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business
fundamental accounting principles

Questions and Answers of Fundamental Accounting Principles

For each of the following, identify the primary GAAP that has been violated and explain why.1. Delta Company prepared its first set of financial statements for the three years ended July 31, 2020.2.
Review the income statement of WestJet in Appendix III. How much depreciation was recorded in the adjusting entry for depreciation at the end of 2017? What types of assets would WestJet need to
When preparing financial statements from an accrued trial balance, which of the following financial statements should be prepared first?a. Statement of Changes in Equityb. Balance Sheetc. Cash Flow
Which of the following is correct about adjusting entries?a. Adjusting entries never affect cashb. Adjusting entries always affect cashc. Both A and B are true.d. Neither A nor B are true.
At the end of March, One Eleven Music Studio had $200 outstanding relating to employee salaries that were earned in March but not yet paid. Select the appropriate journal entry:a. Debit Salaries
The revenue recognition principle requires that One Eleven Music Studio report $5,000 on the March Income Statement for student tuition revenue that was collected March 1 and earned over the month.
Interest of $15 has been accrued on One Eleven’s $3,000, 6% six-month note payable. Select the appropriate journal entry:a. Debit Interest Asset $15, credit Interest Expense $15b. Debit Interest
Straight-line depreciation is calculated as:a. The estimated value of an asset at the end of its useful life divided by the number of years the asset has been in useb. The cost of an asset minus the
It is determined that One Eleven Music Studios has $500 worth of supplies left at the end of March out of the $2,200 purchased in March. The entry to record the month-end adjustment is:a. Debit
Depreciation is:a. The cost of storing inventory and suppliesb. The process of calculating expenses to match the cost of plant and equipment assets over their expected useful livesc. Calculated by
Prepaid expenses refer to:a. Assets that are paid for in cashb. Expenses that are incurred immediately when the item is purchasedc. Costs paid for in advance of receiving their benefitsd. Adjusting
At the end of an accounting period, financial statements need to be adjusted for the following reasons:a. The accrual basis of accounting is a requirement of GAAPb. The cash basis of accounting is
Bruce Ibach owns Biotech Fitness Centre, which showed the following selected transactions for the month ended May 31, 2020: Required Prepare journal entries for each of the above transactions.
1. Refer to WestJet’s income statement in Appendix III at the end of the textbook.a. Total Guest revenues for 2017 were $3,822,045 (thousand).(i) Prepare two possible journal entries that might
Les Waruck, Kim Chau, and Leena Manta formed a partnership, WCM Sales, on January 11, 2020, by investing $68,250, $109,200, and $95,550, respectively. The partnership agreement states that profits
Josh and Ben Shaw are brothers. They each have $75,000 to invest in a business together: Northern Canadian Extreme Adventures. They estimate that an additional $200,000 is required to get the
On April 1, 2020, Harry Regal and Meghan Merle formed a partnership in Alberta, renting reusable moving boxes. Net Income during the year was $177,000 and was in the Income Summary
Ben Conway, Ida Chan, and Clair Scott formed CCS Consulting by making capital contributions of $245,000, $280,000, and $175,000, respectively. They anticipate annual profit of $360,000 and are
On February 1, 2020, Tessa Williams and Audrey Xie formed a partnership in Ontario. Williams contributed $80,000 cash and Xie contributed land valued at $120,000 and a small building valued at
Jobs, Alford, and Norris formed the JAN Partnership to provide landscape design services in Edmonton, by making capital contributions of $150,000, $100,000, and $250,000, respectively, on January 7,
Zeller, Acker, and Benton are partners with capital balances as follows: Zeller, $95,000; Acker, $80,000; and Benton, $158,000. The partners share profit and losses in a 3:2:5 ratio. Dent is admitted
Dallas and Weiss formed a partnership to manage rental properties, by investing $144,000 and $216,000, respectively. During its first year, the partnership recorded profit of $469,000.RequiredPrepare
On April 1, 2019, Guy Comeau and Amelie Lavoi formed a partnership in Ontario. Net Income during the year was $560,000 and was in the Income Summary account. On April 1, 2020 Travis Roberts
On July 1, 2019, Alleya Amrick and Breanne Balas formed a partnership to make crafts and sell them online. Net Income during the year was $410,000 and was in the Income Summary account. On July 1,
