List of Check Figures and Solution Hints to accompany Phillips/Libby/Libby: Fundamentals of
Financial Accounting, 5e
CHAPTER 1
Mini-Exercises
M1-1
M1-2
M1-3
M1-4
M1-5
M1-6
M1-7
M1-8
M1-9
M1-10
M1-11
M1-12
M1-13
M1-14
M1-15
M1-16
(5) IFRS = International Financial Reporting
Standards
(2) F, (8) G
(2) C, (8) G
(6) B/S, SE
(3) B/S, A
(8) SE, B/S
(10) A, B/S
(3) R, I/S
(4) A
(5) (I)
(4) (F)
Retained earnings 12/31/14 = $25,000
(c) $256, (f) $99, (i) $85
(c) $80, (f) $60, (i) $700
(a) $(300), (b) $20, (c) $3,700
(3) Total Assets = $18,600, (4) Financed
primarily by liabilities (liabilities exceed
stockholders’ equity)
Exercises
E1-1
E1-2
E1-3
E1-4
E1-5
E1-6
E1-7
E1-8
E1-9
E1-10
E1-11
E1-12
(c) $3,500 + $1,300 – $500 = $4,300
(d) $3,200 + $15,700 – $7,200 - $5,300 = $6,400
(1) Total Liabilities = $403,500 (2) Total
Stockholders’ Equity = $858,600
(1) Total Assets = $122,400; (4) $14,550
(f) Dividends, SE
(1) Total Expenses = $706,900
Total Expenses = $130,825
(A) Net Income = $28,000; (C) Stockholders’
Equity = $78,000
Net Income is $40,500
(2) Net Income = $6,000
(3) F
(4) (O)
Coached Problems
CP1-1
CP1-2
CP1-3
CP1-4
(1) Net Income = $21,950;
(3) Total Assets = $115,500
(3) Stockholders’ Equity = $84,030
(1) Net Income = $34,800; (3) Total Assets =
$2,253,800
(1) Stockholders; (2) Greater amount of Retained
Earnings
Group Problems
PA1-1
PA1-2
PA1-3
PA1-4
PB1-1
PB1-2
PB1-3
PB1-4
(1) Net income = $23,450; (3) Total assets =
$113,850
(1) Mainly financed by stockholders’ equity
(1) Net Income = $23,100 (3) Total Assets =
$286,500 (4) Cash used in financing activities
= $(2,500)
(1) Relies more on stockholders (4) Primarily
from its current year earnings
(1) Net Income = $25,150;
(3) Total Assets
= $118,400
(3) Company was profitable
(1) Net Income = $80,000 (3) Total Assets =
$925,000 (4) Cash used in financing activities
= $(126,000)
(1) Increase cash balance by $5,000, SCF
Skills Development Cases
S1-1
S1-2
S1-3
S1-4
S1-5
S1-6
S1-7
(1)
(2) Lowe’s revenue of $53,417 (million) was
lower than the $78,812 (million) reported by
Home Depot
The solutions to this case will depend on the
company and/or accounting period selected for
analysis.
(1) Separate entity concept
(1) An independent audit is an absolute must
(1) Based on historical cost, Ashley’s Net Worth
= $1,550. Based on fair value, Ashley’s Net
Worth = $2,150
Total Assets = $3,754; Net income = $51
Continuing Case
(1) Net income = $2,400;
CC-1
$73,930
(3) Total assets =
CHAPTER 2
Mini-Exercises
M2-1
M2-2
M2-3
M2-4
M2-5
M2-6
M2-7
M2-8
M2-9
M2-10
Stockholders’ Equity: Debits Decreases,
Credits Increases
Assets: Increases with Debits, Decreased with
Credits
(2) C
(4) NCA, (11) SE
(2) CL, credit, (7) SE, credit
(1) CL, credit, (6) NCA, debit
(2) No, (6) Yes
(1)Yes, (3) No, lacks exchange
(b) Cash (+A) +$4,630, Common Stock
(+SE) +$4,630
(b) dr. Cash (+A) $4,630 cr. Common Stock
(+SE) $4,630
List of Check Figures and Solution Hints to accompany Phillips/Libby/Libby: Fundamentals of
Financial Accounting, 5e
M2-11
M2-12
M2-13
M2-14
M2-15
M2-16
M2-17
M2-18
M2-19
M2-20
M2-21
M2-22
M2-23
M2-24
M2-25
(a) Debit (left side) Cash account for $3,940;
Credit (right side) Notes Payable account for
$3,940
Ending balance in cash account = $8,070
debit, Total current assets = $9,070
(a) dr. Cash (+A) $70,000 cr. Common Stock
(+SE) $70,000
Total Assets = $104,000
(d) dr. Accounts Payable (-L) $1,500 cr. Cash
(-A) $1,500
Total Assets = $5,500
(c) dr. Cash (+A) $400 cr. Accounts
Receivable (-A) $400
Total Assets = $71,000
(e) dr. Equipment (+A) $2,200 cr. Cash (-A)
$1,000 cr. Note Payable (+L) $1,200
Total Assets = -$5,800
Yes, Current ratio 1.5
(1) Total current liabilities = $1,000 million,
Total assets = $14,900 million (3) Current
ratio 10.5
Current ratio = 2.0
(c) Increase to 2.33
(b) Increase to 2.11
Exercises
E2-1
E2-2
E2-3
E2-4
E2-5
E2-6
E2-7
E2-8
E2-9
E2-10
E2-11
E2-12
E2-13
E2-14
E2-15
(1) E, (10) D
(2) Applying cost principle; $21,000 and
$50,000 for truck and land respectively are
recorded as assets.
(4) CA debit, (10) CL credit
(a) Cash (+A) $10,000, Common Stock (+SE)
$10,000
(1) (c) No effect
(b) dr. Cash (+A) $7,000 cr. Note Payable (+L)
$7,000
(1) (a) dr. Equipment (+A) $216 cr. Cash (-A)
$211 cr. Note Payable (long-term) (+L) $5.0
(1) Ending cash balance = $57,000 debit, (2)
Liabilities = $9,000
(1) 2 Borrowed $50,000 cash and signed a Note
Payable (2) Cash (Ending) = $62,000 (3)
Liabilities
(1) (b) Equipment (+A) +$30,000, Cash (-A) $10,000, Note payable (+L) +$20,000 (2) (b) dr.
Equipment (+A) $30,000 cr. Cash (-A) $10,000
cr. Note Payable (short-term) (+L) $20,000 (3)
Ending Assets = $257,000
(3) Total Current Assets = $70,000
(1) (e) Not a transaction (3) Cash balance End. =
$36,000 (4) Total Assets = $70,000
(c) Used cash to purchase supplies costing
$1,500
(1) 4.36 at 9/30/13, 4.45 at 12/31/12 (3) Current
Ratio 4.49
(3) Total Assets = $47,900 (4) Complying
Coached Problems
CP2-1
CP2-2
CP2-3
(2) Total Cash = $30,000 (4) (c) $126,000 $86,000 = $40,000 (5) Liabilities
(1) (b) Cash (+A) $30,000, Notes Payable (+L)
$30,000, (2) (b) dr. Cash (+A) $30,000 cr. Notes
Payable (+L) $30,000,
(3) Total Cash = $105,000 debit, Total Notes
Payable = $147,000 credit
(5)Total assets = $669,000
(3) Ending cash balance = $84,000 dr.(5) Total
Assets = $432,000
Group A & B Problems
PA2-1
PA2-2
PA2-3
PB2-1
PB2-2
PB2-3
(1) Ending Cash = $10,000, Ending Notes
Payable = $147,000 (3) (c) $747,000 $347,000 = $400,000
(1) (e) Supplies (+A) $30,000, Accounts
payable (+L) $30,000 (2) (b) dr. Cash (+A)
$100,000 cr. Note Payable (long-term) (+L)
$100,000 (3) Ending cash = $254,000 (4)
Total Assets = $1,091,000 (6) Stockholders’
equity
(1) (e) No effect (2) (c) dr. Equipment (+A)
$170 cr. Cash (-A) $80 cr. Note payable (+L)
$90 (3) Ending cash $26 debit (4) Event (e) is
not a transaction (5) Total Assets = $757 (6)
Liabilities
1) Ending Cash = $87,000, Ending Notes
Payable = $218,000; (3) (b) $1,780,000 +
$218,000 = $1,998,000; (4) Liabilities
(1) (d) Equipment (+A) $90,000, Cash (-A)
$(90,000), (2) (c) dr. Buildings (+A)
$166,000 cr. Cash (-A) $66,000 cr. Notes
Payable (long-term) (+L) $100,000, (3)
Ending Cash = $594,000 debit, (5) Total
Assets = $2,041,000
(1) (e) No effect (2) (c) dr. Equipment (+A)
$13,500 cr. Cash (-A) $4,000 cr. Note Payable
(+L) $9,500 (3) Ending cash = $6,760 million
debit (5) Total Assets = $30,230 million (6)
Liabilities
Skills Development Cases
S2-1
S2-2
S2-4
S2-5
S2-6
S2-7
(3) B
(1) Lowe’s Total Assets = $32,732 million (3)
Reported inventories represent their original
cost. Cost principle (4) Liabilities. Lowe’s
stockholders have less risk
(1) Assets = $15,000
(3) Conservatism
Inclusion of the owner’s personal residence as a
business asset makes business riskier.
Ending Cash = $19,300 debit, Ending Property
and Equipment = $58,800 debit
Continuing Case
CC2-1 (1) (b) dr. Land (+A) $9,000 cr. Cash (-A) $2,000
cr. Notes Payable (long-term) (+L) $7,000, (2)
Ending Cash = $59,650 debit, (3) Total Assets =
$87,650, (4) Current ratio = 93.3
List of Check Figures and Solution Hints to accompany Phillips/Libby/Libby: Fundamentals of
Financial Accounting, 5e
E3-10
CHAPTER 3
Mini-Exercises
M3-1
M3-2
M3-3
M3-4
M3-5
M3-6
M3-7
M3-8
M3-9
M3-10
M3-11
M3-12
M3-13
M3-14
M3-15
M3-16
M3-17
M3-18
M3-19
M3-20
M3-21
Cash income = $6,400, Accrual income =
$9,200
(b) $250
(c) $5,475
(b) dr. Accounts receivable (+A) $250 (c) cr.
