Accounting Principles And Practice 1st Edition S. Hall, N. Skene Smith - Solutions

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9 Exercise I Which of the following transactions results in a decrease in retained earnings? Why?a. Employees were paid USD 20,000 for services received during the month.b. USD 175,000 was paid to acquire land.c. Paid an USD 18,000 note payable. No interest was involved.d. Paid a USD 200 account
8 Exercise H Give examples of transactions that would have the following effects on the items in a firm’s financial statements:a. Increase cash; decrease some other asset.b. Decrease cash; increase some other asset.c. Increase an asset; increase a liability.d. Decrease retained earnings; decrease
7 Exercise G Indicate the amount of change (if any) in the stockholders’ equity balance based on each of the following transactions:a. The stockholders invested USD 100,000 cash in the business by purchasing capital stock.b. Land costing USD 40,000 was purchased by paying cash.c. The company
6 Exercise F Bradley Company, engaged in a courier service business, completed the following selected transactions during July 2010:a. Purchased office equipment on account.b. Paid an account payable.c. Earned service revenue on account.d. Borrowed money by signing a note at the bank.e. Paid
5 Exercise E For each of the following events, determine if it has an effect on the specific items (such as cash) in the accounting equation. For the events that do have an effect, present an analysis of the transaction showing its two sides or dual nature.a. Purchased equipment for cash, USD
4 Exercise D At the start of the year, a company had liabilities of USD 50,000 and capital stock of USD 150,000. At the end of the year, retained earnings amounted to USD 135,000. Net income for the year was USD 45,000, and USD 15,000 of dividends were declared and paid. Compute retained earnings
3 Exercise C On 2010 December 31, Perez Company had assets of USD 150,000, liabilities of USD 97,500, and capital stock of USD 30,000. During 2011, Perez earned revenues of USD 45,000 and incurred expenses of USD 33,750. Dividends declared and paid amounted to USD 3,000.a. Compute the company’s
2 Exercise B Assume that retained earnings increased by USD 3,600 from 2010 June 30, to 2011 June 30. A cash dividend of USD 300 was declared and paid during the year.a. Compute the net income for the year.b. Assume expenses for the year were USD 9,000. Compute the revenue for the year.
1 Exercise A Match the descriptions in Column B with the appropriate terms in Column A.Column A Column B 1. Corporation.a. An unincorporated business owned by an individual.2. Merchandising company.b. The form of organization used by most large businesses.3. Partnership.c. Buys raw materials and
9 Real world question: Refer to the financial statements of The Limited in the Annual Report Appendix. Has the solvency of the company improved from one year to the next?Discuss.
8  Real world question: Refer to the 2000 financial statements of The Limited in the Annual Report Appendix at the back of the text. What were the net income or loss amounts in the latest three years? Discuss the meaning of the changes after reading management’s discussion and analysis of
7 Of what importance is the periodicity (time periods) concept to the preparation of financial statements? Describe a transaction that would: Increase both an asset and capital stock. Increase both an asset and a liability. Increase one asset and decrease another asset. Decrease
6 What effect does the going-concern (continuity) concept have on the amounts at which long-term assets are carried on the balance sheet?
5 Of what significance is the exchange-price (or cost) concept? How is the cost to acquire an asset determined?
4 A company purchased equipment for USD 2,000 cash. The vendor stated that the equipment was worth USD 2,400. At what amount should the equipment be recorded?
3 You have been elected to the governing board of your church. At the first meeting you attend, mention is made of building a new church. What accounting information would the board need in deciding whether or not to go ahead?
2 Give an example from your personal life that illustrates your use of accounting information in reaching a decision.
1 What is the accounting equation? Why must it always balance?
11 What is a transaction? What use does the accountant make of transactions? Why?
10 Identify the three types of activities shown in a statement of cash flows.
9 What information does the statement of retained earnings provide?
8 What is an income statement? On what aspect of a business does this statement provide information?
7 What is a balance sheet? On what aspect of a business does the balance sheet provide information?
6 Define expenses. How are expenses measured?
5 Define revenues. How are revenues measured?
4 How do accounts payable and notes payable differ? How are they similar?
3 How do liabilities and stockholders’ equity differ? How are they similar?
2 Define asset, liability, and stockholders’ equity.
1  Accounting has often been called the language of business. In what respects would you agree with this description? How might you argue that this description is deficient?