On June 1, 2020, Jill Bow and Aisha Adams formed a partnership to open a gluten-free commercial bakery, contributing $292,000 cash and $384,000 of equipment, respectively. The partnership also
Liam and Katano formed a partnership to open a sushi restaurant by investing $95,000 and $105,000, respectively. They agreed to share profit based on an allocation to Liam of an annual salary
On November 1, 2020, Harris, Davis, and Tallis formed Restore, a home renovation business, by contributing $56,000 in cash, $91,000 of equipment, and a truck worth $42,000, respectively. The partners
Lui, Montavo, and Johnson plan to liquidate their Premium Pool and Spa business. They have always shared profit and losses in a 1:4:5 ratio, and on the day of the liquidation their balance sheet
Keith Williams and Brian Adams were students when they formed a partnership several years ago for a parttime business called Music Works. Adjusted trial balance information for the year ended
Poppy, Sweetbean, and Olive have always shared profit and losses in a 3:1:1 ratio. They recently decided to liquidate their partnership. Just prior to the liquidation, their balance sheet appeared as
Trish Craig and Ted Smith have a bio-energy and consulting business and share profit and losses in a 3:1 ratio. They decide to liquidate their partnership on December 31, 2020, when the balance sheet
Talent, a local HR consulting firm, has total partners’ equity of $774,000, which is made up of Hall, Capital, $607,000, and Reynolds, Capital, $167,000. The partners share profit/(losses) in a
Leslie Bjorn, Jason Douglas, and Tom Pierce have an architect firm and share profit(losses) in a 3:1:1 ratio. They decide to liquidate their partnership on March 31, 2020. The balance sheet appeared
Keri & Nick Consulting’s partners’ equity accounts reflected the following balances on August 31, 2020:Keri Lee, Capital
Brenda Roberts, Lacy Peters, and Aarin MacDonald are partners in RPM Dance Studios. They share profit and losses in a 40:40:20 ratio. Aarin retires from the partnership on October 14, 2020, and
The partners in the Kingdom partnership have agreed that partner Jefferson may sell his $145,000 equity in the partnership to Riches, for which Riches will pay Jefferson $125,000. Present the
David Wallace, Olena Dunn, and Danny Lin were partners in a commercial architect firm and showed the following account balances as of December 31, 2020: Due to several unprofitable periods, the
Sam, Andrew, and Mary were partners in Gem Skateboard Company. The partners shared profits and losses 3:2:3, respectively. On April 1, 2020, the partnership showed the following account balances just
Martha Wheaton, Bess Chen, and Sam Smith were partners in an urban Calgary tea shop called Wake and showed the following account balances as of December 31, 2020: Due to difficulties, the partners
Assume the same information as in QS 11-15 except that the Equipment was sold for $85,000 on April 1, 2020. Prepare the journal entry to record the final distribution of cash. QS 11-15 Sam, Andrew,
Linda, Sue, and Darlene are partners in Designs Unlimited. Their capital balances are $150,000, $140,000, and $250,000, respectively, on March 15, 2020. They share profit and losses in the ratio of
Oliver, Peter, and Wendell are partners in NewTech Company, an R&D firm specializing in cloud storage. Their capital balances are $30,000, $22,000, and $15,000, respectively, on November 23,
Hector, Wilson, and Stuart are partners in What’s Your Beef?, a local vegan burger chain, with capital balances of $25,000, $40,000, and $35,000, respectively. Based on their partnership agreement,
On April 21, 2020, Wilson agrees to invest $30,000 into Quest, a land development partnership in Niagara-onthe Lake, for a 20% interest in total partnership equity. At the time Wilson is admitted,
On June 17, 2020, Bishop agrees to invest $30,000 into an online custom T-shirt print shop business for a 40% interest in total partnership equity. At the time Bishop is admitted, the existing
Suppose on March 12, 2020, Kate agrees to pay Ramos and Bailey $12,000 each for a one-third interest in the existing Ramos–Bailey partnership. At the time Kate is admitted, each partner has a
Ramos and Bailey have a frozen yogurt shop in Victoria, BC. They are equal partners, with $30,000 in each of their partnership capital accounts. Bailey’s sister Kate is admitted to the partnership
Jenn Smith and Mike Yang have a small business consulting partnership. They share profits and losses as detailed in their partnership agreement that gave Jenn a salary allowance of $115,000 and Mike
Lisa Montgomery and Joel Chalmers established a coffee bean distribution business. Their partnership shared profits and losses based on an agreement that gave Lisa a salary allowance of $45,000 and