Service Revenue (+R,+SE) $250
(c) dr. Salaries and wages Expense $5,475, cr.
Cash $5,475
(b) Assets +$250, Liabilities = NE, SE
(Service revenue) (+R) +$250
(a) Assets -$1,500, Liabilities = NE, SE
(Repairs and maintenance expense (+E) $1,500
Net income = $2,775
(e) $125
(c) $800
(d) dr. Cash (+A) $2,250 cr. Unearned
revenue (+L) $2,250
(b) dr. Accounts payable (-L) $1,750 cr. Cash
(-A) $1,750
(a) dr. Cash (+A) $25,000 cr. Common Stock
(+SE) $25,000
(e) dr. Accounts receivable (+A) $180 cr.
Service revenue (+R, +SE) $180
(e) dr. Supplies (+A) $2,500 cr. Donation
revenue (+R, +SE) $2,500
(b) dr. Accounts receivable (+A) $2,000 cr.
Service Revenue (+R, +SE) $2,000
(a) Assets +$15,000, Liabilities = NE, SE
(Service revenue) (+R) +$15,000
(h) Assets = NE, Liabilities = +$800, SE
(Utilities expense) (+E) - $800
Net Income = $9,575
Net Income = $31,120, Total assets =
$155,350
Net Income = $530
E3-11
E3-12
E3-13
E3-14
E3-15
E3-16
E3-17
E3-18
E3-19
E3-20
E3-21
Coached Problems
CP3-1
CP3-2
CP3-3
CP3-4
Exercises
E3-1
E3-2
E3-3
E3-4
E3-5
E3-6
E3-7
E3-8
E3-9
(3) C
(2) A
(d) $100,000 (=1,000 installations x $100 per
installation)
(c) $4,000,000
(c) $3,000
(a) Expense (and liability) recorded in
December.
(b) Assets = +$5,000, Liabilities = +$5,000, SE
= NE
(d) Assets increase and decrease $18,600.
Liabilities = NE, SE = NE
(a) dr. Cash (+A) $80,000 cr. Notes payable
(short-term) (+L) $80,000
(b) dr. Equipment (+A) $20,000 cr. Cash (-A)
$20,000
2/4 dr. Cash (+A) $800 cr. Unearned Revenue
(+L) $800
(2) (c) dr. Cash (+A) $14,500 cr. Service
Revenue (+R, +SE) $14,500
Total Debits on unadjusted trial balance =
$89,150, Total Credits on unadjusted trial
balance = $89,150
OTT (c) dr. Accounts Payable $500 cr. Cash
$500, NN (c) dr. Cash $500 cr. Accounts
Receivable $500
(1) Accounts receivable increases with sales to
customers on account and decreases with cash
collections from customers (2) Prepaid Rent $42
credit
(f) Assets = NE, Liabilities (Accounts payable)
+$1,250, SE (+Utilities expense) -$1,250
(e) dr. Supplies (+A) +$1,000 cr. Accounts
payable (+L) $1,000
Ending Cash balance = $45,500 debit
Total Debits on unadjusted trial balance =
$81,950
(1) (g) Paid $3,000 of the accounts payable
balance, (2) Net income = $2,540, Total assets =
$15,800
(f) Utilities expense E + Debit, Utilities payable
L + Credit
(h) Debit: 12, Credit: 3
5/31 dr. Prepaid insurance (+A) $2,400 cr. Cash
(-A) $2,400
(2) Ending Cash balance = $13,910 debit
(3) Total Debits on unadjusted trial balance =
$27,800, Total Credits on unadjusted trial balance
= $27,800
(2) 9/13 dr. Supplies (+A) $200 cr. Accounts
payable (+L) $200 (3) Preliminary net income of
$9,410 indicates LTC is profitable (4)
Adjustments will be required to record wages
earned but not yet recorded in September and
supplies used in September
Group Problems
PA3-1
PA3-2
PA3-3
PA3-4
PB3-1
(d) Debit: 11, Credit: 5
4/8 dr. Advertising Expense (+E, -SE) $400
cr. Cash (-A) $400
(2) Ending cash balance = $124,400, (3) Total
Debits and Credits = $304,000
(2) 9/22 dr. Cash (+A) $6,000 dr. Accounts
receivable (+A) $2,000 cr. Service revenue
(+R, +SE) $8,000 (3) Preliminary net income
$2,000 (4) Adjustments will be required to
record salaries and wages earned but not yet
recorded in September and supplies used in
September
(d) Debit: 3, Credit: 12
List of Check Figures and Solution Hints to accompany Phillips/Libby/Libby: Fundamentals of
Financial Accounting, 5e
PB3-2
PB3-3
PB3-4
c) dr. Equipment (+A) $82,000 cr. Notes
Payable (long-term) (+L) $82,000
(2) Ending Cash balance = $23,500
(3) Total Debits on unadjusted trial balance =
$68,100, Total Credits on unadjusted trial
balance = $68,100
(2) 12/17 dr. Cash (+A) $200 cr. Unearned
Revenue (+L) $200 (3)Adjustments will be
required to record cost of supplies used in
December and income taxes
Comprehensive Problem
C3-1
(2) (1) dr. Cash (+A) $50,000, cr. Accounts
Receivable (-A) $50,000 (3) Ending cash
balance = $1,431,500 (5) Net Income $1,650
(8) Net Profit Margin = 0.4%
M4-4
M4-5
M4-6
M4-7
M4-8
M4-9
M4-10
M4-11
Skills Development Cases
S3-1
S3-2
S3-4
S3-5
S3-6
S3-7
(1) C
(1) Lowe’s sales revenue increased by $2,896
million or 5.7% (2) Lowe’s Cost of sales which
represents the cost of merchandise sold to
customers increased by $1,747 million or 5.3%
(3) Current year net income will be higher than it
should be since some expenses were avoided by
recording them as assets. The following year’s
net income will be lower when those assets are
expensed
You should not comply with Mr. Lynch’s
request since to act in ways that benefit
management to the detriment of stockholders is
inappropriate and could be considered fraud
(1)(d) Purchased land for $18,000; $14,000 was
paid in cash and a note was signed for the
remainder
(2) Total Debits on unadjusted trial balance =
$136,000, Total Credits on unadjusted trial
balance = $136,000
Ending Cash balance = $9,555 debit, Total
Debits on unadjusted trial balance = $11,350
Continuing Case
CC-3
May 4, No transaction,
May 19, dr. Cash (+A) $1,900 cr. Unearned
Revenue (+L) $1,900
M4-12
M4-13
M4-14
M4-15
M4-16
M4-17
M4-18
M4-19
M4-20
M4-21
M4-22
M4-23
M4-24
CHAPTER 4
Mini-Exercises
M4-1
M4-2
M4-3
(4) B,F
(3) B,F
(5) B
M4-25
M4-26
(2) dr. Interest receivable (+A) $250; cr.
Interest revenue (+R +SE) $250
(a) Assets=NE, Liabilities (Unearned rent
revenue -$800, SE (Rent revenue) +$800
(b) dr. Insurance expense (+E, -SE) $50; cr.
Prepaid insurance (-A) $50
(c) Assets (Interest receivable) +$100,
Liabilities = NE, SE(Interest revenue (+R))
+$100
(c) dr. Interest receivable (+A) $100; cr.
Interest revenue (+R +SE) $100 ($100 =
1/12 x $1,200)
(b) Sept 30 dr. Cash (+A) $16,000 cr.
Unearned revenue (+L) $16,000 Oct 31 AJE
dr. Unearned revenue (-L) $8,000 cr.
Service revenue (+R, +SE) $8,000
(a) Dec 31 dr. Cash (+A) $12,000; cr.
Unearned revenue (+L) $12,000, Jan 31 AJE
dr. Unearned revenue (-L) $1,000; cr. Service
revenue (+R +SE) $1,000
(b) dr. Service revenue (-R,-SE) $1,000; cr.
Unearned revenue (+L) $1,000
Unearned revenue BS,CL, Cr.
Total debits = $6,200, Total credits = $6,200
Net income = $4,910
Ending Retained earnings balance = $5,610
Total assets = $17,930
After closing, all revenue, expense, and
dividends declared account balances should
be zero. Retained earnings should have been
credited for $4,910 which reflects the net
income in the first closing entry. In the
second closing entry, Retained earnings
should have been debited for $300 which
reflects the dividends declared.
Ending balance in the Supplies Expense
account after adjustment = $1,300 debit
Ending balance in the Accumulated
depreciation account after adjustment =
$6,000 credit
Ending balance in the Prepaid insurance
account after adjustment=$5,400 debit
Ending balance in the Unearned Revenue
account after adjustment=$2,500 credit
Ending balance in the Salaries and Wages
Expense account after adjustment = $21,200
debit
Ending balance in the Interest payable
account after adjustment = $500 credit
Ending balance in the Amortization Expense
account after adjustment = $5,000 debit
Total debits = $73,700, Cash = $5,000
(e) CJE: 12/31/16 dr. Retained Earnings (-SE)
$10,000; cr. Insurance Expense (-E) $10,000
Exercises
E4-1
(1) Total Debits = $3,297,390
List of Check Figures and Solution Hints to accompany Phillips/Libby/Libby: Fundamentals of
Financial Accounting, 5e
E4-2
E4-3
E4-4
E4-5
E4-6
E4-7
E4-8
E4-9
E4-10
E4-11
E4-12
E4-13
E4-14
E4-15
E4-16
E4-17
E4-18
E4-19
(3) Ending balance of Retained Earnings,
5/31/2013 = $17,310
(c) Sept 1 No journal entry,
Sept 30 dr. Accounts Receivable (+A) $2,000;
cr. Rent Revenue (+R +SE) $2,000
(2) Both transactions are accruals
(b) October 31: dr. Interest Receivable (+A)
$3,000 cr. Interest Revenue (+R +SE) $3,000
(1) Insurance expense on the income statement =
$3,600 ((12/24) x $7,200)
(b) dr. Supplies expense (+E –SE) $5,000 cr.
