF:
Step 1: Convert net income to cash flow from operations
a. Net income to be added on SCF
b. Depreciation to be added back
Amortization to be added back
c. Losses to be added back
Gains to be deducted
d. Analysis of changes in non‐cash working capital accounts:
2022
Dr. (Cr.)
2021
Dr. (Cr.)
Change
Debit
(Credit)
Non‐cash current assets
Non‐cash current liabilities
574
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–8 continued
Journal entries to record operating activity effects on the SCF:
Date
Description
Debit
Credit
Analysis
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
575
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–8 continued
Step 2: Record investing activities
Analysis of changes in long‐term assets accounts:
2022
Dr. (Cr.)
2021
Dr. (Cr.)
Change
Debit
(Credit)
Long‐term assets
Equipment sale:
Cost (given)
Acc. dep’n (derived)
Carrying amount
Proceeds (given)
Loss (gain) on sale
(given)
576
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–8 continued
Journal entries to record investing activity effects on the SCF:
Date
Description
Debit
Credit
Analysis
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
577
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–8 continued
Step 3: Record non‐current liabilities and shareholders’ equity account
activities
Analysis of changes in non‐current liabilities and shareholders’ equity
accounts:
2022
Dr. (Cr.)
Change
Debit
(Credit)
2021
Dr. (Cr.)
Non‐current liabilities
Shareholders’ equity
Journal entries to record financing activity effects on the SCF:
Date
Description
Debit
Credit
Analysis
578
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–8 continued
Step 4: Calculate the net change in cash and ending cash balance, and prepare
the statement of cash flows
Operating activities
Items not affecting cash flow
Cash flow from (used by) operating activities
Investing activities
Cash flow from (used by) investing activities
Financing activities
Cash flow from (used by) financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Represented by
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
579
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–8 continued
1b. Construct the 2023 SCF:
Step 1: Convert net income to cash flow from operations
a. Net income to be added on SCF
b. Depreciation to be added back
c. Losses to be added back
Gains to be deducted
d. Analysis of changes in non‐cash working capital accounts:
2023
Dr. (Cr.)
Change
Debit
(Credit)
2022
Dr. (Cr.)
Non‐cash current assets
Non‐cash current liabilities
Journal entries to record operating activity effects on the SCF:
Date
580
Description
Debit
Credit
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–8 continued
Analysis
Step 2: Record investing activities
Analysis of changes in long‐term assets accounts:
2023
Dr. (Cr.)
2022
Dr. (Cr.)
Change
Debit
(Credit)
Long‐term assets
Equipment sale:
Cost (given)
Acc. dep’n (derived)
Carrying amount
Proceeds (given)
Loss (gain) on sale
(given)
CHAPTER THIRTEEN / Financial Statement Analysis Version 3.1
581
CHAPTER FOURTEEN
The Statement of Cash Flows
Name
P 14–8 continued
Journal entries to record investing activity effects on the SCF:
Date
Description
Debit
Credit
Analysis
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Step 3: Record non‐current liabilities and shareholders’ equity account
activities
2023
Dr. (Cr.)
2022
Dr. (Cr.)
Change
Debit
(Credit)
Non‐current liabilities
Shareholders’ equity
Journal entries to record financing activity effects on the SCF:
Date
Description
Debit
Credit
Analysis
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Step 4: Calculate the net change in cash and ending cash balance, and prepare
the statement of cash flows
Operating activities
Items not affecting cash flow
Cash flow from (used by) operating activities
Investing activities
Cash flow from (used by) investing activities
Financing activities
Cash flow from (used by) financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Represented by
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2. Analysis
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3.a. (Appendix) Cash flow table for the year ended December 31, 2022 ($000s)
Account
Balance
2022
2021
Dr(Cr)
Change
Dr
Cash Effect
Cr
Inflow
$
Outflow
net cash flow
Notes (if any)
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3.b. Cash flow table for the year ended December 31, 2023 ($000s):
Account
Balance
2023
2022
Dr(Cr)
Dr(Cr)
Change
Dr
Cash Effect
Cr
Inflow
$
Outflow
net cash flow
Notes (if any)
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Revised operating activities section of the SCF:
Statement of Cash Flows
Operating activities
Items not affecting cash flow
Cash flow from (used by) operating activities
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Name
Copyright © 2018 David Annand
Published by David Annand
Box 308, Rochester AB T0G 1Z0
ISBN 978‐0‐9953266‐2‐0
Library and Archives Canada Cataloguing in Publication
Annand, David, 1954–
This student workbook is licensed under a Creative
Commons License, Attribution–Non‐commercial–Share
Alike 4.0 Canada: see www.creativecommons.org. This
material may be reproduced for non‐commercial purposes
and changes may be used by others provided that credit is
given to the original author.
To obtain permission for uses beyond those outlined in the
Creative Commons license, please contact David Annand,
at [email protected]
Latest version available at
http://business.athabascau.ca/faculty/david‐annand‐edd/
Please forward suggested changes to
[email protected]
Version 3.1
July 31, 2018
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