2 When services are performed on account, what is the effect?a. Both cash and retained earnings decrease.b. Both cash and retained earnings increase.c. Both accounts receivable and retained earnings increase.d. Accounts payable increases and retained earnings decreases.
1 When the stockholders invest cash in the business, what is the effect?a. Liabilities increase and stockholders’ equity increases.b. Both assets and liabilities increase.c. Both assets and stockholders’ equity increase.d. None of the above.
1 Which of the following is not one of the five underlying assumptions or concepts mentioned in the chapter?a. Exchange-price concept.b. Inflation accounting concept.c. Business entity concept.d. Going-concern concept.
2 Which of the following is not a correct form of the accounting equation?a. Assets = Equities.b. Assets = Liabilities + Stockholders’ equity.c. Assets – Liabilities = Stockholders’ equity.d. Assets + Stockholders’ equity = Liabilities.
1 The ending balance in retained earnings is shown in the:a. Income statement.b. Statement of retained earnings.c. Balance sheet.d. Both (b) and (c).
The balance sheet contains the same major headings as appear in the accounting equation.true or false.
The statement of retained earnings shows both the net income for the period and the beginning and ending balances of retained earnings.true or false.
The income statement shows the profitability of the company and is dated as of a particular date, such as 2010 December 31.true or false.
The three types of business activity are service, merchandising, and manufacturing.true or false.
The three forms of business organizations are single proprietorship, partnership, and trust.true or false.
1 On 2010 June 1, Green Hills Riding Stable, Incorporated, was organized. The following transactions occurred during June:June 1 Shares of capital stock were issued for USD 10,000 cash.4 A horse stable and riding equipment were rented (and paid for) for the month at a cost of USD 1,200.8 Horse feed
 State the basic accounting equation and describe its relationship to the balance sheet.
4 Differentiate between financial and managerial accounting.
3 Describe employment opportunities in accounting.
2 Describe the functions performed by accountants.
1 Define accounting.
=+14. A manager is entitled to receive commission at the rate of 5 % of net profits after charging such commission. How much is this commission if the net profit was £4,200 before charging the commission?
=+2. Provide Depreciation as follows:Machinery and Plant 10 %Showroom Equipment 5 %General Office Equipment 5 %
=+1. Stocks at 31st December, 1962, were:£Raw Materials 8,316 Work in Progress 9,410 Finished Goods 18,613
=+General Office 560 Showroom Equipment 17,000 General Office Equipment 12,000 Machinery and Plant 183,400 Stocks at 1st January, 1962 Raw Materials 11,400 Work in Progress 8,090 Finished Goods 20,160 Capital 210,000 Drawings 6,200 Creditors 21,094 Debtors 30,615 Cash at Bank 13,379 60 ACCOUNTING
=+13. From the following list of balances and additional information prepare Manufacturing, Trading and Profit & Loss Accounts for the year ended 31st December, 1962, and a Balance Sheet as at that date:Dr, Cr.£ £Sales 250,000 Raw Materials Purchased 65,000 Wages: Factory 71,000 Showroom 3,800
=+Show the account for Motor Expenses in Currants ledger for 1962 after the accounts for the year had been closed.
=+To cover private use of the car he treats half of the expenses as private and transfers this proportion to his personal Drawings Account.On 1st January, 1962, he owed £16 for Repairs and had paid Insurance in advance £12. During 1962 he drew cheques to the value of £193 and on 31st December,
=+12. *Curran pays all his car expenses by cheques drawn on his business bank account. In the books of the business all these payments are debited to an account for Motor Expenses.
=+10. Give the Rent, Rates and Insurance Account incorporating the following information:FINAL ACCOUNTS 59£481,094 £481,094*Re-printed by courtesy of the Royal Society of Arts (R.S.A.)