Supplies (-A) $5,000
(c) dr. Unearned Revenue (-L) $2,200; cr. Rent
Revenue (+R,+SE) $2,200
(c) Assets = NE, Liabilities (Unearned revenue) $2,200, Stockholders’ equity (Rent revenue)
+$2,200
(1) Salaries and Wages payable increase with a
credit for accrual of salaries and wages expense
for the period that are unpaid and decrease with a
debit when the salaries and wages are paid (2)
(b) debit $19,800 for wages paid
Income statement, Depreciation expense $30,000
(e) debit $1,000 (A) credit $1,000 (M)
Corrected net income = $4,620, Correct Total
assets = $82,000
(1) (c) dr. Depreciation expense (+E –SE)
$23,000 cr. Accumulated dep. – Equip. (+xA –
A) $23,000
(2) (d) dr. Income tax expense (+E,-SE) $390 cr.
Income tax payable (+L) $390 (3) Adj. trial bal.,
Total debits = $89,290
(1) (b) dr. Depreciation expense (+E –SE) $4 cr.
Accumulated depreciation (+xA –A) $4
(2) Adj. trial bal., Total debits = $189
Net income = $19, Ending Retained earnings =
$23, Total assets = $124
The closing entry should close revenue and
expense account balances to Retained earnings
(Retained earnings will get credited for $19)
(f) (1) Billed customers for advertising services,
(2) Assets (Accounts receivable) +$10,000,
Liabilities = NE, SE (Service revenue) +
$10,000
Coached Problems
CP4-1
CP4-2
CP4-3
(1) Retained earnings = $99,900, Total debits =
$582,400,
(2) Debit revenue accounts, credit expense
accounts, credit Retained Earnings for $15,900,
(3) Total credits = $272,700
(1)(g) Assets = NE, Liabilities (Income tax
payable) = +$9,000, SE (Income tax expense) = $9,000, (2) (b) dr. Unearned revenue (-L) $3,200
cr. Rent revenue (+R +SE) $3,200
(g) Assets = NE, Liabilities (Income tax payable)
+$9,000, SE (Income tax expense) -$9,000
CP4-4
(1) Net income = $13,000, (3) (d) dr. Interest
expense (+E –SE) $100; cr. Interest payable
(+L) $100, (4) Net income = $10,710
Group Problems
PA4-1
PA4-2
PA4-3
PA4-4
PB4-1
PB4-2
PB4-3
PB4-4
(1) Total debits = $10,400,
(2) debit revenue accounts, credit expense
accounts, credit Retained earnings $300, (3)
Total debits = $4,400
(1) (a) dr. Insurance expense (+E,-SE) $150;
cr. Prepaid insurance (-A) $150 (2) Without
adjusting entries, Net income would be
overstated by $5,950
(e) Assets = -$2,750, Liabilities = NE, SE
(Depreciation expense) = -$2,750, (g) Assets
= NE, Liabilities = +$9,000, SE (Income tax
expense = -$9,000 ($30,000 x .30)
(1) Net income = $9,700 (2) Salaries and
Wages payable on the balance sheet; Salaries
and Wages expense on the income statement,
(3) (d)dr. Salaries and Wages expense (+E,SE) $150; cr. Salaries and Wages payable
(+L) $150, (4) Net income = $,1470
(1) Total debits = $3,510, (2) debit revenue
account, credit expense account, credit
retained earnings $30, (3) Total debits =
$1,500
(1) (a) Assets (Accounts Receivable) =
+$2,000, Liabilities = NE, SE (Service
revenue) +$2,000, (2) (a) dr. Accounts
receivable (+A) $2,000; cr. Service revenue
(+R +SE) $2,000
(c) Assets = NE, Liabilities = +900, SE
(Salaries and Wages expense) -$900
(1) Net income = $6,600, (2) (2) Unearned
revenue on the balance sheet should be
decreased while Service revenue on the
income statement should be increased, (3) (b)
dr. Unearned revenue (-L) $500 cr. Service
revenue (+R +SE) $500, (4) Net income =
$4,760
Comprehensive Problems
C4-1
C4-2
C4-3
C4-4
(1) 1/31 dr. Income tax expense (+E, -SE) $525;
cr. Income tax payable (+L) $525, (3) Total
debits = $30,735, Net income = $2,975, Total
Assets = $23,610
(2) 9. dr. Salaries and Wages Expense (+E, -SE)
$85; cr. Cash (-A) $85, (3) Total debits $295, (5)
Total Credits = $327, (6) Net income = $23,
Total Assets = $168, (9) Current ratio 2.23
(2) (4) dr. Software (+A) $3, cr. Cash (-A) $3,
(3) Total debits $108 (5) Total credits $121, (6)
Net income = $5, Total Assets = $64, (9) Current
ratio 0.86
(2) (5) dr. Supplies (+A) $10, cr. Accounts
payable (+L) $10, (3) Total debits $122 (5) Total
credits $135, (6) Net income = $9, Total Assets
= $71, (8) Total debits = $79
List of Check Figures and Solution Hints to accompany Phillips/Libby/Libby: Fundamentals of
Financial Accounting, 5e
C4-5
C4-6
(1) (h) dr. Interest Expense (+E, –SE) $40, cr.
Interest Payable (+L) $40, (2) Net income = $
945, (3) Total assets = $ 13,560
(1) (5) dr. Cash (+A) $6,000, cr. Common Stock
(+SE) $6,000, (2) Total Debits = $70,200, (4)
Total credits = $74,250, (5) Net income =
$11,875, Total assets = $65,525
M5-2
M5-3
M5-4
M5-5
M5-6
M5-7
Skills Development Cases
S4-1
S4-2
S4-3
S4-4
S4-5
S4-6
S4-7
(2) D
(1) Home Depot had $865 million in Advertising
expense while Lowe’s had $811 million
Solutions vary depending on company and/or
accounting period selected
(1) Large adjustments are not necessarily
improper but are suspicious, especially when
they have a large impact on net income (2) To
capitalize an expense is to record it as an asset
rather than an expense (3) 1999 (Q4) dr. Bonus
payable (-L) $7.6 million cr. Bonus expense (E,+SE) $7.6 million
The change in estimated depreciation expense
will increase net income this year but since some
depreciation will now extend into next year, net
income will be reduced then
(1)(b) dr. Insurance expense (+E –SE) $2,000
cr. Prepaid insurance (-A) $2,000, (2) Corrected
net income = $10,950, Corrected total assets =
$67,800, (3) (a) Decrease net income by $27,050
Total debits = $267,301, Net income = $11,138,
Ending Retained earnings = $38,709, Total
assets = $96,786
Continuing Case
CC4-1 (1) (a) Deferral, (2) (f) dr. Cash (+A) $90 cr.
Unearned revenue (+L) $90, (3) (d) dr. Insurance
expense (+E –SE) $1,750 cr. Prepaid insurance (A) $1,750 (7/12 x $3,000)
M5-8
M5-9
M5-10
M5-11
M5-12
M5-13
M5-14
M5-15
M5-16
(5) E
(3) Restrict access
(4) B – Segregate duties
(b) Segregate duties - The accounting
department should not have access to and
responsibility for recording cash receipts
(1) C
(c) Restrict access – Any employee who
enters the lunch room could prepare
unauthorized checks by accessing the checksigning machine and checks
Reconciling Item (d) Interest earned of $5,
Bank statement NE, Company’s Books +
(d) dr. Cash $5, cr. Interest revenue $5
May 4 Check #3 $70
The May 31 bank reconciliation should
include a deposit in transit of $150 made on
May 30
Company's Books = Up-to-date cash balance
= $250
(2) dr. Accounts receivable $50, cr. Cash $50
(4) Yes
(B) dr. Supplies $40, cr. Cash $40
Cr. Cash 82
Exercises
E5-1
E5-2
E5-3
E5-4
E5-5
E5-6
E5-7
E5-8
E5-9
E5-10
(1) The control principle is segregation of duties
and the objective is to prevent or detect
unauthorized activities involving the company’s
assets.
(a) You didn’t ensure that adequate records (of
donations) were maintained, and (b) the failure
to issue receipts makes it difficult to know
whether you used the company’s (donated)
assets in an authorized manner.
(1) a. Establish responsibility
(1) d. Independently verify
(1) Company’s books up-to-date cash balance
$6,370, (4) Cash $6,670
(1) Company’s books up-to-date cash balance
$2,680, (4) Cash $3,080
Total current asset = $2,695
(1) Total Cash and Cash Equivalent = $30, (2)
Total assets = $380
(1) Jan. 1 dr. Petty Cash $100, cr. Cash 100, (2)
No Journal entry recorded
(1) Jan. 1 dr. Petty Cash $200, cr. Cash 200, (2)
No Journal entry recorded
Coached Problems
CP5-1
CHAPTER 5
Mini-Exercises
M5-1
(3) C
CP5-2
(1) (a) Strength, (d) Weakness, (2) (d) The
journal entry should be prepared after ensuring
the cash register receipt total equals the total on
the cash count sheet and the bank’s stamped
deposit slip.
(1) Company’s books up-to-date cash balance
$2,680, (4) Cash $6,875
List of Check Figures and Solution Hints to accompany Phillips/Libby/Libby: Fundamentals of
Financial Accounting, 5e
CP5-3
CP5-4
(1) Company’s books up-to-date cash balance
$20,290, (6) Cash $20,390
(1) (d) No Journal entry, (2) Cash and Cash
Equivalents = $1,900
Group Problems
PA5-1
PA5-2
PA5-3
PA5-4
PB5-1
PB5-2
PB5-3
PB5-4
(1) (a) Weakness, (b) Strength, (2) Supplies
should be safeguarded
(1) Company’s books up-to-date cash balance
$19,180, (4) Cash $19,230
(1) Company’s books up-to-date cash balance
$95,070, (6) Cash $95,370
(1) (i) dr. Supplies $125, dr. Office expenses
$30, cr. Cash $155, (2) Cash and Cash
Equivalents $1,250
(1) (d)Weakness (e) Strength
(1) Company’s books up-to-date cash balance
$37,240, (4) Cash $37,290
(3) Company’s books up-to-date cash balance
$122,930, (6) Cash $123,130
(1) (h) dr. Supplies $35, dr. Petty cash $100, cr.