Bill Ace and Dennis Bud are partners in an urban restaurant called Salt. Profit for the year ended March 31, 2020, is $120,000.a. How much profit should be allocated to each partner assuming there is
Len Peters and Beau Silver form a partnership to operate a catering business, called A Catered Affair. Peters invests $20,000 cash and Silver invests $30,000 cash on March 1, 2020. Prepare the
Stanley organized a limited partnership and is the only general partner. Hillier invested $20,000 in the partnership and was admitted as a limited partner with the understanding that he would receive
In the chapter-opening vignette featuring Kicking Horse Coffee, Elana Rosenfeld advises that partners avoid a 50/50 partnership split and she strongly suggests obtaining legal counsel in drafting
If the partners in Bloom Partnership, a floral design shop, want the financial statements to show the procedures used to allocate the partnership profit among the partners, on what financial
Which of the following does not occur upon liquidation of a partnership:a. Non-cash assets are sold for cash and a gain or loss on liquidation is recordedb. Gain or loss on liquidation is allocated
Which of the following statements is true regarding the admission of a new partner through the purchase of partnership interest:a. There is no impact on partnership assets, liabilities, or total
Under what circumstances could a partner’s capital account increase when a partnership loss is allocated to a partnership:a. Each partner’s agreed upon salary and interest allowance is allocated,
Salaries paid to a partner under a partnership agreement are treated as:a. Salaries expenseb. Increase in owner’s capital accountc. A partner’s withdrawald. All of the above.
Under a partnership agreement, the balance sheet has which of the following characteristics:a. Each partner has a separate cash accountb. Each partner has a separate capital accountc. The balance
Under mutual agency, which of the following statements is true:a. One partner can commit the partnership to any contract within the scope of the partnership’s businessb. All partners have to agree
What is the purpose of establishing a limited partnership?a. To ensure that the life of the partnership is limitedb. To ensure that assets are limited to those contributed by its ownersc. To enable
Which of the following is not an advantage of a partnership:a. Ease of formationb. Unlimited liability for general partnerships creating personal obligationsc. Low startup costsd. Shared business
Which of the following is a characteristic of partnerships:a. Separate legal entityb. Limited liabilityc. Separate business entityd. Unlimited life
Which of the following items should not be included in the partnership agreement:a. Names and contributions of each partnerb. Rights and duties expected to be carried out by each partnerc. Allocation
Interior Design Company specializes in home staging consulting services and sells furniture built by European craftsmen. The following six-column table contains the company?s unadjusted trial balance
Zest Company is a Montreal HR firm. Its condensed income statement for the year ended November 30, 2020, is shown below. ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?Zest
Heritage Architect Company of Manitoba purchased some modular office furniture on March 10, 2020 that had a cost of $290,000 (ignore GST/PST). Show the journal entries that would record this purchase
Quebec Construction Company purchased some equipment on September 10, 2020, that had a cost of $190,000 (ignore GST/PST). Show the journal entries that would record this purchase and payment under
Sarah’s Pottery and Gift store had the following transactions:a. On November 15, 2020, Katie from the small office business Custom Graphics contacted Sarah to purchase gift cards for the holiday
The following alphabetized list of selected adjusted account balances is from the records of Jasper Company on December 31, 2020:Accounts Payable
On January 2, 2020, the Casual Elite Co. acquired land to build a distribution centre by issuing a 6%, three-year note for $200,000. The note will be paid in three annual payments of $74,822 each
On December 20, 2020, The Net Department Store sold a computer for $3,500 with a one-year warranty that covers parts and labour. Warranty expense was estimated at 2% of sales dollars. On March 2,
On January 1, 2020, La Petite Macaron, a local French bakery, borrowed $84,000 from the bank. Interest is calculated at the rate of 4% and the term of the note is four years. Four equal annual
Refer to the balance sheet for Telus in Appendix II. What percentage is accounts payable and accrued liabilities at December 31, 2017, of the total current liabilities? of total liabilities?