=+per annum. The rate of gross profit he expects to make on Sales is 25 %(i.e. before deducting expenses or wages). Assuming that T. will make a Net Profit of £1,000 and that, at the end of the year he will have a stock of £500, draft a pro forma Trading and Profit & Loss Account for the first
=+Raw Materials: Stock at Beginning£2,100 Purchases 12,000 Stock at End 3,100 Finished Goods: Stock at Beginning 1,750 Stock at End 980 Work in Progress: At Beginning 1,870 At End 2,090 Sales 34,646 Wages 7,960 Carriage: Inwards 650 Outwards 482 Fuel, Light and Power: Factory 520 Office 168
=+You are to make provision for the prepayments and accrual at 30th September, 1962 and to show the transfer to the Profit & Loss Account at that date.11. From the following information relating to a manufacturing business, compile a statement from which to ascertain:(a) The cost of materials
=+5 8 ACCOUNTING PRINCIPLES AND PRACTICE April 1 Rent Accrued£April 1 60 Insurance prepaid 200 Payments £May 16 Rent, 3 months to 30th April 300 Aug. 1 Insurance, Year to 31st July, 1963 216 24 Rates, Year to 31st March, 1963 156 Sept. 16 Rent, 4 months to 31st August 400
=+8. *Given below is the abridged Balance Sheet of G. Cantone:Balance Sheet 1st March, 1962£ £Creditors 1,890 Cash 20 G. Cantone Debtors 625 Capital Account 2,355 Stock 2,100 Machinery 1,500*Re-printed by courtesy of the Royal Society of Arts (R.S.A.).
=+Stock on Hand 1st January, 1962 at cost price 6,000 Purchases from 1st January to 14th March, 1962 14,000 Sales from 1st January to 14th March, 1962 18,000 State the value of the stock destroyed by fire, showing your calculations.
=+7. *A trader dealing in a standard line of goods which he regularly sold at 25% above cost price, discovered on the morning of 17th March, 1962—a Monday—that during the week-end all his stock had been destroyed by fire. His stock was fully covered by insurance, but no records were immediately
=+9. *T. is proposing to set up in business as a retailer and is negotiating for a shop, the rent of which is £450 per annum and the Rates £375 per annum.He expects that he will need to employ an assistant at a wage of £8 per week and that the incidental expenses of the business will be £50
=+(c) Cantone purchases goods for resale (stock) costing £75. This was a credit Purchase.(d)Old machinery is sold for £100 in cash; the book value was £250.(e) It is decided to correct the valuation of stock on 1st March, 1962, reducing it by £320.(f) Goods were sold on credit for £190 (cost
=+(a) Cantone receives a loan of £500, which he used to pay £200 to a creditor and £300 for the purchase of new Machinery.(b) A debtor pays £120 on account.
=+ApL 1 To Balance Apl. 1 By Cash on sale(Old Van) b/f 350 of old van 500 Cost of New Van 1400 1961 Mar. 31 Balance 1250 FINAL ACCOUNTS 57£4,245 £4,245 The following transactions took place on 2nd March, 1962:
=+The following matters are to be taken into account:(a) The Stock in Trade at 31st March, 1961 was valued at £5,040.(b) Salaries accrued at 31st March, 1961 amounted to £840 and Rent accrued, £250.(c) Insurances paid in advance at 31st March, 1961 amounted to £30.(d) The provision for doubtful
=+On September 30th, 1962, the directors decided to maintain the provisions existing against the debts of S. Jones and A. Brown and to create provisions as follows:£. s. d.A. K. James 21. 9. 4.B.L. Stanley 16. 10. 5.Show the entries that these facts will require in the Company's Nominal Ledger in
=+During the year ended 30th September, 1962, no further business was done with any of these debtors, but a first and final dividend of £85 was received from the liquidator of Smith Ltd. and T. Robinson paid his debt in full. A further debt of £100. 16. 2. by King Ltd. proved to be bad.
=+6. tAt September 30th, 1961, the directors of XY Ltd. created a provision in their accounts against the following debts which they consider to be of doubtful nature:£. s. d.Smith Ltd. 250. 7. 2.S.Jones 5. 9. 4.T. Robinson 26. 13. 3.A. Brown 30. 14. 6.