Cash $135, (2) Cash and Cash Equivalents
$1,900
Comprehensive Problems
C5-1
(1) 1/31 dr. Cash $3,000; cr. Unearned revenues
$3,000 (3)Up-to-date cash balance $5,300, (6)
Total debits $49,365, (7) Net income $2,940,
Total assets = $37,100, (9) Net profit margin =
32.65%
on which decisions can be based. Honesty
should be more important than loyalty.
S5-6
Continuing Cases
CC5-1 (1) Oct 13 No journal entry, (2) Up-to-date cash
balance $5,480, (3) (f) dr. Accounts payable
$270, cr. Cash $270, (4) Cash and cash
equivalents at Dec 31 $5,600
CC5-2 (1) b
CHAPTER 6
Mini-Exercises
M6-1
M6-2
M6-3
M6-4
M6-5
M6-6
M6-7
M6-8
M6-9
M6-10
M6-11
M6-12
M6-13
M6-14
M6-15
Skills Development Cases
S5-1
S5-2
S5-3
S5-4
S5-5
(1) D
(1) Lowe’s reported less Cash and Cash
Equivalents than The Home Depot.
Solutions vary depending on company and/or
accounting period selected
(1) The article refers to asset misappropriation.
(4) The parties most directly affected by
inventory theft in this case are Famous
Footwear’s (1) managers, (2) employees, (3)
investors, (4) creditors, and (5) honest customers
(2) As an accounting assistant, your primary
responsibility is to provide reliable information
(1) Total approx. amount stolen = $4,820
M6-16
M6-17
M6-18
(3) RM
Shrinkage $2,000
(a) These items are not reported as The Knot’s
inventory because Emerald Bridal still owns
the goods.
Purchases for the third quarter totaled $1.3
billion.
Inventory Cost $22,014
(1) (C) dr. Accounts payable $1,200, cr.
Inventory $1,200
(a) Ending inventory $17,400, (b) Gross Profit
$15,000
Goss profit $940
Time of sale: dr. CGS $2,000, cr. Inventory
$2,000
If American Eagle were to ship as FOB
shipping point, then American Eagle would
record its revenues earlier
(b) dr. Cash $686, dr. Sales discounts $14, cr.
Accounts receivable $700
(b) Revised CGS $105,000, (d) Revised Gross
Profit $45,000
Net Income = $5,452
Gross profit percentage = 40.0%
Ziehart Pharmaceuticals; Gross profit
percentage = 67.4%; Candy Electronics Corp.
Gross profit percentage = 27.2%
2012 & 2011 Gross profit percentage = 66.2%
& 66.1% respectively
Gross profit percentage = 30.30%
Gross profit = $105,000, COGS = $195,000,
Ending inventory $85,000
Exercises
E6-1
E6-2
E6-3
E6-4
E6-5
Inventory, Financial statement: B/S, Type: MC
CGS = $1.6 Billion, Purchases = $3 billion
(b) CGS = $850, Shrinkages = 0 (D) Purchases =
600$, Shrinkage = $10
Shrinkage = $0.2 billion
(C) Purchases $400
List of Check Figures and Solution Hints to accompany Phillips/Libby/Libby: Fundamentals of
Financial Accounting, 5e
E6-6
E6-7
E6-8
E6-9
E6-10
E6-11
E6-12
E6-13
E6-14
E6-15
E6-16
E6-17
E6-18
E6-19
E6-20
E6-21
E6-22
E6-23
(C) Sales revenue = $600
Purchase discount = $24
Feb 28 dr. Inventory $350, cr. Accounts Payable
$350
Purchase discount $60
June 6 dr. Inventory $1,000, cr. Accounts
payable $1,000
(3) FOB shipping point
Sales discount $2
Jan 14 dr. Cash $98, dr. Sales discounts $2, cr.
Accounts receivable $100
Net sales = $8,850
July 23 dr. Cash $4,850, dr. Sales discounts
$150, cr. Accounts receivable $5,000
Sales Returns and Allowances -$600, Sales
Discounts -$162
Dec. 30 dr. Cash $4,000, cr. Accounts receivable
4,000.
Sales Returns & Allow. July 20 + $150
(4) Gross profit percentage = 36.2%
Case C, Sales Revenue $6,195, Gross Profit
$520
(1) Net Income = $33,200, (2) Gross profit
percentage = 40.0%, (3) Increase in gross profit
(1) Net income = $80 Million, (2) Gross profit %
= 38.4%
(b) CGS = $1,875
PB6-3
PB6-4
PB6-5
Comprehensive Problems
C6-1
CP6-2
CP6-3
CP6-4
CP6-5
(1) (a)+230,000, (2) (a) dr. Inventory $230,000,
cr. Accounts payable $230,000
((1) c. Net sales -$4,500, Gross profit $ -4,500,
(3) (b) dr. Sales Returns and Allowances $5,000,
cr. Accounts Receivable $5,000
Gross profit = $131,130, (2) Gross profit
percentage = 45.0%, (4) Gross profit percentage
= 43.8%
(1) Gross profit = $69,000, (2) Net income =
$22,400
(2) Perpetual inventory system Jan 31 dr. CGS
$100, cr. Inventory $100
Group Problems
PA6-1
PA6-2
PA6-3
PA6-4
PA6-5
PB6-1
PB6-2
(1) (a) +$550,000, (c) -$10,800
(1) (c) Sales Discounts = +$10,800
(1) Net sales = $60,340, (2) Gross profit
percentage = 45.0%, (4) Gross profit
percentage = 42.7%
(2) Net income = $35,000, (3) Gross profit
percentage = 30.9%
(2) Perpetual inventory system: Jan 31 dr.
CGS $5, cr. Inventory $5, (3) (b) When using
a perpetual inventory system in requirement
2, shrinkage can be determined to be $5.
(1) (a) +$125,000, (c) -$2,440
(1) (c) Sales Discounts = +$2,440
(2) Net income = $100, (3) Gross profit
percentage = 25%
Skills Development Cases
S6-1
S6-2
S6-3
S6-4
S6-5
Coached Problems
CP6-1
Gross profit = $275,550, (2) Gross profit
percentage = 55.0%, (4) Gross profit
percentage = 53.7%
(1) Net income = $79,000, (3) Gross profit
percentage = 35.9%
(2) Perpetual inventory system: Jan 31 dr.
CGS $200, cr. Inventory $200, (3) (b) When
using a perpetual inventory system in
requirement 2, shrinkage can be determined
to be $200.
S6-6
(2) A
(2) Lowe’s current year GP % = 34.6%, The
Home Depot’s current year GP % = 34.8%, The
Lowe’s appears to have lower mark-ups
Solutions vary depending on company and/or
accounting period selected
(2) Net income $10,000, GP % = 50%
(1) 2015 Net Sales = $390,000, (2) (2) Sales
returns and allowances have grown dramatically
in the most recent year
(1) Net income = 35,100, (3) GP % = 28.22%
Continuing Cases
CC6-1 (2) Gross profit = $614, Company earns 36.5
cents of gross profit per dollar of sales
CC6-2 (2) 2011 Gross profit = $58,225, 2011 GPP =
72.2%
CHAPTER 7
Mini-Exercises
M7-1
M7-2
M7-3
M7-4
M7-5
M7-6
M7-7
M7-8
M7-9
M7-10
M7-11
M7-12
Raw materials = manufacturing
The sale (and Abercrombie & Fitch purchase)
should be recorded when the goods are
leaving the seller’s shipping department.