Classification of current and non-current liabilities is important for the following reason(s):a. Allows external users to assess whether the company has the ability to pay, enabling better financial
On January 2, 2018, Redbook Manufacturing acquired machinery by issuing a 5%, $350,000 note due in six years on January 2, 2023. Annual payments are $68,956 each January 2. The payment schedule
Mike Li is a sales manager for an electric car dealership in Alberta. Mike earns a bonus each year based on revenue generated by the number of vehicles sold in the year less related warranty
On August 31, 2020, World Travel Consulting showed the following adjusted account balances in alphabetical order:Accounts
Selected information taken from the December 31, 2020, financial statements for Mesa Company is shown below for the year just ended: The accountant was not sure about how to handle a few
Companies are required to report which of the following known liabilities:a. Unearned Revenueb. Payroll Liabilitiesc. Provincial Sales Tax (PST) and Goods and Services Tax (GST)/Harmonized Sales Tax
Part 1:RequiredAnswer the following questions by referring to the December 31, 2017, balance sheets for each of WestJet and Spin Master in Appendix II.a. WestJet shows Advance ticket sales of
The Creative Electronics Company shows the following selected adjusted account balances as at December 31, 2020:Accounts Payable ......................................................
Zero-rated products and GST/HST-exempt products and services have unique treatment. Fifty Cent Recording Studio has approached you for direction on how to handle accounting for GST on their music
Brad?s Building Supplies entered into the following transactions involving current liabilities during 2020 and 2021: Required Prepare journal entries to record these transactions for Brad?s
What amount does WestJet, in Appendix II, report as the current portion of long-term debt as at December 31, 2017? In what accounting period will this amount be paid?
MetroConcerts receives $2,000,000 in advance cash ticket sales for a four-date tour for Diana Krall. Record the advance ticket sales as a lump sum as of October 31, 2020. The concerts sold out and no
Zing Cell Phone Company entered into the following transactions involving current liabilities during 2020 and 2021: Required 1. Determine the maturity dates of the three notes just described. 2.
Organic Skin Care Inc. negotiates a 90-day note payable to replace an overdue account owed to Collagen Research Inc. The 90-day, 9%, $9,000 note payable is signed on December 1, 2020. Calculate the
On November 9, 2020, Snowbot Snow Removal began to buy and resell snow blowers for $700 each. Snowbot uses the perpetual system to account for inventories. The snow blowers are covered under a
Refer to the Indigo balance sheet in Appendix II. Does Indigo show any un-redeemed gift card liability tax? If so, what is the balance in the account and what does the liability represent?
On November 10, 2020, Singh Electronics began to buy and resell scanners for $55 each. Singh uses the perpetual system to account for inventories. The scanners are covered under a warranty that
Customer loyalty programs such as points offered for purchases made require the following accounting treatment:a. The company must email or text message the total points earned to financial statement
Tara Kim is the new manager of accounting and finance for a medium-sized manufacturing company. Now that the end of the year is approaching, her problem is determining whether and how to describe
Hinton Designers, located in Quebec, provided $7,300 of services on credit to a client on May 7, 2020. Record Hinton’s entry, including the appropriate GST and PST. Refer to Exhibit 10.6 for PST
Stone Works is a paving stone installation business that operates from about April to October each year. The company has an outstanding reputation for the quality of its work and as a result
Part 1:Okanagan Refrigeration manufactures and markets commercial refrigeration systems for food trucks and specialized transport trucks. It was disclosed in notes to the company’s financial
Buxton Snowboards offers an unlimited warranty on all parts attached to their boards. Which of the following statements is accurate with respect to their warranty liabilities:a. Buxton must offer all
Africa Safari is a tour business that operates from about April to October each year. The company has an outstanding reputation for the quality of its tours and as a result pre-books customers a full
On September 3, 2020, Reynolds Retailers, operating out of Nunavut, sold $14,700 of goods for cash with a cost of $12,380. Record Reynolds’s entries, including all appropriate sales taxes.
Designer Architects had the following additional information at its November 30, 2020, year-end: a. The Unearned Revenue account showed a balance of $62,000, which represented four months of services

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