=+You are required to prepare a Trading and Profit & Loss Account for the year to 31st March, 1961 and a Balance Sheet as at that date.
=+5. *The following Trial Balance was extracted from the books of Jackson trader, at 31st March, 1961.56 ACCOUNTING PRINCIPLES AND PRACTICE£1750 £1750 Provide for the depreciation on the new van at the rate of 20% per annum on cost.
=+•Re-printed by courtesy of the Royal Society of Arts (R.S.A.).From the following details, piepare the Plant and Machinery Account for the years ended 31st December, 1959 to 31st December, 1962 inclusive.1959 Jan. 1 Machine cost. £500; estimated life, scrap value £50.10 years;1960 Jan. 1 „
=+Balance At Bank 3,920 Drawings 4,600 Motor Expenses (including Petrol) 510 Motor Vans 1,250 Rent and Rates 750 Salaries 8,120 Provision for Bad Debts, 1st April, 1960 210 Bad Debts 730 General Expenses 1,120 Discounts Allowed 1,050 Discounts Received 930 Insurances 200£75,020 £75,020
=+4. *A manufacturer, who prepares his accounts to 31st December each year, debits all his purchases of machinery to a single Plant and Machinery Account, and writes oif depreciation by fixed annual instalments from each asset.*Re-printed by courtesy of the Royal Society of Arts (R.S.A.).FINAL
=+(b) During the year Bad Debts, as they occurred, had been debited to Provision foi Bad Debts Account. Additional provision should be made to bring the balance of this account up to £100.(c) Fixtuies and Fittings should be depreciated by £50.(d) The rent of the warehouse and offices is £1,400 a
=+You are required to draw up Macarthy's Trading and Profit & Loss Account for the year ended 30th June, 1962, and his Balance Sheet as at 30th June, 1962, taking into account the following:(a) On 30th June, 1962, his unsold stock was valued at £4,385.
=+Customs Duty on Imported Purchases 317 Carriage Outwards 432 Returns Inward 218 Returns Outward 74 Rent, Rates and Insurance 2,170 Fixtures and Fittings 900 Discount Allowed 315 Discount Received 284 Sundry Debtors 5,132 Sundry Creditors 2,390 Drawings 1,200 General Expenses 496 Balance at Bank
=+3. •The books of Francis Macarthy, a wholesale dealer in toys, showed the following balances at the close of business on 30th June, 1962:•Re-printed by courtesy of the Royal Society of Arts (R.S.A.)54 ACCOUNTING PRINCIPLES AND PRACTICE£ £Capital, 1st July, 1961 7,163 Stock, 1st July, 1961
=+2. •On 1st January, 1962 the Provision for Bad Debts Account in the books of G. Gardham showed a credit balance of £230. During the following twelve months, debts amounting to £185 were written off as irrecoverable and £25 was received in respect of a debt previously written off in 1959. At
=+1. •The following Trial Balance of a sole trader, although it adds up to the same total on both sides, is incorrect:Trial Balance at 30th June, 1962 Dr, Cr.£ £Capital, 1st July, 1961 8,950 Drawings 1,050 Stock, 1st July, 1961 3,725 Purchases 23,100 Sales 39,425 Wages and Salaries 6,205
=+4. On 1st January, 1960, J. Milford purchases a machine costing £600 from Wheelers Ltd. He estimates that the machine will last nine years and its scrap value will then be £60. Prepare two accounts for the three years to 31st December, 1962, charging depreciation:(a) on the Straight Line
=+Goods, invoice price £80, were returned by G. Jones.Provide for Depreciation on the Motor Van, £20.Make the requisite entries in the accounts of B. Hoad and take out a Trial Balance.
=+30 Received £350 from D. Fale but was informed that it would not be possible to collect any more of the debt.31 Paid Salaries, £100.