(a) Sales Revenue = I/S
(b) (2) LIFO
(b) Rising costs = LIFO
FIFO CGS = $1,150
(c) Weighted average CGS = $418,500
(b) Ending inventory = $7,050
Total inventory = $2,700
Entry should reduce inventory by
$1,700,000,000
(a) +
(c) Gross profit percentage
List of Check Figures and Solution Hints to accompany Phillips/Libby/Libby: Fundamentals of
Financial Accounting, 5e
M7-13
M7-14
M7-15
M7-16
M7-17
M7-18
M7-19
(b) EI = $200
(b) Total Goods Sold = $422,000
Perpetual FIFO Ending Inventory = $7,950
2015 CGS = Overstated by $10,000
2016 CGS = Overstated by $100,000
2012 Gross profit is understated by $10,000
2012 Gross profit id overstated by $100,000
PA7-5
PB7-1
PB7-2
PB7-3
PB7-4
PB7-5
Comprehensive Problems
7-1
7-2
7-3
Exercises
E7-1
E7-2
E7-3
E7-4
E7-5
E7-6
E7-7
E7-8
E7-9
E7-10
E7-11
E7-12
E7-13
E7-14
E7-15
E7-16
E7-17
(a) NO
(d) Inventory -3,000, CGS = NE
(B) dr. Supplies = $5,000, cr. Inventory = $5,000
(1) (a) CGS = $402, (c) CGS = $432.40
(1) Goods available for sale = $65,800, (3)
Weighted average CGS = $22,560
(1) Units available for sale = 2000 units, (3)
LIFO CGS = $11,400, (4) FIFO operating
income = $6,900
(1) Goods available for sale = $164,500, (3)
FIFO CGS = $105,000, (5) Operating income
Case A = $9,000, Case B = ($4,000), Case C =
$1,200
(1) FIFO CGS = $152,800, Weighted average
CGS = $153,340
(1) Ending inventory Case A = $1,950, Case B =
$1,800, Case C = $1,800, Case D = $1,950
(1) Total LCM valuation=$10,400
(2) Write-down = $325
(1) dr. Cost of goods sold) $18M cr. Inventory
$18M
(1) 2012 Inventory Turnover Ratio = 7.1
(1) FIFO CGS = $2,050, (2) LIFO Inventory
Turnover Ratio = 4.41
Perpetual FIFO, CGS = $20,400
Perpetual LIFO, CGS = $10,800
(3) Second Quarter, CGS beginning Inventory =
$4,400
Coached Problems
CP7-1
CP7-2
CP7-3
CP7-4
CP7-5
(1)(c) Cost of goods sold = $12,400
(1) Net income = $27,300
Inventory turnover = 5.4 times per year in 2013
LIFO Perpetual Cost of goods sold = $12,900
(1) Quarter 2 Cost of goods sold= $32,000
Group Problems
PA7-1
PA7-2
PA7-3
PA7-4
(1) (d) Cost of goods sold = $198,340
(2) Net income decreased $5,600
Inventory turnover = 6.5 times per year in
2013
Cost of goods sold = $229,300
(1) 2013 CGS = $1,680,000
(1)(c) Cost of goods sold = $1,130
(2) Net income decreased by $9,450
(1) Days to sell = 43.5 in 2012
CGS = $950
Q2 Cost of goods sold = $2,520
(4) Current ratio FIFO 2.06, Weighted average
1.72, LIFO 1.50
(4) Net income=$1,841, Total assets= $13,170
2015 (1) GPP = 3.8%, 2014 GPP = 10.0%, 2013
GPP = 15.9%, (3) 2015 Inventory turnover ratio
= 8.3, 2014 Inventory turnover ratio = 11.3
Skills Development Cases
S7-1
S7-2
S7-3
S7-4
S7-5
S7-6
S7-7
(3) A
(3) Lowe’s inventory turn over 3.9 times and
Days to sell 93.6
Solutions vary depending on company and/or
accounting period selected
Look for seven pieces of evidence: related to
management action, related to the company’s
books, and related to inventory levels
(1) Cost of goods sold LIFO = $147,500, (3)
FIFO Gross profit = $52,500
(2) Ending inventory = $330,000
(1) Total LCM = $6,505, (2) LCM adjustment =
$560
Continuing Cases
CC7-1 (2) CGS FIFO = $753, (3) Inventory turnover
ratio = 7.3 times
CC7-2 (1) B, (5) D
CHAPTER 8
Mini-Exercises
M8-1
M8-2
M8-3
M8-4
M8-5
M8-6
M8-7
M8-8
M8-9
Nutty should extend credit because that
would increase its operating income.
Yes, Pastis Productions should extend credit.
(c) Net accounts receivable = $745,000
Make two entries: one to reinstate the account
(Credit Allowance for doubtful accounts for
$500) and one entry to collect the account
(Credit Accounts receivable for $500)
(b) dr. Allowance for Doubtful Accounts
$7,000; cr. Accounts Receivable $7,000
(b) Assets (Allowance for doubtful accounts)
(+xA) -$8,000, Liabilities NE, SE (Bad debt
expense)(-E) -$8,000
Bad debt expense = $2,500
Required adjustment = $2,750 cr.
(a) dr. Bad debts expense $2,500 cr.
Allowance for doubtful accounts $2,500
List of Check Figures and Solution Hints to accompany Phillips/Libby/Libby: Fundamentals of
Financial Accounting, 5e
M8-10
M8-11
M8-12
M8-13
M8-14
M8-15
M8-16
(a) Interest earned = $5,000
(b) June 30 Interest revenue = $700 cr.
(c) April 30 Interest revenue = $160 cr.
Total current assets = $4,040
(b) Receivable Turnover ratio = “-”, Days to
collect = “+”
Factoring fee = $15,000 and reported as
“Other” expense
(a) Accounts receivable = $800,000 (b) Debit
Bad debt expense for $10,000
CP8-4
CP8-5
Group Problems
PA8-1
PA8-2
PA8-3
Exercises
E8-1
E8-2
E8-3
E8-4
E8-5
E8-6
E8-7
E8-8
E8-9
E8-10
E8-11
E8-12
E8-13
E8-14
E8-15
E8-16
E8-17
(b) Debit Allowance for doubtful accounts
$1,000
(a) Assets (Allowance for doubtful accounts) = $9,750, Liabilities = NE, SE (Bad debt expense)
= -$9,750
(3) 2% rate is too low given the Allowance
account began 2015 with a $600 balance but
$1,500 was written off during the year
(a) dr. Allowance for doubtful accounts $300 cr.
Accounts receivable $300
(a) Assets (Allowance for doubtful accounts =
+$300, Accounts receivable = -$300), Liabilities
= NE, SE = NE
(2) Desired balance = $165,000
(3) Adjustment = $2,300 credit
(3) Desired balance in the allowance account =
$11,100 credit
(2) (d) Net receivables = -$500, Net sales NE,
Income from operations = -$500
(b) Dec. 31, 2014 entry should have a credit to
Interest revenue of $3,500
Dec. 31 dr. Cash $4,000 cr. Interest receivable
$2,000 cr. Interest revenue $2,000
April 30, 2015 entry should contain a credit to
interest revenue of $3,000
(2) Receivables turnover ratio = 4.6 times
(d) Bad debt expense = $3
(b) Net credit sales = NE, Average net accounts
receivable = “-”, Receivables turnover = “+”
(1) Days to collect = 40.1 days
(2) 2016 Net income = $1,000
Coached Problems
CP8-1
CP8-2
CP8-3
(3) Entry should include a credit to Allowance
for doubtful accounts for $1,017,050
(3) Net receivables is not affected when accounts
are written off
Dec. 31, 2015 dr. Interest receivable $1,667 cr.
Interest revenue $1,667
(1) (j) Desired ending balance in the Allowance
account = $8,390 credit, thus requiring a $2,390
credit as part of the adjusting entry
Hasbro 2012 Receivables turnover = 4.0, Days to
collect = 91.3 days
PA8-4
PA8-5
PB8-1
PB8-2
PB8-3
PB8-4
PB8-5
(3) dr. Bad debt expense $100 cr. Allowance
for doubtful accounts $100
(3) Write-offs = $4,900
(2)Dec 31, 2015 dr. Interest receivable
$2,000 cr. Interest revenue $2,000
(1) (j) Adjustment needed to the allowance
account = $478 credit
(1) Coca-Cola 2012 Receivable turnover =
9.9 Days to collect = 36.9 days
(4) Debit Allowance for doubtful accounts
$15
(1) Ending balance in the Allowance for
doubtful accounts = $110 credit
(2) May 31, 2016 entry should have a credit
to Interest receivable of $2,000
(1) (j) Desired ending balance in Allowance
for doubtful accounts=$12,650 credit
(2) J.M. Smucker was quicker than H.J. Heinz
Comprehensive Problem
C8-1
C8-2
C8-3
(2) Estimated Uncollectible ($) $1,600 (3) Income
from Operations = $12,400
(4) 2015 Receivables Turnover Ratio = 7.9
(2) Total debits = $47,987, (3) Net Income =
$1,754, Total Assets = $28,999
Skills Development Cases
S8-1
S8-2
S8-3
S8-4
S8-5
S8-6
S8-7
(2) D
(1) No; since Lowe’s sold its receivables to
GECR, it did not report any receivables
Solutions vary depending on company and/or
accounting period selected
(3) Net accounts receivable = $700,000
(3) Net income = $13,110
(c) Receivables turnover ratio = 7.8 times
(2) dr. Bad debt expense $10,060 cr. Allowance
for doubtful accounts $10,060
Continuing Case
CC8-1 (2)Desired balance in the allowance account =
$315 cr. (4) receivable turnover = 9.8 times
CHAPTER 9
Mini-Exercises
M9-1
M9-2
(8) E, D
(6) E
List of Check Figures and Solution Hints to accompany Phillips/Libby/Libby: Fundamentals of
Financial Accounting, 5e
M9-3
M9-4
M9-5
M9-6
M9-7
M9-8
M9-9
M9-10
M9-11
M9-12
M9-13
M9-14
M9-15
(7) C
Book value at the end of the third year =
$130,000
Book value at the end of the third year =
$94,000
Book value at the end of the third year =
$50,000
(b) Year 1 depreciation = $17,200
(a) The gain on sale is $268 million
(a) dr. Accumulated depreciation- Equip.
$4,800 cr. Equipment $4,800
Gain on sale of store fixtures=$400
Expense in the current year
Market value of Taste-T’s assets less
liabilities on the date of the offer =
$5,600,000
Fixed asset turnover ratio = 0.5
Entry should contain a debit to Timber
inventory of $60,000
Book value at end of fifth year = $25,800,
New depreciation expense = $2,850 per year
E9-16
E9-17
Coached Problems
CP9-1
CP9-2
CP9-3
E9-4
E9-5
E9-6
E9-7
E9-8
E9-9
E9-10
E9-11
E9-12
E9-13
E9-14
E9-15
(1) Total Property, plant and equipment = $240
(3) Acquisition cost = $76,600
(2) Acquisition Cost = $42,750, (4) Book value
at end of year 2 = $35,150
(1) Assets (Accumulated Depreciation) = $10,000, Liabilities = NE, SE (Depreciation
expense)
-$10,000
(1) Credit Accumulated Depreciation $10,000
(1) (a) Straight-line book value after Year 4 =
$6,000, (b) Units-of-production book value after
Year 4 = $4,000 (c) Double-declining-balance
book value after year 3 = $4,752
(a) Straight-line book value after Year 2 =
$10,000
(b) Units-of-production book value after year 2 =
$6,855
(c) Double-declining-balance book value after
year 2 = $3,000
Depreciation expense per year = $2,000
(1) (b) Loss on sale = $2,000,
(4) (c) Entry should include a credit to Gain on
disposal for $3,000
Google Inc. is the company that amortizes its
intangible assets over the longest periods.
Google; Amortization Expense = $96,800
(2) Trademark is not amortized due to indefinite
life (3) Amortization expense = $12,620
(C) Loss on disposal = $9
2011 Fixed asset turnover ratio = 17.3 times
(1) Depreciation expense Year 2 for, Straightline = $12,000, Units-of-production = $18,000,
and Double-declining balance = $15,600
(1) Machine A total cost = $9,300, (2) Machine
C double-declining-balance depreciation =
$3,600
(2) Machine B’s loss on disposal = $6,500
(2) Vehicle partial year depreciation = $4,000,
Equipment partial year depreciation = $400,
Building partial year depreciation = $1,750
Group Problems
PA9-1
PA9-2
PA9-3
PA9-4
Exercises
E9-1
E9-2
E9-3
Book value of oil reserves at the end of year 1 =
$2,400,000
(1) New Depreciable cost = $84,000
PB9-1
PB9-2
PB9-3
PB9-4
Total cost of machine C = $25,400, (2)
Machine B depreciation = $10,000
(1) Machine A’s gain on disposal = $600
(2) Equipment partial year depreciation =
$27,000, Licensing rights partial year
amortization = $150
Dec. 31 2015 Accumulated Building
depreciation = $20,000, Equipment
depreciation = $4,500, and Accumulated
amortization = $2,000
(1) Total cost of Machine B = $10,900, (2)
Machine C depreciation = $5,300
(1) Machine A’s gain on disposal = $1,500
(2) Equipment partial year depreciation =
$400, Franchise rights partial year
amortization = $190
2015 Building depreciation= $3,200 and
Franchise rights amortization= $1,500
Comprehensive Problem
C9-1
(3) Depreciation expense = $586 Bad debt
expense = $120, Net income = $4,861, Total
assets = $109,294
Skills Development Cases
S9-1
S9-2
S9-3
S9-4
S9-5
S9-6
(2) C
(2) Fixed asset turnover for Lowe’s Companies
= 2.52 times
Solutions vary depending on company and/or
accounting period selected
(1) Q1 Year 1 with the entries: Property &
equipment, net = $38,614; Sales revenues =
$8,825; Operating expenses = $7,628; Operating
income = $1,197
(2) Fixed asset turnover ratio in Q2 Year 1 =
0.24
(1) Straight-line depreciation expense = $7,000;
Book value = $28,000, Units of production
depreciation = $4,000, Double declining-balance
book value = $17,500
The two companies’ financial results differ in
terms of depreciation expense and other gains
(losses). Provide possible explanations for these
two differences
List of Check Figures and Solution Hints to accompany Phillips/Libby/Libby: Fundamentals of
Financial Accounting, 5e
S9-7
Straight line method: Depreciation formula for
Year 1 in cell D8 is =($C$3-$C$4)/$C$5,
Formula for Year 7 EOY-AD in cell E14 is
=SUM($D$8:D14),
Double declining-balance method: Depreciation
formula for Year 1 in cell D8 is =IF((C8+(($C$3
– C8)*2/$C$5))>$C$3-$C$4,F7-$C$4,($C$3C8)*2/$C$5), Formula for Year 7 EOY-AD in
cell E14 is =C14+D14
Continuing Cases
(3) Straight Line; Income from Operations
CC9-1
$2,700, Units-of-production; Income from
Operations = $6,100, Double declining balance;
Income from Operations = $4,580
CC9-2
(2) A, (4) D
CHAPTER 10
Mini-Exercises
M10-1
M10-2
M10-3
M10-4
M10-5
M10-6
M10-7
M10-8
M10-9
M10-10
M10-11
M10-12
M10-13
M10-14
M10-15
M10-16
M10-17
(b) After the first show: Should have credit to
Service revenue $37,500
To record the expense: dr. Cost of goods sold
$6,000 cr. Inventory $6,000
Net pay = $40,375
Credit FICA payable $2,625
Current portion of long-term debt as of
December 31, 2015 = $2,000
Debit Interest expense $15,000
Long-term debt = $800,000
The bonds are selling at a premium since the
bond quote is more than 100
The Bonds payable, net would be shown as
$485,000 (the face amount of $500,000 less
the discount on bonds payable of $15,000)
The Bonds payable would be shown as
$510,000 (the face amount of $500,000 plus
the bond premium of $10,000)
(b) December 31, 2013 debit Interest expense
$125,000
2014 liability must be disclosed because a
liability is likely but cannot be recorded
because the amount is still not estimable
Numerator for debt to asset ratio: $110,000 =
$40,000 + $70,000, Income tax expense for
the Times interest earned ratio = $1,960
(a) Increases to 0.76
(a) Debit Discount on bonds payable $20,000
(a) Debit Discount on bonds payable $59,000
Debit Interest expense $5,700
E10-3
E10-4
E10-5
E10-6
E10-7
E10-8
E10-9
E10-10
E10-11
E10-12
E10-13
E10-14
E10-15
E10-16
Coached Problems
CP10-1
CP10-2
CP10-3
CP10-4
CP10-5
CP10-6
CP10-7
CP10-8
CP10-9
CP10-10
PA10-1
PA10-2
PA10-3
PA10-4
PA10-5
Exercises
E10-2
(1) (b) Assets = NE, Liabilities (Interest payable)
= +$80,000, SE (Interest expense) = - $80,000
(1) Nov. 1, 2015 dr. Cash $6,000,000 cr. Note
payable $6,000,000
(1) Dec. 20: Assets (Cash) = +$100; Assets
(Accounts receivable) = -$100, Liabilities = NE,
SE = NE
(3) Total current liabilities = $49,400
(1) Debit Payroll tax expense = $11,300, (2) (a)
Credit Unearned rent revenue $3,600
(1) (b) Case B at 96 Unamortized discount =
$8,000
The answer is (a).
(2) Credit Premium on bonds payable $24,000
(2) Credit Premium on bonds payable $24,000
(2) Credit Bonds payable-net $624,000
(1) End of year 2015 balance = $6,076
(1) End of year 2017 balance = $6,028
Group Problems
PA10-6
E10-1
(2) Credit Withheld income taxes payable
$37,000
(1) (b) Procedure 2 Total labor cost = $850
(2) Cash paid = $41,600
(2) (b) dr. Unearned revenue $204,000,000 cr.
Subscription revenue
$204,000,000
(3) Debit interest expense $50,000
(3) Debit Loss on bond retirement $2,000
(1) Bond payable (a) B/S (b) +$250,000 (c) 0
(1) Debt ratio for 2013 = 0.78, Times interest
earned ratio for 2013 = 5.92
(1) Credit Premium on bonds payable $50,328
(1) Debit Cash $300,328
(2) Debit Interest expense $24,026
(2) Credit Discount on Bonds Payable (-xL)
$1,284
(2) Debit Interest expense $16,845
(3) Yr. 9 End (B) Interest expense $17,837
PA10-7
(1) April 30 Assets (Cash) +$600,000,
Liabilities (Note payable) +$600,000, SE=
NE
(1) April 30 dr. Cash $600,000 cr. Note
payable $600,000 (3) Total current liabilities
= $672,000
(2) (a) Credit unearned revenue $6,000
(1) (c) Carrying value Case B At 98 =
$196,000
Contingent liabilities are to be recorded only
when they are probable and the amount can
be reasonably estimated
(5) January 1, 2017 dr. Bonds payable
$600,000 cr. Discount on bonds payable (-xL)
$5,350 cr. Cash $588,000 cr. Gain on bond
retirement $6,650
(5) January 1, 2017 dr. Bonds payable
$600,000 dr. Loss on bond retirement
$11,767 cr. Cash $606,000 cr. Discount on
bonds payable (-xL) $5,767
List of Check Figures and Solution Hints to accompany Phillips/Libby/Libby: Fundamentals of
Financial Accounting, 5e
PA10-8
PB10-1
PB10-2
PB10-3
PB10-4
PB10-5
PB10-6
PB10-7
PB10-8
(5) January 1, 2017 dr. Bonds payable
$594,233 dr. Loss on bond retirement
$11,767 cr. Cash $606,000
(1) January 3: Assets (Inventory) +$24,000,
Liabilities (Accounts payable) = +$24,000,
SE = NE
(2) January 3 effect decreased
(1) August 1: dr. Cash $8,000 cr. Unearned
revenue $8,000, (3) Total current liabilities =
$98,000,(4) January 3 effect = Increased,
Numerator = Increased, Denominator =
Increased
(1) Debit to Payroll tax expense = $22,000
(1) (c) The carrying value of Case C at 102 =
$510,000
(2) Loss would be reported on the income
statement between operating income and
income before income tax expense
(5) January 1, 2017 dr. Bonds payable
$100,000 dr. Premium on bonds payable
$690 dr. Loss on bond retirement $1,310 cr.
Cash $102,000
(5) January 1,2017 dr. Bonds payable
$100,000 dr. Premium on bonds payable
$718 dr. Loss on bond retirement $282 cr.
Cash $101,000
(5) January 1. 2017 dr. Bonds payable net
$100,718 dr. Loss on bond retirement $282
cr. Cash $101,000
Comprehensive Problem
C10-1
(1) Interest expense = $108,000, (3) (c) Unitsof-production 2016 Fixed Asset Turnover Ratio
= 1.00
Skills Development Cases
S10-1
S10-2
S10-3
S10-4
S10-5
S10-6
S10-7
S10-8
(2) C
(2) Lowe’s times interest earned ratio = 8.72
Solutions vary depending on company and/or
accounting period selected
Most people conclude that the use of the call option
is ethical but that corporations have an obligation to
provide understandable information to investors
The manager has been hired to protect the interests
of the investors. Therefore, the manager must place
investors first regardless of his or her own personal
social conscience
(1) Debt-to-assets ratio = 0.83
The formula for cell D12: =$G$11/$D$8
The formula for cell B12:
=If(A12<$C$8,ROUND(G11*$C$7*12/12,0),F11+
C12)
S10-9
The formula for cell C11:
=If(A11<$D$8,ROUND(B11*$D$7*12/12,0),D10+
$D$4-F10)
Continuing Cases
Dec. 31, 2014 dr. Interest expense $750 cr.