=+3. On 1st July, 1962, B. Hoad paid £2,000 into his business as capital.The following transactions took place:July 3 Purchased Motor Van for £800.6 Purchased goods on credit from Vale & Co., £700.8 Paid Rent £40.14 Purchased goods on credit from B. Archall, £300.16 Sold goods for cash,
=+31 Bought from Smith a supply of chemical waste for £50.You are asked to prepare from the above information Smith's account as it would appear in Turner's ledger, balancing it and bringing down the balance on the 31st January.
=+17 Bought from Smith 5 tons coranium at £22/10/- per ton.*Re-printed by courtesy of the Royal Society of Arts (R.S.A.).22 Sold to Smith 4 old Pressing machines as scrap, for £220 the lot.28 Paid cheque to Railway £5 for carriage on goods returned on the 16th January, chargeable to Smith.
=+2. *Turner is in business as a manufacturer and the following are his transactions with Smith for the month of January, 1962:Jan. 1 Balance due to Smith £430.10 Bought from Smith 20 tons xyncalia at £45 per ton, less 15%trade discount.15 Paid amount due to Smith on 1st January less 5 % cash
=+Enter these transactions in the accounts of B. Pratt and take out a Trial Balance.
=+1. Β. Pratt commenced business on 1st January, 1962, with a capital of£3,000 cash. The following transactions took place:Jan. 3 Paid £200 Rent for premises.6 Purchased good for cash, £160.7 Purchased goods on credit from W. Davies, £300.9 Paid Wages, £60.10 Cash Sales to date, £200.14
Sam sells a team kit for £15. He knows his direct costs are £11 and his indirect costs are £2.43. Jaz offers to make the product for £12. Should he accept Jaz’s offer? What will happen to the cost of Sam’s other products if he accepts it?
Sam plans to make 15,000 team kits, 6,000 tennis racquets, and 2,000 badminton racquets. Anna has told Sam that it takes the labour hours presented in Table 11.5 to manufacture and string the tennis and badminton racquets.Required:a) Calculate the rate to be used for charging out team kits, using
Wanda runs a home laundry service, Kwicky Washy Ltd, where customers’ laundry is collected, washed, ironed, and delivered back to them for a set charge per bag.The service is offered to customers only within a limited radius of Oxford City Centre.The following outgoings are associated with her
=+1. *On 31st December, 1961, a limited company owned machinery which appeared in its balance sheet drawn up as on that date as "at cost£97,300 less aggregate depreciation £51,770."During 1962 the company bought new machinery at a cost of £12,400 and sold old machinery which had originally cost
=+Show how the machinery should appear in the company's Balance Sheet as on 31st December, 1962, supposing that:
=+(a) the company wishes to disclose to its members information regarding additions to and disposals of machinery, and(b) no more than the minimum statutory information is to be given.
=+2. *The authorised share capital of the Excelsior Machine Co. Ltd. is £250,000 divided into 60,000 5 per cent preference shares of £1 each and 190,000 ordinary shares of £1 each: 40,000 preference shares and 60,000 ordinary shares have been issued and fully paid.The balances on the books on
=+Quoted investments, at cost 9,784 Sundry Debtors and prepayments 28,551 Creditors and accrued expenses 11,203 Stock on hand, at cost 46,259 Cash at bank 10,327 Cash in hand 1,052 Trade investments, at cost 5,000 Provision for deferred repairs 2,786 Debentures Redemption Reserve 4,000 Profit &
=+The balances shown for Freehold Land and Buildings, Machinery and Plant, and Furniture, Fixtures and Fittings are the net amounts after providing depreciation on the diminishing value up to 31st December, 1961. From the accounts for these items it is ascertained that the cost of the assets now in
=+No disposal of any of these assets has been made during the year.The directors are of the opinion that the market value of the Stock on hand and of the Trade Investments is in excess of cost. The market value of the Quoted Investments is £10,800.Out of the Profit & Loss Account balance it has
=+(a) appropriate £8,000 by way of future tax reserve;(b) increase the debenture redemption reserve to £5,000;(c) set aside £5,000 against a possible increase in the prices of raw materials;(d) pay a half-years dividend on the preference shares and propose a dividend of 12 per cent on the

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Accounting Principles And Practice 1st Edition S. Hall, N. Skene Smith - Solutions

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