CC10-1
Interest payable $750
CC10-2
(1) B
CHAPTER 11
Mini-Exercises
M11-1
M11-2
M11-3
M11-4
M11-5
M11-6
M11-7
M11-8
M11-9
M11-10
M11-11
M11-12
M11-13
M11-14
M11-15
M11-16
(4) E
150 shares currently issued
80,000 additional shares may be issued
Credit Additional paid-in capital, Common
stock $49,000
Asset Debit Cash $50,000, Liability = NE,
SE = Common stock = +$50,000
Purchase of 20,000 shares of treasury stock
(3) Total assets = decreased by $900,000,
Total liabilities = no change, Total
stockholders’ equity = decreased by
$900,000, net income = no change
Dividend amount to be paid = $170,000
June 14 dr. Dividends payable $250,000 cr.
Cash $250,000
(1) Stock Dividend: No change in total assets
(4) No change in total stockholders’ equity
Total to Preferred Stockholders = $400,000
Past year, Total dividends = No dividends
EPS = $2.00
This year, market price per share = $255
(c) Retained Earnings = $7,000
dr. Retained earnings = $200,000, cr.
Common stock = $200,000
Exercises
E11-1
E11-2
E11-3
E11-4
E11-5
E11-6
E11-7
(b) Treasury stock at end of year 2013 = 114
million (106+24-16)
(2) (a) Credit Additional paid-in capital,
common stock $114,000, (3) Total contributed
capital = $166,000
Additional paid-in capital, common = $617,000
Additional paid-in capital, preferred stock =
$300,000
(1) Retained earnings = $38,000
(1) (a) dr. Cash $800,000 cr. Common stock,
no-par $800,000, (2) Total stockholders' equity
= $1,236,000
(2) Number of preferred shares outstanding:
4,200
List of Check Figures and Solution Hints to accompany Phillips/Libby/Libby: Fundamentals of
Financial Accounting, 5e
E11-8
E11-9
E11-10
E11-11
E11-12
E11-13
E11-14
E11-15
E11-16
E11-17
E11-18
E11-19
E11-20
(2)Feb. 1 dr. Treasury stock $8,000 cr. Cash
$8,000
(1) (b) Assets = "NE", Liabilities = "+", SE = "-"
(1) (b) Total Preferred shares cumulative:
$14,400 total, $2.40 per share
(1) (a) Debit Dividends $100,000 (2) Ending
Retained earnings = $600,000
(1) Additional paid-in capital after stock
dividend = $36,000, (2) Large stock dividends
are recorded at par value
Feb. 18, 2014: Credit Dividends payable
$77,500,000
Total Stockholders’ equity= $360,000 in all
cases
(b) March 15, dr. Dividends payable = $40,000,
cr. Cash = $40,000
(1) Ending Retained earnings = $96,000, (3)
ROE = 6.8%
(1) EPS = $0.10 per share, (2) ROE = 5.6%
(1) Total contributed capital = $705,000, Total
stockholders' equity = $781,000
(2) EPS = $0.125 (up from $0.10)
(1) Case A: Credit Proprietor A, Capital
$20,000, Case B: Debit Individual revenue
accounts $150,000, Case C: Credit Retained
earnings $20,000,
(2) Case A: A, Capital, December 31 = $62,000,
Case B: Partners’ Equity for B is $39,000, Case
C: Retained earnings = $85,000
Coached Problems
CP11-1
CP11-2
CP11-3
CP11-4
CP11-5
(3) Total Stockholders’ Equity = $746,200
(1) 100% stock dividend was result in moving
$600 from Retained earnings to common stock,
thus leaving total stockholders' equity unchanged
(2) additional paid-in capital= $4,200,000
Case A, preferred shares, Per share = $0.80
(1) ROE Aaron= 10.6%
Group Problems
PA11-1
PA11-2
PA11-3
PA11-4
PA11-5
PB11-1
PB11-2
PB11-3
PB11-4
PB11-5
(3) Total contributed capital = $5,500,000,
Total Stockholders’ equity = $5,650,000
(1) March 5 Credit Dividends payable
$100,000
(3) EPS on net income = $7.40
Case A Preferred dividend = $16,800
(2) BusinessWorld P/E ratio = 17.0
(3) Total contributed capital = $4,600,000,
Total stockholders’ equity = $4,538,000
(1) May 31 Debit Dividends payable,
Preferred $302,500
(2) Additional paid-in capital = $6,750,000
(1) Case A: Common dividend = $8,800;
Case C: Common dividend = $21,400
(2) Sound Jonx PE ratio = 17.0
Comprehensive Problem
C11-1
C11-2
(1) 1/15 Assets(Cash) = +$50,000, Liabilities =
NE, SE(Common stock) +$5,000, (Additional
paid-in capital-common +$45,000, (2) August
15: dr. Cash $4,600 dr. Additional paid-in
capital-Treasury stock $2,000 cr. Treasury stock
$6,600, (4) Retained earnings = $125,400
(2) Adjusted trail balance, total debits =
$176,593, (3) Net income = $8,777, B/S Total
assets = $136,007, (9) Retained Earnings =
$3,075
Skills Development Cases
S11-1
S11-2
S11-3
S11-4
S11-5
S11-6
S11-7
(3) A
(3) Lowe’s net earnings increased consistently
throughout the three-year period.
Solutions vary depending on company and/or
accounting period selected
(4) Yes, this would be a concern because it
suggests that management might be acting
opportunistically - buying when the stock price
is low and selling when the price is high
Whether you believe that employees are more
important than investors or vice versa,
ultimately, most people agree that a balanced
perspective is warranted, for short-term returns
and long-term payoffs
Every investor must consider his or her own
financial requirements, stage of life, and
acceptable level of risk. For most retired people
living on a fixed income, option 2 is the most
appropriate choice
Responses will vary depending on the company
selected and depending on how "surprising" the
information in the earnings or dividend
announcement is to the investor
Continuing Cases
(2) Common stockholders would prefer issuance
CC11-1
of additional preferred shares to avoid diluting
ownership and voting rights in the company (4)
(a) ROE = "-"
CC11-2
(1) C, (2) C
CHAPTER 12
Mini-Exercises
M12-1
M12-2
M12-3
M12-4
M12-5
M12-6
M12-7
(3) E
(5) O
(2) +
Case A: Net cash provided by operating
activities = $310,000
Case A: Net cash provided by operating
activities = $2,250
Net cash provided by (used in) investing
activities = $250
Net cash provided by financing activities =
$1,600
List of Check Figures and Solution Hints to accompany Phillips/Libby/Libby: Fundamentals of
Financial Accounting, 5e
M12-8
M12-9
M12-10
M12-11
M12-12
M12-13
Net cash provided by investing activities =
$550
(1) No
Company reports a net cash outflow for both
years even though they borrowed significant
amounts and issued stock. There is very little
cash available for the coming year's
operations. Thus, they appear to be in big
trouble
(5) O
Case A: Cash collected from customers =
$66,000, Net cash provided by operating
activities = $25,500
Case B: Cash payments to suppliers =
($11,980), net cash provided by operating
activities = $3,820
E12-17
E12-18
E12-19
E12-20
E12-21
E12-22
E12-23
E12-24
Exercises
E12-1
E12-2
E12-3
E12-4
E12-5
E12-6
E12-7
E12-8
E12-9
E12-10
E12-11
E12-12
E12-13
E12-14
E12-15
E12-16
(1) F
(4) Net cash provided by operating activities =
$110
(2) The $225 increase in cash should be reported
as net cash from operating activities
(4) Net cash provided by operating activities =
$120
(5) When converting net income to cash flow
here is how to handle changes in current account
balances: subtract increases in noncash current
assets and decreases in noncash current
liabilities, add back decreases in noncash current
assets and add increases in current liabilities
(1) Net cash flow from operating activities =
$210
(2) Net cash provided by operating activities =
$195, Net cash used in investing activities =
$(60), net cash provided by financing activities =
$70
Net cash provided by operating activities =
$14,750
(1) Net cash provided by operating activities =
$33,050
(1) Net cash flow provided by operating
activities = $22,492
(a) Accounts receivable decreased during the
period
(a) Accounts receivable increased during the
period
(1) Net cash used for investing activities $16,000
(1) Aztec Cost of goods sold = $175, (2) Aztec
Total cash paid = $200, (4) Aztec Inventory
increase = $25, Aztec Accounts payable increase
= $0
Net cash provided by financing activities =
$1,105
Net cash provided by (used in) investing
activities = $(2,330)
(2) Disney generated nearly two times the
financing required to purchase parks, resorts and
equipment
(13) Both direct and indirect methods
(1) Net cash provided by operating activities =
$33,050
(1) Net cash provided by operating activities =
$22,492
Book value = $32 million
Cash received from the sale = $1,700
(1) Net cash flow provided by operating activity
= $13,700, Net cash flow used in investing
activities = $9,000, Net cash flow used in
financing activities = $6,000, (2) Cash balance
Year ending = $19,200
Net cash provided by operating activities =
$13,700,net cash provided by (used in) investing
activities = $(9,000), net cash provided by (used
in) financing activities = $(6,000)
Coached Problems
CP12-1
CP12-2
CP12-3
CP12-4
CP12-5
CP12-6
CP12-7
(2) Activity = "O", Cash flow = "-"
Total adjustments = $206
(1) Statement of Cash Flows: Net cash provided
by operating activities = $28,800
(1) Statement of Cash Flows: Net cash provided
by operating activities = $4,500
Net cash provided by operating activities = $226
(1) Net cash flows from operating activities =
$4,500
(1) Cash flows from financing activities =
$2,000
Group Problems
PA12-1
PA12-2
PA12-3
PA12-4
PA12-5
PA12-6
PA12-7
PB12-1
PB12-2
PB12-3
PB12-4
(1) Activity = "I", Cash Flow = "-"
Net cash provided by operating activities =
$8,803
(1) Statement of Cash Flows: Net cash
provided by operating activities = $16,000
(1) Statement of Cash Flows: Net cash
provided by operating activities = $1,600
Net cash provided by operating activities =
$8,803
(1) Net cash provided by (used in) investing
activities = $(500)
(1) Net cash provided by operating activities
= $2,400
(1) Activity = "O", Cash Flow = "+"
Net cash provided by operating activities =
$26,000
(1) Statement of Cash Flows: Net cash
provided by operating activities = $58,000
(1) Net cash provided by financing activities
= $200
List of Check Figures and Solution Hints to accompany Phillips/Libby/Libby: Fundamentals of
Financial Accounting, 5e
PB12-5
PB12-6
Net cash provided by operating activities =
$26,000
(1) Net cash provided by (used in) operating
activities = $(1,000)
M13-11
M13-12
M13-13
Skills Development Cases
S12-1
S12-2
S12-3
S12-4
S12-5
S12-6
S12-7
S12-8
S12-9
(1) B
(1) Lowe's used the indirect method to report
cash flows from operating activities
Solutions vary depending on company and/or
accounting period selected
(2) Since transaction recorded as a regular sale,
the company will report the cash as a cash flow
from operating activities. Had the transaction
been recorded as a loan, the cash received would
have been reported as a financing activity
If cash is spent on long-lived assets, it is
typically classified as an investing activity. If
cash is spent on expenses, it is typically
classified as an operating activity
The new controller's idea will not work.
Net cash flow provided by (used in) operating
activities = $(4,000)
Net cash flow provided by (used in) operating
activities = $(4,000)
If all four of the above events had taken place,
net cash flow from operating activities would
increase by $14,000.
Continuing Cases
CC12-1 (1) Net cash provided by operating activities=
$3,269
CC12-2 Correct option is b. $78,400
M13-14
Exercises
E13-1
E13-2
E13-3
E13-4
E13-5
E13-6
E13-7
E13-8
E13-9
E13-10
E13-11
E13-12
E13-13
E13-14
E13-15
CHAPTER 13
Mini-Exercises
M13-1
M13-2
M13-3
M13-4
M13-5
M13-6
M13-7
M13-8
M13-9
M13-10
Horizontal analysis: Percentage change in net
income = 37.9%
Vertical analysis: 2013 net income = 21% of
sales
The two most significant changes, in terms of
dollar amounts, are revenues and cost of
goods sold
The vertical analyses include comparisons of
net income to net sales and gross profit to net
sales
CGS = $67,200
GPP = 40.0%
ROE = 16%
The inventory turnover ratio is calculated as
cost of goods sold divided by average
inventory.
Current Liabilities = $6,480,000
Market price per share = $55
(a) Net profit margin
(a) Good
In most circumstances when costs are falling,
a change from FIFO to LIFO will cause
inventory to increase and cost of goods sold
to decrease
(1) (a) Straight-line yields lower depreciation,
(b) No effect
Total revenues decreased $11 billion from 2012
to 2013
(1) Gross profit percentage 2013 = 35.0%, (2)
Net profit margin 2013 = 9.5%
(2) 2013 net income as a percentage of sales =
2.5%
(2) 2013 net profit margin = 2.5%
(2) 2013 times interest earned = 8.0
(6) = J
(1) Accounts receivable turnover = 6.0
Inventory turnover: Cintas turned its inventory
over (i.e., bought and sold) 10.2 times during the
year
(1) Inventory turnover ratio = 6.2
(1) Gross profit percentage of 28.5% means 28.5
cents of gross profit was generated for each
dollar of sales
Current ratio after transaction 1 = 1.67
(1) Current assets = Increase, Current liabilities
= no change, Current ratio = Increase
Current ratio after transaction 3 = 1.63
Current ratio after transaction 4 = 1.81
(1) LIFO  higher inventory  higher current
ratio  Company B
Coached Problems
CP13-1
CP13-2
CP13-3
CP13-4
CP13-5
CP13-6
CP13-7
(1) Sales revenue increased by $15,000, a 9.1%
increase
(1) 2013 Gross profit percentage = 38.9% (8)
2013 P/E ratio= 18.0
(1) (c) 11%
(1) (b) 21%
(3) Kohl’s appears only more solvent with debts
providing 33% of its assets compared to 34% for
Macy’s
(1) (5) Armstrong EPS = $3.00, Blair EPS =
$4.50
Consider liquidity, level of debt, and growth
opportunity
Group Problems
PA13-1
(1) Change in cash = $31,500, a
82.9% increase
List of Check Figures and Solution Hints to accompany Phillips/Libby/Libby: Fundamentals of
Financial Accounting, 5e
PA13-2
PA13-3
PA13-4
PA13-5
PA13-6
PA13-7
PB13-1
PB13-2
PB13-3
PB13-4
PB13-5
PB13-6
PB13-7
(1) Current year Gross profit percentage =
52.7% (6) Debt-to-assets ratio current year =
0.40
(3) Simultech’s assets are financed more by
liabilities (60%) than by equity (40%)
(1) (e) 4%
(2) Pepsi appears more liquid
(7) Receivables turnover: Royale = 15.69
Cavalier = 18.67
Company A appears to be a better choice
(2) Sales increased by $37,000, retained
earnings increased by 60%
(1) Current year Gross profit percentage =
42.5%
(1) (c) 33%
(1) (f) 2%
(4) Analyses suggest Hasbro and Mattel are
fairly evenly matched with respect to
profitability, liquidity, and solvency
(1) (1) Net profit margin: Thor = 10.0%,
Gunnar = 12.5%
Company A’s ratios suggest that it has a high
level of debt, low level of liquidity and a low
price/earnings ratio
Skills Development Cases
S13-1
S13-2
S13-3
S13-4
S13-5
S13-6
S13-7
D: Inventory Turnover Ratio = 4.72
Lowe’s controls operating expenses other than
cost of goods sold better than Lumber
Liquidators.
Solutions vary depending on company and/or
accounting period selected
Inaccurate audit reports (either failing to report
problems that exist or reporting problems that
don’t exist) have negative consequences for
parties internal and external to the firm
Current ratio after the transaction = 2.26
(2) It is impossible to determine which
company will report the higher ratios without
knowledge of the average life of the company’s
depreciable assets
(2) The formula to calculate the percent of total
assets represented by Cash is found in Cell E9:
=D9/$D$15*100
Continuing Case
(1) 2016 return on equity = 21.70%,2016 Fixed
CC13-1
Asset turnover = 1.06 (2) 2016 Current ratio =
1.37 (3) 2016 times interest earned = 11
APPENDIX C
Mini-Exercises
MC-1
MC-2
MC-3
MC-4
MC-5
MC-6
MC-7
MC-8
MC-9
MC-10
MC-11
MC-12
Exercises
EC-1
EC-2
EC-3
EC-4
EC-5
EC-6
$231,595
$92,169
$487,138
It is much better to save $15,000 for 20 years
PV = $231,597
$92,168.51
$487,137
$859,125
$231,597
$92,169
$487,137
It is much better to save $15,000 for 20 years
(1) $15,562
(1) $58,802
(3) 2017 = $163
(2) $1,311
$108,237
(2) Total bond proceeds = $2,140,473
Coached Problems
CPC-1
CPC-2
CPC-3
CPC-4
Option 1 = $8,513,560
(4) Interest = $4,762, (5) Notes payable (longterm) $100,000
(3) Interest = $1,604, (4) Interest = $1,100
(c) Annual Coupon Payment by the Face Value =
5.5%
Group Problems
PAC-1
PAC-2
PAC-3
PAC-4
PBC-1
Option 2 = $589,089
(6) dr. Notes payable $20,000, cr. Cash =
$20,000
(4) Interest = $1,429
(c) Annual Coupon Payment by the Face Value
= 6%
Option 3 = $55,306
List of Check Figures and Solution Hints to accompany Phillips/Libby/Libby: Fundamentals of
Financial Accounting, 5e
PBC-2
PBC-3
PBC-4
(5) dr. Notes payable $100,000, cr. Cash
$100,000
(5) Interest = $1,132
(c) Annual Coupon Payment by the Face Value
= 7%
APPENDIX D
Mini-Exercises
January 2: dr. Investments $100,000 cr. Cash
MD-1
$100,000
MD-2
January 2: Assets +/- $100,000
December 15 dr. Cash $16,000 cr. Dividend
MD-3
revenue $16,000
MD-4
July 2: Assets +/- $224,000
July 2: dr. Available for sale Securities
MD-5
$224,000, cr. Cash $224,000
December 31: Assets +8,000, Stockholders’
MD-6
equity +8,000
June 23: dr. Cash $19,800 cr. Trading
MD-7
securities $17,400 cr. Gain on sale of
investments $2,400
Exercises
ED-1
ED-2
ED-3
ED-4
ED-5
ED-6
ED-7
(1) Equity method since the company owns
35% of the total shares outstanding of Nueces
Corporation
Dec. 31, 2016 dr. Available for sale securities
$70,000 cr. Net unrealized gains/losses
$70,000
Dec. 31, 2016 dr. Trading securities $70,000
cr. Net unrealized gains/losses $70,000
(1) Non-current assets-Available-for-sale
securities 2016 = $310,000, Stockholders’
equity- Net Unrealized gains = $110,000
Dec. 31, 2016 dr. Net unrealized losses/gains
$25,000 cr. Available for sale securities
$25,000
Dec. 31, 2016 Debit Net unrealized
losses/gains $15,000
(2) Current assets on balance sheet: Trading
securities $210,000 in 2016
Coached Problems
CPD-1
CPD-2
(1) Dec. 31, 2014 credit Net unrealized
losses/gains $7,000 (2) Dec. 31, 2014 credit
Net unrealized losses/gains $7,000 (3) Dec. 31,
2016 credit Equity in affiliate earnings $15,000
(1) Case A: The fair value method must be used
because it only owns 12% of the total outstanding
shares of Bart Company
Group Problems
PAD-1
(1) Dec. 31, 2014 credit Net unrealized
losses/gains $3,000 (2) Dec. 31, 2014 debit
Trading securities $3,000 (3) Dec. 31 2014 Debit
investment in affiliate $15,000
PAD-2
(2) Case A: (b) No entry (c) credit Dividend
revenue $6,000 (d) debit Net unrealized
losses/gains $20,000 (3) Case B income
statement-Equity in affiliate earnings, $120,000